1984 (1) TMI 278 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the applicant can be said to be a "dealer" within the meaning of section 2(f) of the Rajasthan Sales Tax Act, 1954.

Detailed Analysis:

Issue 1: Definition of "Dealer" under Section 2(f) of the Rajasthan Sales Tax Act, 1954
- Relevant Statutory Provision: Section 2(f) of the Rajasthan Sales Tax Act, 1954 defines a "dealer" as any person who carries on the business of buying, selling, supplying, or distributing goods, directly or otherwise, for cash, deferred payment, commission, remuneration, or other valuable consideration.

- Facts and Circumstances: The assessee-firm entered into a contract with the Government of Rajasthan for the manufacture and supply of bricks and tiles for the Rajasthan canal construction. The materials necessary for the manufacture, including earth, coal, and water, were supplied by the State Government. The assessee claimed that it was not a "dealer" as the contract was for work and labour, not for the sale of goods.

- Board of Revenue's Decision: The Board of Revenue held that the contract was for the sale of bricks and tiles and that the assessee was a "dealer" within the meaning of the Act.

- Assessee's Argument: The assessee argued that the contract was for work and labour since all materials were supplied by the State, and only labour and skill were provided by the assessee. The ownership of the materials and finished goods remained with the State Government.

- Court's Analysis:
- Nature of Contract: The court emphasized that whether a transaction is a contract for sale or a works contract depends on the terms and conditions of the agreement, the intention of the parties, and the surrounding circumstances.
- Terms of the Contract: The tender and contract terms indicated that the contract was for the supply of a specified quantity of bricks and tiles, with taxes and royalties borne by the contractor. The contractor was responsible for any loss or damage during manufacture due to natural calamities.
- Risk and Ownership: The court noted that the bricks and tiles remained at the contractor's risk until delivery to the State. The contractor bore the risk of loss or damage until delivery, indicating that the property in the bricks and tiles passed to the State only upon delivery.
- Case Law: The court referred to several precedents, including Chandra Bhan Gosain v. State of Orissa and Commissioner of Sales Tax, Gujarat v. Sabarmati Reti Udyog Sahakari Mandali Ltd., which held that contracts for the manufacture and supply of bricks were contracts for sale, not works contracts.

- Conclusion: The court concluded that the contract was for the sale of bricks and tiles, and the assessee was a "dealer" within the meaning of section 2(f) of the Act. The property in the bricks and tiles did not pass to the State until delivery, and the contractor bore the risk of loss until that point. The question referred to the court was answered in the affirmative, in favor of the revenue and against the assessee.