1955 (7) TMI 12 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of sales tax and penalty on contract works turnover; Whether contract entered before Sales Tax Act came into force is liable to be taxed; Whether contract for earth work involves sale of goods rendering petitioner liable for assessment under Orissa Sales Tax Act.

Analysis:
The petitioner was assessed for sales tax and penalty on the turnover of contract works. The primary grievances raised were that the contract was made before the Sales Tax Act came into force and that the contract pertained to earth work, not involving the sale of goods subject to taxation under the Orissa Sales Tax Act. The petitioner supplied earth for a construction project, with the tender accepted in October 1947, but work commenced earlier. The Act came into force after the contract, and a proviso exempted contracts entered before the specified date from tax liability.

The Act specified the date of enforcement by government notification, which was after the contract in question. The petitioner argued that the Act exempted contracts made before the specified date from taxation, relying on the proviso to section 4(1) of the Orissa Sales Tax Act. The Department contended that the date of contract should be based on when the tender was accepted, not the oral agreement date. However, payments were made for work completed before the Act came into force, indicating a pre-existing contract, whether oral or written, as the basis for the work.

The Court held that the Act applied to turnover of contractors, not the contract terms, and the proviso to section 4(1) exempted contracts made before the Act from taxation. Therefore, the petitioner was not liable for tax or penalty imposed by the Sales Tax Department. The petition was allowed, and the petitioner was entitled to costs, with any paid tax to be refunded. The judgment was agreed upon by both judges, and the petition was allowed.