1973 (3) TMI 132 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Admissibility of additional evidence under Rule 61 of the Orissa Sales Tax Rules, 1947.
2. Determination of whether the contract in question is a "works contract" or a "sale of chattels."

Issue-wise Detailed Analysis:

1. Admissibility of Additional Evidence:
The first issue was whether the Tribunal was right in accepting the letter dated 9th January 1968, from the Executive Engineer, Salandi Irrigation Project, as evidence, which was not produced before the assessing or first appellate authority and was objected to under Rule 61 of the Orissa Sales Tax Rules, 1947. The court noted that both the learned Advocate for the opposite party and the learned standing counsel did not object to the letter being considered. Consequently, the court answered this question in the positive, affirming that the Tribunal was correct in accepting the letter as evidence under Rule 61.

2. Nature of the Contract:
The core issue was whether the supply of materials under the agreement between the Public Works Department (P.W.D.) and the opposite party constituted a "works contract" or a "sale" under Section 2(g) of the Orissa Sales Tax Act, 1947. The court examined the terms and conditions of the agreement, particularly focusing on the ownership of the quarries and the payment of royalty.

- Ownership and Royalty Payment: The court analyzed the ownership of the Bajabati and Mandia (Pakhar) quarries, which originally belonged to Darpan Estate and were later transferred to the P.W.D. The agreement stipulated that the contractor had to pay a royalty of Rs. 2 per 100 cubic feet for the materials extracted. The court determined that the payment of royalty created a jural relationship of licensor and licensee between the P.W.D. and the contractor, thereby vesting the title of the materials in the contractor.

- Legal Precedents: The court discussed several precedents to determine the nature of the transaction. It referred to cases like *Chandra Bhan Gosain v. State of Orissa* and *Commissioner of Sales Tax v. Purshottam Premji*, which provided insights into similar contractual relationships involving royalty payments and ownership of materials. The court concluded that the prohibitive clause in the agreement, which restricted the contractor from selling quarry produce to private parties, did not negate the conclusion that the transaction constituted a sale.

- Elementary Legal Analysis: The court emphasized that the supply of materials by the contractor to the P.W.D. involved a transfer of property in goods, which meets the definition of "sale" under Section 2(g) of the Act. The court concluded that the transaction was not merely a works contract but a sale of goods, making it exigible to sales tax.

Conclusion:
The court answered the second question by stating that the supply under the contract constituted a sale. The references were answered accordingly, with no order as to costs.

Separate Judgment:
ACHARYA, J., concurred with the judgment delivered, agreeing with the conclusions reached.

References Answered Accordingly.