1982 (3) TMI 249 - HC - VAT and Sales Tax

Summary

Issues:
1. Quashing of sales tax officer's order and deputy commissioner's revision order.
2. Classification of contracts as sale of goods or work and labor.
3. Acceptance of reduced tax rate declarations.
4. Penalty reconsideration in light of reduced tax rate.

Detailed Analysis:
1. The petitioner sought to quash the order of the Sales Tax Officer dated June 14, 1976, and the Deputy Commissioner's order dated May 18, 1977. The Sales Tax Officer imposed sales tax and penalty on the petitioner, which was upheld in part by the Deputy Commissioner. The petitioner contended that the contracts with Bhilai Steel Plant were not sales of goods but contracts for work and labor.

2. The Deputy Commissioner examined the contracts and found that when material was supplied free of cost, the contracts were for work and labor. However, when material was supplied on a cost recovery basis, the contracts amounted to the sale of goods. The court upheld the Deputy Commissioner's decision, stating that the contracts were correctly classified based on whether the material became the property of the petitioner before fabrication.

3. The petitioner argued that the reduced tax rate should apply based on declarations filed before the Deputy Commissioner. The court agreed with this contention, citing a Full Bench judgment supporting the acceptance of declarations in revision. However, the court rejected the petitioner's request to claim the reduced rate for transactions deemed as sales by the Deputy Commissioner, as no such claim was made earlier.

4. Lastly, the petitioner requested reconsideration of the penalty under section 17(3) in light of the entitlement to a reduced tax rate. The court agreed with this contention, leading to the partial allowance of the petition. The Deputy Commissioner's order was quashed, and a re-decision was directed considering the court's observations. No costs were awarded, and the security amount was to be refunded to the petitioner.