1994 (12) TMI 313 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the use of mechanized labor (cranes, tippers, and trucks) for the execution of a works contract is entitled to the benefit of section 13(1)(b)(ii) of the Bihar Finance Act, 1981.
2. Whether the goods in question should be included in the registration certificate from the date of application or from the date of judgment.

Issue-wise Detailed Analysis:

1. Mechanized Labor and Section 13(1)(b)(ii) of the Bihar Finance Act, 1981:

The petitioner, a public limited company, entered into a works agreement requiring the use of cranes, tippers, and trucks. The sales tax authorities refused to include these items in the registration certificate under section 13(1)(b)(ii) of the Bihar Finance Act, 1981, arguing that these items were not "directly" used in the execution of the works contract. The petitioner challenged this decision under articles 226 and 227 of the Constitution of India.

The court reviewed the precedent set by Tata Iron and Steel Company Ltd. v. State of Bihar [1970] 26 STC 30 (Pat.), where the inclusion of certain items in the registration certificate was allowed, interpreting that items need not be an ingredient of the finished goods to qualify for inclusion. However, the court also considered the Orissa High Court decision in Kalinga Construction Co. Ltd. v. Collector of Sales Tax, Orissa, Cuttack [1962] 13 STC 225, which emphasized that materials must form part of the work itself.

The court noted that the Deputy Commissioner of Commercial Taxes rejected the inclusion of the items based on their durable nature and potential use outside Bihar. However, the court found that the goods were required for the execution of the works contract and should be included in the registration certificate.

The court held that the word "directly" in section 13(1)(b)(ii) should be interpreted to mean that the goods are essential for the execution of the works contract, not necessarily that they must form part of the final product. The court concluded that the petitioner is entitled to the inclusion of cranes, tippers, and trucks in the registration certificate.

2. Effective Date of Inclusion in the Registration Certificate:

The petitioner argued that the registration certificate should be amended from the date of application. The court referred to the Madhya Pradesh High Court judgment in Orient Paper Mills Ltd. v. Commissioner of Sales Tax [1969] 23 STC 308, which held that the amendment should be effective from the date of application if allowed.

The court found no statutory provision indicating the effective date of the amendment in the Bihar Finance Act, 1981. Therefore, the court directed that the entry in the registration certificate should be effective from the date of the application, which was October 14, 1985.

Conclusion:

The court allowed the writ petition, directing that the goods in question (cranes, tippers, and trucks) be included in the registration certificate from the date of application, October 14, 1985. The judgment emphasized that the inclusion of the word "directly" in section 13(1)(b)(ii) was to ensure the essentiality of the goods for the execution of the works contract, not to restrict their use to the final product. The court found that the Division Bench judgment in Tata Iron and Steel Company Ltd. v. State of Bihar did not require reconsideration.