1985 (7) TMI 336 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the supply of cement bags by the Executive Engineer to the contractor for utilization in the execution of a contract constituted a sale and attracted the levy of tax under the Rajasthan Sales Tax Act, 1954.

Analysis:
The High Court of Rajasthan was tasked with determining whether the supply of cement bags by the Executive Engineer to the contractor for use in a government contract constituted a sale, thereby attracting tax liability under the Rajasthan Sales Tax Act, 1954. The case originated from an assessment order in 1964, where the assessing authority deemed the supply of cement as a sale and levied tax for the assessment year 1957-58. However, an appeal was filed, and the Deputy Commissioner (Appeals) overturned the assessment, stating that the supply of cement did not constitute a sale. Subsequently, a revision was filed, which was rejected by the Board based on the terms of the agreement between the State and the contractor, emphasizing that property in the goods had not been transferred, thus no sale had occurred.

The Division Bench of the Board also rejected a special appeal, concluding that no regular sale was involved in the transaction, and the Executive Engineer was not considered a dealer under the Sales Tax Act. However, a reference application was made under section 15 of the Act, which was initially rejected by the Board. Following a decision by the High Court based on a previous Supreme Court ruling, it was determined that a question of law did arise from the Board's order, leading to the reference being made for revision under the Amendment Act.

In analyzing the case, the Court examined the definitions of "business," "dealer," and "sale" under the Act. It was noted that the State Government was included in the definition of a dealer if engaged in business activities. The Court emphasized the importance of the terms of the agreement between the parties in determining whether a sale had taken place. Citing a previous Supreme Court decision, it was established that even if the property in the goods remained with the supplying party, a sale could still be deemed to have occurred under certain conditions.

Ultimately, the High Court held that the supply of cement bags by the Executive Engineer to the contractor constituted a sale under the Act, attracting tax liability. The Court allowed the revision, setting aside previous orders that deemed the transactions not constituting a sale and restoring the initial assessment order. As no representation was made on behalf of the non-petitioner, no costs were awarded in the case.