2008 (2) TMI 958 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the supply of explosives by the petitioner to his contractor for use in mining operations constitutes a sale under the Rajasthan Sales Tax Act, 1994.
2. If the supply is considered a sale, whether such sale is not taxable as a subsequent sale within the state on which tax has already been paid at the first point.
3. Whether the explosives used for blasting in the petitioner's mine could be purchased at concessional rates against declaration form ST17.

Issue-wise Detailed Analysis:

1. Whether the supply of explosives by the petitioner to his contractor constitutes a sale under the Rajasthan Sales Tax Act, 1994:

The petitioner argued that the supply of explosives to the contractor for use in mining operations does not constitute a sale because the ownership of the explosives was never transferred to the contractor. The petitioner maintained that the explosives were used under strict supervision and control and were exhausted in the mining operation. Therefore, no legal title of the goods passed on to the contractor.

However, the court found that the transaction met all the criteria of a sale as defined under Section 2(38)(ii) of the Rajasthan Sales Tax Act, 1994, which includes "a transfer of property in goods involved in the execution of a works contract." The court noted that the property (explosives) was delivered to the contractor, the cost of the explosives was recovered from the contractor, and the transaction was completed with the passing of goods for consideration.

The court also referenced the Supreme Court's decision in Karya Palak Engineer, CPWD, Bikaner v. Rajasthan Taxation Board, Ajmer, where it was held that the use or consumption of materials in the construction work amounts to a sale. Therefore, the court concluded that the supply of explosives to the contractor constituted a sale under the Act of 1994.

2. If the supply is considered a sale, whether such sale is not taxable as a subsequent sale within the state on which tax has already been paid at the first point:

The petitioner contended that even if the supply of explosives is considered a sale, it should not be taxable as it is a subsequent sale of tax-paid goods. The petitioner argued that the explosives were purchased against declaration form ST17 at a concessional rate of 4%, making them tax-paid commodities.

The court rejected this argument, stating that the transfer of property to the contractor constituted a sale before the explosives were used in the mining operation. Therefore, the petitioner did not fulfill the conditions of Sub-section (1) or (3) of Section 10 of the Act of 1994, which would have allowed the purchase of goods at a concessional rate for the petitioner's own use. Consequently, the petitioner was liable to pay the difference in tax and interest as per Sub-section (2) of Section 10 of the Act of 1994.

3. Whether the explosives used for blasting in the petitioner's mine could be purchased at concessional rates against declaration form ST17:

The petitioner argued that the explosives were shown as raw material in the certificate of registration and were used for mining operations, thus qualifying for purchase at a concessional rate under Section 10 of the Act of 1994. The petitioner submitted a declaration form ST17 and paid tax at a concessional rate of 4%.

The court found that since the transfer of property to the contractor was considered a sale, it occurred before the explosives could be utilized by the petitioner for its own mining operations. Therefore, the petitioner did not meet the conditions required to purchase the goods at a concessional rate under Section 10 of the Act of 1994. The court upheld the assessing authority's decision to charge the petitioner the difference in tax and interest.

Conclusion:

The court dismissed the revision petitions, holding that the supply of explosives to the contractor constituted a sale under the Rajasthan Sales Tax Act, 1994. The petitioner was not entitled to purchase the explosives at a concessional rate, and the subsequent sale of tax-paid goods was taxable. The petitioner was also liable to pay interest on the tax due.