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TMI Blog2012 (8) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... tween the parties, the Tribunal was legally justified in holding the impugned transactions effected to M/s. Assam Gas Company Limited (wherein the materials have been supplied and installed) as divisible ones and hence interstate sales of goods liable to tax under the Central Sales Tax Act, 1956? Q.2 Whether on the facts and circumstances of the case and having regard to the terms of the contract entered into between the parties, the tribunal was justified in holding the impugned transactions to M/s. Assam Gas Company Limited (wherein the materials have been supplied and installed) as not indivisible and hence not works contract? 3. Few facts necessary for the purposes of answering this reference are as under. 4. The return filed by the applicants for the assessment year 1st April, 1994 to 31st March, 1995 was considered by the Assessing Officer i.e. Assistant Commissioner of Sales Tax (Asstt.) B/254, Nagpur division, Akola. The said Assessing Officer by his assessment order dated 7th December, 1997 called upon the applicants to pay amounts towards the Central Sales Tax more particularly stated in the order dated 7th December, 1997. Penalty in terms of Section 9(2) of the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd November, 1994 (For short said Agreement) executed between Assam Gas and M/s. Polyolefins Industries Ltd. It is required to be noted that the company namely M/s. Polyolefins Industries Ltd was taken over by the present applicants and that is how orders are passed against applicants. 7. Learned advocate Mr. Joshi appearing on behalf of the applicants submitted that the authorities below did not take into consideration the terms and conditions incorporated in the said agreement for the purposes of deciding the question whether the transaction with the Assam Gas was an indivisible interstate works contract. 8. Learned advocate Mr. Joshi had submitted that in order to appreciate the terms on which the applicants had agreed to carry out work for Assam Gas, it would be proper to consider the terms of the said agreement. He had submitted that for the purposes of deciding as to whether the transaction between the applicants and Assam Gas was a works contract or a contract to supply pipes and installation of the same the terms appearing in the said agreement would be relevant. He submitted that authorities who passed the orders ought to have considered those terms while deciding the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to show in what way the applicants would be charging the Assam Gas for the purposes of work done. According to Mr. Joshi since the applicants were to charge Assam Gas on the basis of work done at the rate specified for the individual item, it would go to show that the contract with the Assam Gas was indivisible and it could not be divided into two parts namely; supply of material and installation of the said material at site. 12. Learned advocate Mr. Joshi submitted that the authorities below merely relied upon the work order dated 8th September, 1994 and the invoices prepared by the applicants. Learned advocate Mr. Joshi had submitted that the said invoices were raised by the company for the limited purpose of complying with the provisions of the Excise duty provisions and were not the invoices to show that the HDPE pipes were sold to the Assam Gas. Learned advocate Mr. Joshi had drawn our attention to Exh."F" page 47 of the paper book to support the aforesaid contention. He had pointed out that a specific endorsement was passed on the invoice to show that the goods covered by the said invoices were for the home consumption. Learned advocate Mr. Joshi had drawn our attention to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... November, 2001 to the 46th amendment to the Constitution of India by which the concept of divisible contract and indivisible contract had come to an end was not warranted as the liability under the said Act for transfer of property in goods involved in the execution of works contract could be fastened only after 11th May, 2002 when the definition of the term 'sale' appearing in the said Act came to be amended on account of Amendment Act 20 of 2002. Learned advocate Mr. Joshi had, therefore, submitted that prior to 11th May, 2002, in order to fasten the liability under the said Act, it was necessary for the authorities concerned to arrive at a conclusion as to whether the transaction in question is divisible contract or indivisible contract. 17. Learned advocate Mr. Joshi had submitted that question whether works contract could be divisible or indivisible would ultimately depend upon the facts and circumstances of the case and no straight jacket formula could be laid down. Learned advocate Mr. Joshi had submitted that the approach of the authorities below was not proper in the facts and circumstances of this case. 18. Learned advocate Mr. Joshi appearing on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the reference should be answered to hold that the transaction with the applicants and Assam Gas was divisible and that the said transaction could be divided into two parts namely contract for sale of pipes to Assam Gas and contract of laying of pipes for the benefit of Assam Gas. 21. Learned advocate Mr. Sonpal had taken us through the very clause on which reliance was placed by learned advocate Mr. Joshi appearing on behalf of the applicants namely clause 1(e) 'delivery'. Clause 3 ''scope of work', clause 9 'payment terms' and clause 21. In addition to the aforesaid clauses, he had relied upon clause 23 'Care of material and equipment furnished by the company'. Learned advocate Mr. Sonpal submitted that on proper interpretation of these clauses, the transaction with Assam Gas be treated as divisible. 22. Learned advocate Mr. Sonpal submitted that since in the Annexure I cost of the material to be used while performing the contract and cost of installation is shown separately, it was easily possible to divide the total amount payable to the applicants into two parts namely; cost towards supply of pipes and other materials and charges for layi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l had, therefore, submitted that the order passed by the Assessing Officer has been rightly confirmed by the said tribunal and it needs no interference. He submitted that the reference should be answered in favour of the respondents. 26. We have heard learned Counsel on both sides and we have perused the entire record. We have also perused the judgments which have been cited across the bar. The applicants executed the said agreement dated 23rd November, 1994 with Assam Gas for the performance of work of laying HDPE pipe for transportation of natural gas as specified in the 'scope of work' as set out in clause 3. It would be necessary to quote clause 3 'scope of work' as the interpretation of the said clause along with other clauses would determine the nature of the contract namely whether the said contract was an indivisible interstate works contract or a contract to supply pipes and a contract to lay down the pipes as per the requirement of Assam Gas. "3. SCOPE OF WORK The scope of this contract includes supply of HDPE pipes of various sizes (as mentioned in Annexure '1') and all HDPE on line fittings, cleaning/ clearing of ROW, hauling and stringing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be done for the successful fulfillment of terms of the contract. The applicants were entitled to have mobilization of advance to the extent of 10% of the contract value on furnishing of bank guarantee from a nationalized bank for equal amount with the work order. Clause 9 refers to the term 'contract value' and in our view use of this term contract value clearly indicates that the consideration payable to the applicants was to be calculated as a whole and not in parts as suggested by the respondents. If at all the contract was intended to be divided into two parts, the said payment terms would have indicated that the applicants would be entitled to get cost of the pipes on delivery of required quantity of pipes to be used for the purposes of laying the pipes. In substance, the payment terms set out in the said agreement speak in favour of the applicants that the contract was to be read as an interstate indivisible works contract. Clause 21 specifically mention that the work was awarded to the applicants on a turnkey basis. The use of the term 'Turnkey basis' would clearly indicate that the parties intended to look to the transaction as a whole and not as a transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age 47 specifically mentions that the articles mentioned in the invoice are for home consumption. This would mean that the said articles were not to be sold in the market but the said articles were to be used in performance of an obligation cast upon the applicants to comply with the said agreement. The fact that the said invoice was raised in the name of Assam Gas clearly indicates that pipes mentioned in the said invoice were to be used in performing the contract. It is pertinent to note that the applicants have specifically passed an endorsement 'no tax being works contract'. In our view, this endorsement would support the stand of the applicants that the invoices were not raised to show that goods covered by the invoices were sold to Assam Gas. The said invoices appear to have been raised to show that the particular quantity of pipes will be used while performing the work contract with Assam Gas. The applicants have raised commercial invoices and one such invoices is at page 50. Reading of the said commercial invoices would clearly go to show that the amount mentioned in the said invoice was being claimed by the applicants on account of performance of the said agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon by the learned advocates on both sides. The judgment relied upon by respondents in the case of Indian Hume pipes Ltd. Vs. State of Rajasthan & Ors (Supra) will have no application to the facts of this case as the said judgment pertained to the imposition of tax liability under the State Sales Tax Law. In the present case, we are concerned with imposition of liability under the Central Sales Tax Act. 35. Reliance placed by the learned advocate Mr. Sonpal on the judgment in the case of H.Y. Jadhav Vs. State of Karnataka (Supra) will have no application to the facts of this case in as much as the facts covered by the said case are distinguishable. In the said case, the party was required to supply ballast to the railways and while doing so they were required to stack it in a particular manner before actually delivering the goods to the railways. In the present case the applicants were required to perform the contract of laying of pipelines as a whole as set out in the clause 3 'scope of work' of the said agreement. We have already indicated as to how the said agreement will have to be considered as a indivisible interstate works contract. 36. The reference to the judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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