The Madras High Court ruled that work contracts undertaken prior to 11.05.2002, the said work contracts cannot be brought under the purview of the tax net under the Central Sales Tax Act, 1956.
The petitioner, M/s Industrial Engineering Corporation, an entity engaged in Industrial Engineering Services, had entered into work contracts with the Government of India, Ministry of Defence, and the South Central Railways in 1999. These contracts involved work executed in Mumbai and Secunderabad.
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The central issue was whether these contracts, which were undertaken prior to 11.05.2002, should be taxed under the Central Sales Tax Act, 1956, following its amendment on 11.05.2002.
Before the amendment, the term “sale” under Section 2(g) of the Central Sales Tax Act did not explicitly include work contracts. However, the amendment included work contracts in the tax net, making them subject to sales tax from 11.05.2002 onwards. The petitioner argued that their contracts, dated before this cutoff, should not fall under the new tax provisions.
The Tribunal had previously ruled against the petitioner, citing a lack of proof that the work undertaken was classified as work contracts rather than simple sales. Despite submitting evidence including contracts with substantial values, the Tribunal’s decision was based on procedural issues, dismissing the petitioner’s claims and allowing the State’s appeal.
Citing decisions in Sundaram Industries Limited vs. Commercial Tax Officer, the Court noted that the amendment’s impact was prospective, not retroactive, meaning that work contracts executed before the amendment could not be retrospectively taxed under the revised provisions of the Central Sales Tax Act.
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Justices R Suresh Kumar and C. Saravanan concluded that the work contracts undertaken by the petitioner before 11.05.2002 could not be subjected to tax under the amended provisions of the Central Sales Tax Act.
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