1989 (1) TMI 353 - HC - VAT and Sales Tax

Issues Involved:
1. Liability under the M.P. General Sales Tax Act, 1958.
2. Liability under the M.P. Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (Entry Tax Act).
3. Validity of the notice dated June 8, 1987, issued by the Sales Tax Officer.
4. Validity of the order dated September 10, 1987, issued by the Sales Tax Officer.

Issue-wise Detailed Analysis:

1. Liability under the M.P. General Sales Tax Act, 1958:
The petitioner, a partnership firm, contended that it is not covered under the M.P. General Sales Tax Act, 1958, as it does not qualify as a "dealer" under section 2(d) of the Act. The firm undertook a contract with Hindustan Copper Ltd. for excavation and removal of waste rock and earth, which is purely a labor contract. The petitioner argued that it does not sell, supply, or consume any material in the execution of this work. The court examined the charging section (Section 4) and the definition of "dealer" and concluded that the petitioner is not a dealer as it merely consumes diesel, lubricating oil, and spare parts for operating and maintaining its machinery, which are not sold or supplied to the Government company. Therefore, the petitioner is not liable to pay tax under the Sales Tax Act.

2. Liability under the M.P. Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (Entry Tax Act):
The petitioner argued that it is not liable under the Entry Tax Act as it does not execute any works contract as defined under section 2(m) of the Act. The court analyzed the charging section (Section 3(1)(b)) and the definition of "works contract" and "incidental goods." It was found that the petitioner's work does not involve the construction of buildings, dams, bridges, erection of factories, or installation of machinery. The diesel and lubricating oil used by the petitioner are for the operation and maintenance of machinery and not for the execution of a works contract. Therefore, the petitioner is not liable to pay entry tax.

3. Validity of the notice dated June 8, 1987, issued by the Sales Tax Officer:
The petitioner challenged the notice issued under section 29(1) of the Sales Tax Act for the production of account books, arguing that it is not liable to the incidence of taxation under the Sales Tax Act and the Entry Tax Act. The court referred to the Supreme Court's decision in Calcutta Discount Co. Ltd. v. Income-tax Officer, which held that High Courts have the power to issue orders prohibiting executive authorities from acting without jurisdiction. The court found that the notice was issued without jurisdiction as the petitioner is not liable under the said Acts.

4. Validity of the order dated September 10, 1987, issued by the Sales Tax Officer:
The petitioner also challenged the order directing it to submit particulars about all purchases made between specified periods. The court reiterated that the petitioner is not liable under the Sales Tax Act and the Entry Tax Act, and therefore, the order was without jurisdiction and uncalled for. The court quashed the order dated September 10, 1987, as it was issued without legal basis.

Conclusion:
The court allowed the petition, declaring that the petitioner firm is not liable to pay any tax under the M.P. General Sales Tax Act, 1958, and the M.P. Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976. Consequently, the notice dated June 8, 1987, and the order dated September 10, 1987, were quashed. The parties were directed to bear their own costs, and the outstanding security amount was ordered to be refunded to the petitioner.

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