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High Court held that there was only one taxable event of sale
High Court held that there was only one taxable event of sale
Larsen & Toubro was into execution of civil, mechanical contracts. It was a registered dealer for VAT and CST. It entered into works contracts with various companies and execution of contracts was entrusted to various sub-contractors. It challenged levy and recovery of taxes both at the hands of sub-contractors and main contractor. High Court held that there was only one taxable event of sale of goods in such a transaction. It set aside tax levy.-900223
1 .The first petitioner-company, was engaged in the execution of civil, mechanical and other contracts.
2 .It was a dealer registered under the APVAT Act, 2005 and the CST Act, 1956.
3 .It entered into works contracts with various companies (employers)
4 .The execution of the contracts was entrusted to various sub-contractors.
5 .Petitioners challenged levy and recovery of taxes both at the hands of the nominated sub-contractors as well as the main contractor like the petitioners.
On writ petition, the High Court held as under:
6 .The sub-contractor, as we have already noticed, is only an agent of the contractor and the property in goods passes directly from the sub-contractor to the employer and therefore there can only be one sale which is recognised by the legal fiction created under Sub-article (29A) of Article 366.
7 .It therefore leads us to the conclusion that there is only one taxable event of sale of goods in such a transaction.
8 .We hold that in view of the legal position declared in this judgment, the assessment must be set aside as it proceeded on a plainly erroneous understanding of the law that there are two taxable events, one in the hands of the subcontractor and one in the hands of the contractor (first petitioner).
