1979 (4) TMI 155 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the transfers of goods by the applicant to other consortium companies against payment constituted sales.
2. Whether sales of unserviceable goods, scraps, discarded and surplus materials were taxable under the Bengal Finance (Sales Tax) Act, 1941.
3. Whether the applicant was a dealer within the meaning of the Bengal Finance (Sales Tax) Act, 1941.
4. Whether the contract between the Government of India and the consortium was a divisible contract.
5. Whether the Board was justified in not considering the contract between the Government of India and the consortium.
6. Whether the applicant carried on the business of selling goods to its subcontractors.
7. Whether there was any sale of materials simpliciter involved in the transactions.
8. Whether there was any material before the Board to hold that the supply of materials to the subcontractors or member-contractors or the disposal of surplus materials were made with a profit-motive.
9. Whether the applicant acted as a dealer within the meaning of the Bengal Finance (Sales Tax) Act, 1941, by supplying materials to subcontractors or member-contractors or selling scrap and surplus goods.
10. Whether the supply of materials to sub-contractors or the sale of surplus or scrap materials was done systematically.
11. Whether the supply of materials to member-contractors amounted to carrying on the business of selling goods.
12. Whether the sale of scrap or surplus materials amounted to carrying on the business of selling goods.

Issue-wise Detailed Analysis:

1. Transfers of Goods to Consortium Companies:
The court found that the materials brought to the work site remained the property of the Government of India and were used solely for construction. The property in such goods would revest in the contractor only if the Government directed their clearance. Thus, the applicant could not transfer the property in the goods, and the transactions could not be considered sales. The entries in the books were for adjustment and accounting purposes, not sales.

2. Sales of Unserviceable Goods, Scraps, and Surplus Materials:
The court referred to the decision in *Davy and United Engineering Co. Ltd.* and held that the applicant could not be considered a dealer in respect of isolated sales of scrap and unserviceable materials. The retrospective operation of the extended definition of "business" had been struck down, and the applicant's primary business was construction, not selling goods.

3. Applicant as a Dealer:
The court held that the applicant was not a dealer within the meaning of the Bengal Finance (Sales Tax) Act, 1941. The main business of the applicant was construction, and the transactions connected with or ancillary to this business did not make the applicant a dealer.

4. Divisibility of the Contract:
The court disagreed with the Board's conclusion that the contract was divisible solely because it was divided into parts. The contract related solely to the construction of Durgapur Steel Works and was thus an indivisible contract.

5. Relevance of the Contract:
The court held that the contract between the Government of India and the consortium was relevant and should have been considered by the Board in determining whether the applicant was a dealer.

6. Business of Selling Goods to Subcontractors:
The court found that the transactions between the applicant and its subcontractors were not sales. The materials were provided for the purpose of construction, and the property in such goods remained with the Government.

7. Sale of Materials Simpliciter:
The court held that there was no sale of materials simpliciter involved in the transactions. The transfers were for construction purposes and did not constitute sales.

8. Profit-Motive in Supply of Materials:
The court found no material to support the Board's finding that the supply of materials to subcontractors or member-contractors or the disposal of surplus materials was made with a profit-motive.

9. Applicant Acting as a Dealer:
The court found the Board's finding that the applicant acted as a dealer to be tentative and vague, with no final conclusion reached. Thus, this question did not call for an answer.

10. Systematic Supply of Materials:
The court found no material to support the Board's finding that the supply of materials to subcontractors or the sale of surplus or scrap materials was done systematically.

11. Business of Selling Goods to Member-Contractors:
The court found no material to support the Board's finding that the supply of materials to member-contractors amounted to carrying on the business of selling goods.

12. Business of Selling Scrap or Surplus Materials:
The court found no material to support the Board's finding that the sale of scrap or surplus materials amounted to carrying on the business of selling goods.

Conclusion:
The court answered the questions referred under section 21(2) of the Bengal Finance (Sales Tax) Act, 1941, in the negative and in favor of the applicant. The reference was disposed of accordingly, with no order as to costs.

← Previous Next →