2009 (11) TMI 849 - HC - VAT and Sales Tax

Whether petitioner No. 1 cannot be termed as a dealer within the meaning of section 2(10) of the Mizoram Sales Tax Act, 1989 nor the transfer of building materials to its contractor can be construed as sale under section 2(19)? Held that - While executing hydro electric project petitioner No. 1 necessarily has to supply various kinds of goods to the owner of the project. Besides this, supply of goods directly or indirectly (emphasis Here italicised. supplied) to the client, is also covered under section 2(10). In considered opinion, these words would also bring the methodology of supplying goods by petitioner No. 1 through its contractor in execution of the project, within the ambit of dealer and its supply of materials to the contractor as sale within the purview of the Act. The case in hand is squarely covered by the ratio laid down in N.M. Goel 1988 (10) TMI 106 - SUPREME COURT OF INDIA

Issues Involved:
1. Whether Petitioner No. 1 qualifies as a "dealer" under section 2(10) of the Mizoram Sales Tax Act, 1989.
2. Whether the transfer of construction materials to the contractor constitutes a "sale" under section 2(19) of the Mizoram Sales Tax Act, 1989.
3. Legality of the imposition of sales tax, penalty, and interest on the transfer of construction materials.
4. Legality of the interest imposed on the sales tax amount for the period from July 1, 2002, to March 31, 2004.

Detailed Analysis:

1. Whether Petitioner No. 1 qualifies as a "dealer" under section 2(10) of the Mizoram Sales Tax Act, 1989:
The court examined whether Petitioner No. 1, a Government of India Enterprise engaged in power generation projects, qualifies as a "dealer." According to section 2(10) of the Mizoram Sales Tax Act, a "dealer" is any person who carries on the business of selling, supplying, or distributing goods, directly or indirectly. The court noted that Petitioner No. 1 supplied various construction materials to its contractor for the execution of a hydroelectric project. The court held that the definition of "dealer" is broad and includes any person supplying goods, directly or indirectly. Therefore, Petitioner No. 1 qualifies as a "dealer" under the Act.

2. Whether the transfer of construction materials to the contractor constitutes a "sale" under section 2(19) of the Mizoram Sales Tax Act, 1989:
The court analyzed whether the transfer of construction materials by Petitioner No. 1 to its contractor constitutes a "sale" under section 2(19) of the Act. The definition of "sale" includes any transfer of property in goods for cash, deferred payment, or other valuable consideration. The court noted that the materials supplied to the contractor were for use in the specific project and had to be returned if surplus. Despite this, the court held that the transfer of property in goods to the contractor, even if temporary, amounts to a sale. The court relied on the Supreme Court's decision in N.M. Goel & Co. v. Sales Tax Officer, which held that the transfer of materials by an employer to a contractor for execution of a project constitutes a sale.

3. Legality of the imposition of sales tax, penalty, and interest on the transfer of construction materials:
The court upheld the imposition of sales tax on the transfer of construction materials, stating that Petitioner No. 1 is a "dealer" and the transfer constitutes a "sale" under the Act. The court also upheld the penalty imposed for the delay in depositing sales tax, noting that the penalty was set aside by the Commissioner of Taxes due to the lack of prior notice or hearing. The court found no fault with the respondents' actions in assessing sales tax and imposing interest and penalty for the transfer of construction materials.

4. Legality of the interest imposed on the sales tax amount for the period from July 1, 2002, to March 31, 2004:
The court addressed the imposition of interest on the sales tax amount for the period from July 1, 2002, to March 31, 2004. The interest was imposed under the direction of the Principal Accountant General. The court held that there is no legal infirmity in imposing interest that might have been omitted inadvertently while assessing the tax. However, the court set aside the letter imposing interest due to the lack of detailed calculation and directed the Superintendent of Taxes to pass a fresh order providing full details of the interest calculation. The court also directed the authorities to consider whether it is appropriate to impose interest, given that the assessment was done long back and the tax has already been paid.

Conclusion:
The court disposed of all three writ petitions, upholding the imposition of sales tax and penalty while setting aside the letter imposing interest due to the lack of detailed calculation. The court directed the Superintendent of Taxes to pass a fresh order with detailed interest calculation and to consider whether it is appropriate to impose interest.

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