1961 (11) TMI 50 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the contract between the petitioner and the railway constitutes a divisible contract for the sale and supply of materials and construction work.
2. Whether the sales tax assessment on the petitioner for the assessment year 1955-56 is valid under the Sales Tax Act.
3. Whether the decision of the Supreme Court in the case of State of Madras v. Gannon Dunkerley is applicable to the present case.
4. Whether the petitioner had an alternative remedy through revision to the Judge (Revisions) Sales Tax.

Analysis:

1. The primary issue in this case was whether the contract between the petitioner, a contractor, and the railway was divisible into separate contracts for the sale and supply of materials and for construction work. The contract specified a fixed sum for the construction of each bogie, inclusive of all materials, and additional payment for extra work. The High Court held that the contract was indivisible, as the contractor would receive a fixed amount regardless of the cost of materials, making it a single contract for construction work, not for the sale and supply of materials.

2. The petitioner was assessed for sales tax for the assessment year 1955-56 based on the total amount paid by the railway for the construction work. The Sales Tax Officer imposed a sales tax on the petitioner, which was upheld by the Judge (Appeals) Sales Tax. The High Court noted that the Supreme Court had ruled in a previous case that in a building contract, no sales tax could be charged on the cost of materials supplied by the contractor. The High Court found that the sales tax authorities had misapplied the Supreme Court decision and that the petitioner's case fell within the principles established by the Supreme Court.

3. The High Court analyzed the Supreme Court decision in the case of State of Madras v. Gannon Dunkerley, which established that in an indivisible contract for construction work, no sales tax could be charged on the cost of materials supplied. The High Court determined that the present case aligned with the principles set out by the Supreme Court and that the sales tax authorities had erred in not applying the Supreme Court decision to the petitioner's case.

4. The State argued that the petitioner had an alternative remedy through revision to the Judge (Revisions) Sales Tax, but the High Court cited a recent Supreme Court decision to refute this argument. The High Court held that the petitioner was entitled to seek relief through a writ petition under Article 226 of the Constitution, and as such, the writ petition was allowed, quashing the assessment order and the order of the Judge (Appeals) Sales Tax.

In conclusion, the High Court ruled in favor of the petitioner, finding that the contract was indivisible, and the sales tax assessment was not valid based on the principles established by the Supreme Court. The High Court allowed the writ petition, quashing the assessment order and the order of the Judge (Appeals) Sales Tax.