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TMI Blog1968 (2) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... tallation of electric lamps on its streets, the petitioner submitted its tender and entered into the agreement at annexure A and executed that contract. For the assessment year 1957-58, the petitioner submitted its return at annexure B to the petition under the Bengal Finance (Sales Tax) Act, 1941 (hereinafter referred to as "the Act") and, in pursuance of the notice issued by respondent No. 1, produced before him its books of account as well as the bills submitted by it to the Corporation (a copy of which is at annexure BB). In his assessment order for the year 1957-58, which is at annexure C, respondent No. 1 assessed sales tax under the Act upon a turnover of Rs. 46,052-2-6 on account of "sales from electrical contract" rejecting the petitioner's claim for exemption on that account. Aggrieved by the said order, petitioner appealed to respondent No. 2 (Appeal Case No. 339/58-9) (annexure D), but the appeal was dismissed by the order at annexure E The petitioner then applied in revision against the appellate order to respondent No. 3 (Additional Commissioner, Commercial Taxes) and pressed on his claim for exemption on the authority of the decision of the Supreme Court in Dunkerl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision in Dunkerley's case(1) was followed to declare unconstitutional a statutory provision by which sales tax was payable in respect of building contracts as such and to restrain the taxing authorities from compelling the assessee to file returns in respect of his "receipts from contract works for the purpose of assessment". (iii) The decision in Peare Lal v. State of Punjab[1958] 9 S.T.C. 412; [1959] S.C.R. 438. was also a case of building contract. It was reiterated in this case that whether the contract was an indivisible one or not was to be determined upon a construction of the agreement (page 441) and, from the fact that the tender was invited as well as accepted for execution of the specified building works for a lump sum showed that there was no separate agreement for the sale of materials. In Peare Lal's case(3), the State relied strongly upon rule 33 of the General Conditions of Contracts issued by the Government as follows: "All stores and materials brought to the site shall become and remain the property of the Government and shall not be removed off the site without the permission...of the G.E. But whenever the works are finally completed, the contractor shall at hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the materials was to pass to the owner as soon as they were brought on the site by the contractor, nevertheless, the Court held, applying the decision in Peare Lal's case[1958] 9 S.T.C. 412; [1959] S.C.R. 438. that this was a term inserted with the object of ensuring quality and that it did not mean that the materials were being sold to the owner, as would be evident from another term of the agreement that in case of damage or destruction of the materials during execution of the works, the loss would fall not on the owner but on the contractor. In the result, the statutory provision in question which provided for a fictional splitting up of the contract for separating the value of the materials was struck down as unconstitutional and the assessment proceedings were quashed (page 1621). (v) Government of Andhra Pradesh v Guntur Tobaccos[1965] 16 S.T.C 240; A.I.R. 1965 S.C. 1396. was, of course, a case of packing materials being supplied free of charge with the sale of tobacco but the question of assessability of the value of the packing materials was decided by the majority of the Court on the application of the propositions arrived at in the foregoing cases relating to buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4; A.I.R. 1965 S.C. 1655 at pp. 1662-1663. was also a case of supply of goods to be manufactured by the assessee, namely, the manufacture of a bus on chassis to be supplied by the employer. Both this case and that of Chandra Bhan(1) just cited are authority for the proposition that where the essence of the contract is the sale of specific goods after manufacture, it is immaterial that the manufacture is to be made on some basic material supplied by the employer, or at his specification or even under his supervision (Patnaik's case(2). But as observed in Chandra Bhan's case(1), the Court can infer a separate and independent contract for sale of goods as distinguished from a composite works contract only where it is established that it was "the intention of the parties in making the contract that a chattel should be produced and transferred as a chattel for a consideration", (c) In the case of John Mowlem v. Commissioner of Sales Tax[1967] 19 S.T.C 59., apart from the works contract, the assessee had undertaken to procure and supply certain plant and machinery and the title to those plants, etc., was not to pass aspart of the execution of the works contract. It was held that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s property pass therein as movables. The materials pass to the owner of the building only as an accretion to the building. A contract for the sale of materials cannot be implied from such an agreement (Dunkerley's case(6). (ii) Where the agreement constitutes a single contract as in the preceding paragraph, it is not open to the State "to split up that agreement into its component parts, single out that which relates to the supply of materials and to impose a tax thereon treating it as a sale" (Dunkerley's case[1958] 9 S.T.C. 353; [1959] S.C.R. 379 at pp. 418, 423-424, 427. (iii) Where the contract is one for execution of work for a lump sum as offered by a tender and accepted by the contractor, no separate agreement for supply of material is involved (Peare Lal v. State of Punjab[1958] 9 S.T.C. 412; [1959] S.C.R. 438 at p. 441. and Carl Still's case[1961] 12 S.T.C. 449; A.I.R. 1961 S.C. 1615 at p. 1619., even though there is a term in the agreement that the property in the materials would pass to the employer as soon as the goods were brought to the site by the contractor. (iv) Parties may, however, enter into distinct and separate contracts, one for the transfer of materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready familiar since the observations in Peare Lal's case[1958] 9 S.T.C. 412; [1959] S.C.R. 438.and does not indicate any agreement for the sale of materials. (b) More emphasis has been paid on behalf of the respondents on the second and third paragraphs of clause 2 which read as follows: "The materials (viz., stone, etc.) will be supplied to the contractor by the Corporation at the rates annually fixed by the Chief Engineer... The contractor shall not supply his own materials whenever such Corporation materials are available; any such unauthorised supply by the contractor shall not be paid for. Should the indented quantities of Corporation materials fall short or be in excess, they must be adjusted by further indents or by sending back the surplus; if, however, the shortage be small and negligible in the opinion of the Engineer-in-charge, he may in his discretion allow the contractor to supply the deficiency himself, but in such cases 10 per cent of the cost of materials so supplied by the contractor at the Corporation rates shall be deducted from his bill. If the contractor retains possession of any surplus materials issued to him by the Corporation, a deduction of 50 per cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to infer that the whole or any part of this amount represented the value of any materials supplied by the petitioner in the execution of the contract. (ii) Nor does the bill produced by the petitioner (annexure BB, page 19) gives any contrary indication. It shows that the petitioner did not charge more than Rs. 384-6-0 per post, which was not in excess of the contractual amount and that the only thing that the petitioner did was to give particulars of the items which were involved in the erection of a lamp post, but in respect of each of the items, the petitioner referred to the Corporation rate for execution of the work and there was no extra charge on account of the sale of any materials. What the respondent No. 1 did was a curious thing. Instead of proceeding to ascertain the value of the materials supplied by the petitioner item by item, as the Assistant Commissioner had directed him to do, he relied upon a statement obtained from the petitioner where the total amount realised on account of completed contract was shown as Rs. 71,401 out of which Rs. 25,349 was shown as contracting charges including labour, carriage and cartage, leaving a balance of Rs. 46,052. It was conclud ..... X X X X Extracts X X X X X X X X Extracts X X X X
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