1958 (7) TMI 35 - HC - VAT and Sales Tax

Issues Involved:
1. Jurisdiction of the Superintendent of Sales Tax to impose sales tax on the supply of goods in execution of a contract.
2. Constitutionality and competence of the Bihar Legislature to define and tax "dealer," "goods," "sale," and "sale-price" under the Bihar Sales Tax Act.
3. Applicability of the Supreme Court decision in State of Madras v. Gannon Dunkerley and Company (Madras) Limited.
4. Determination of the transfer of title and price in the context of the contract.

Issue-Wise Detailed Analysis:

1. Jurisdiction of the Superintendent of Sales Tax:
The petitioner, a joint stock limited company from West Germany, entered into a contract with Sindri Fertilisers and Chemicals (Private) Limited for assembling and installing machinery for a coke oven battery. The Superintendent of Sales Tax issued a notice under section 13(5) of the Bihar Sales Tax Act requiring the petitioner to pay sales tax for the years 1952 to 1956. The petitioner contended that the Superintendent had no jurisdiction to impose sales tax on the supply of goods in execution of a contract.

2. Constitutionality and Competence of the Bihar Legislature:
The petitioner argued that the definitions of "dealer" in section 2(c), "goods" in section 2(d), "sale" in section 2(g), and "sale-price" in section 2(h) of the Bihar Sales Tax Act were unconstitutional and beyond the competence of the Bihar Legislature. It was contended that these definitions purport to tax the execution of building contracts, which is beyond the legislative competence.

3. Applicability of the Supreme Court Decision:
The petitioner referred to the Supreme Court's decision in State of Madras v. Gannon Dunkerley and Company (Madras) Limited, where it was held that the expression "sale of goods" must be interpreted in its legal sense as in the Sale of Goods Act, 1930. The Supreme Court had ruled that in the case of an entire and indivisible building contract, there was no sale of goods, and thus, the Provincial Legislature could not impose a tax on the supply of materials used in such a contract. The petitioner argued that their case fell within this principle and sought a writ to quash the proceedings under section 13 of the Bihar Sales Tax Act.

4. Determination of Transfer of Title and Price:
The court noted a vital distinction between the present case and the Supreme Court case. In the Supreme Court case, the title to the materials used did not pass by any clause in the contract but by the theory of accretion. In the present case, the contract expressly stated that all materials and plant brought by the contractor on the site would become the owner's property immediately upon arrival. The court referred to a specific clause in the contract to this effect. The petitioner argued that there was no definite price fixed for each kind of property in the contract, which is necessary to constitute a sale in the legal sense. The Government Advocate countered that the price could be determined by the course of dealings between the parties, as per section 9 of the Sale of Goods Act. The court also considered whether the title to the goods passed at German ports under an F.O.B. contract, concluding that this presumption is subject to the express terms in the contract.

Conclusion:
The court held that the petitioners had not made out a case for the grant of a writ of certiorari to quash the proceedings under section 13 of the Bihar Sales Tax Act. The court emphasized that the facts had not been fully investigated by the Sales Tax Authorities and that the petitioners had not furnished all relevant documents. The Sales Tax Authorities were directed to investigate the facts and determine the extent of the petitioners' liability, keeping in view the principles laid down by the Supreme Court. Both applications were dismissed without any order as to costs.

Separate Judgments:
The judgment was delivered jointly, with CHOUDHARY, J. concurring with the decision.

Application Dismissed:
Both applications were dismissed, with no order as to costs.

← Previous Next →