2001 (6) TMI 794 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Exclusion of turnover related to seigniorage, metal breaking, loading and unloading, and transport charges from taxable turnover.
2. Whether the seigniorage fee constitutes a sale price.
3. Transfer of property in goods under the works contract.

Detailed Analysis:

1. Exclusion of Turnover Related to Seigniorage, Metal Breaking, Loading and Unloading, and Transport Charges:

The petitioner, a registered dealer and contractor, sought to exclude the turnover related to charges incurred for seigniorage, metal breaking, loading, unloading, and transport of metal used for road laying from the taxable turnover for the assessment years 1989-90 to 1991-92 and 1993-94 to 1994-95. Initially, the Commercial Tax Officer accepted the exclusion for the first three years but later revised the assessments to include these amounts. The Sales Tax Appellate Tribunal upheld the revised assessments, leading to the present revisions and writ petitions.

The petitioner argued that the ownership of the metal remained with the Roads and Buildings Department, and therefore, no transfer of property occurred, making the turnover non-taxable. The petitioner relied on the Supreme Court's decision in State of Orissa v. Titaghur Paper Mills Co. Ltd. [1985] 60 STC 213, which held that no sale occurred under similar circumstances.

2. Whether the Seigniorage Fee Constitutes a Sale Price:

The petitioner contended that the seigniorage fee paid for extracting boulders did not amount to a sale price, as there was no sale involved. The petitioner cited the larger Bench decision in Titaghur Paper Mills Co. Ltd., which overruled an earlier decision in State of Madhya Pradesh v. Orient Paper Mills Ltd. [1977] 40 STC 603, stating that a lease for extraction does not constitute a sale.

3. Transfer of Property in Goods Under the Works Contract:

The Government Pleader argued that the petitioner, upon extracting the boulders and converting them into metal, became the owner of the metal. The metal was then used in the road laying work, transferring ownership to the contractee upon incorporation into the work. This transfer constituted a sale or deemed sale, making the turnover taxable.

The Court considered the Supreme Court's decision in Cooch Behar Contractors' Association v. State of West Bengal [1996] 103 STC 477, which held that royalty paid for materials used in a works contract is part of the contractual transfer price and taxable. The Court also referenced the decision in Gannon Dunkerley & Co. v. State of Rajasthan [1993] 88 STC 204, which established that goods used in executing a works contract are deemed to be sold when incorporated into the work.

The Court concluded that the expenditures towards metal breaking, loading, unloading, and transport are part of the cost of goods to the contractor. When these goods are used in the execution of the works contract, there is a transfer of property from the contractor to the contractee, resulting in a deemed sale liable to tax.

Conclusion:

The Court dismissed the tax revision cases and writ petitions, holding that the disputed turnover related to seigniorage, metal breaking, loading, unloading, and transport charges is part of the taxable turnover under the Andhra Pradesh General Sales Tax Act, 1957. The Court found no merit in the petitioner's contention that there was no sale or deemed sale, emphasizing that the transfer of property in goods occurs when they are incorporated into the works contract.