Page 74 - GSTL_16th July 2020_Vol. 38_Part 3

312 GST LAW TIMES [ Vol. 38
prevailing at that time, as declared in Dunkerley’s case as per which domi-
nant intention of the contract was to be seen and further that such a con-
tract was treated as not divisible. It is for this reason in BSNL and M/s.
Larsen and Toubro cases, this Court specifically pointed out that Kame’s case
would not provide an answer to the issue at hand. On the contrary, legal
position stands settled by the Constitution Bench of this Court in Kone Ele-
vator India Pvt. Ltd. v. State of Tamil Nadu and Ors. (2014) 7 SCC 1. Following
observations in that case are apt for this purpose :
“On the basis of the aforesaid elucidation, it has been deduced that a
transfer of property in goods under Clause (29A)(b) of Article 366 is
deemed to be a sale of goods involved in the execution of a Works
Contract by the person making the transfer and the purchase of those
goods by the person to whom such transfer is made. One thing is sig-
nificant to note that in Larsen and Toubro (supra), it has been stated
that after the constitutional amendment, the narrow meaning given to
the term “works contract” in Gannon Dunkerley-I (supra) no longer
survives at present. It has been observed in the said case that even if
in a contract, besides the obligations of supply of goods and materials
and performance of labour and services, some additional obligations
are imposed, such contract does not cease to be works contract, for
the additional obligations in the contract would not alter the nature of
the contract so long as the contract provides for a contract for works
and satisfies the primary description of works contract. It has been
further held that once the characteristics or elements of works con-
tract are satisfied in a contract, then irrespective of additional obliga-
tions, such contract would be covered by the term “works contract”
because nothing in Article 366(29A)(b) limits the term “works con-
tract” to contract for labour and service only.”
17. The view expressed by the Apex Court in Bharat Sanchar Nigam Lim-
ited’s case (supra) that after the 46th Amendment, the sale element of those con-
tracts which are covered by the six sub-clauses of clause (29A) of Article 366 are
separable and may be subjected to sales tax by the States under Entry 54 of List II
and there is no question of the dominant nature test applying, was reiterated by
the Apex Court in M/s. Pro. Lab’s case (supra). Thus, the finding of the Tribunal
that in Bharat Sanchar Nigam Limited’s case (supra) the Apex Court has only given
the passing remarks and did not overrule either C.K. Jidheesh (supra) or Rainbow
Colour Lab and Another v. State of Madhya Pradesh and Others, (2000) 2 SCC 385 =
2001 (134) E.L.T. 332 (S.C.), is unsustainable, as it had been categorically held in
Bharat Sanchar Nigam Limited’s case (supra) that these judgments do not lay down
correct law.
18. The next contention of the Learned Counsel for the appellants was
that appellants having once paid the VAT under the State Act as works contrac-
tor on the material and chemicals consumed in photography service, cannot be
charged service tax on the same value. To bolster his submission, he placed reli-
ance upon the judgment in Safety Retreading Company Private Ltd. (supra). In the
facts of the said case, the assessee was engaged in business of tyres on job work
basis and had been paying 30% service tax only on the labour component shown
in invoices after deducting 70% towards material cost on the gross re-treading
charges billed in terms of Notification No. 12/2003-S.T., dated 20-6-2003. A show
cause notice dated 24-1-2008 was issued to the assessee alleging suppression of
value of taxable services with intention to evade payment of service tax and pro-
posing recovery of service tax together with interest and penal action under the
provisions of Sections 76, 77 and 78 of the Finance Act, 1994. The said deduction

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