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TMI Blog2006 (7) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... 0, in 36 of 1998 of Rs. 67,41,777.66 in assessment year 1990-91, in 37 of 1998 of Rs. 5,15,550.38 1991-92, in 38 of 1998 of Rs. 90,299.15 in assessment year 1992-93 and in 290 of 1990 of Rs. 76,208 for the assessment years 1985-86. The facts for the disposal of all the revisions are the similar. The revisionist had a registered office at Faridabad, Haryana and the revisionist started construction of Tanakpur Hydro Electric Project at river Sharda for hydro electric generation which included construction of barrage, power house, power channel, tail race channel, etc. The project was completed by different contractors and the revisionist during the course of execution of work issued cement and steel to complete the work to their contractors with a strict stipulation that the same shall all along remain with the corporation and after the completion of the work the contractor would return all unused materials. It was further made clear in the agreement inbetween the contractor and the corporation that the material would be supplied at the agreed cost and the said cost of the consumed articles would be deducted or adjusted in the running bills of the contractor. The assessing authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration to the contractor for being used for construction of corporation building and other projects amounted to a transaction of sale within the meaning of section 2(h) of the Act. He further contended that the sales tax was liable to be paid and the assessing authorities had rightly assessed the revisionist and he also contended that the lower appellate courts were perfectly justified in confirming the order of the assessing authority. In these revisions there are two substantial questions involved, namely, (i) whether, in the facts and circumstances of the case the learned Tribunal is legally justified in holding that the material issued to the contractor, i.e., cement and steel, is a sale? and (ii) whether on the facts and circumstances of the case the learned Tribunal is justified in holding that the recovery of the royalty from the contractor for the use of river bed material by contractor for applicant's work is liable to sales tax. Before examining the respective contentions of the parties, I would like to mention the relevant clause of the contract which is reproduced as under: 23 Cement. (a) Cement will be supplied to the contractor in bags as received from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to mention here that the learned counsel for the assessee tried to point out that the transaction which has taken place in-between the parties should be treated as a works contract. A contract for work in execution of which goods were used might take one of the three forms, viz., (i) the contract might be for the work to be done for the remuneration and for supply of materials used in the execution of the works for a price, (ii) the contract might be a contract for work in which the use of the materials was accessory or incidental to the execution of the work, (iii) the third type of contract might be contract for work and use or supply of materials though not accessory to the execution of the contract, is voluntary or gratuitous. In the third contract there was no sale because though the property passed, it did not pass for a price. The question is largely one of fact depending upon the terms of the contract including the nature of the obligation to be discharged thereunder and the surrounding circumstances. The true effect of assertion made pursuant to a contract has to be judged not by artificial rules but from the intention of the parties to the contract. In a contract of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d rightly assessed the assessee. The same controversy came before the honourable apex court in Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211 (SC); [1969] 2 SCC 627, in which it was clearly held by the apex court that when a company supplies to the contractors for use in construction coal, steel, cement, etc., for a consideration it amounts to a sale and the company becomes a dealer for that purpose. The sales tax was rightly assessed from the assessee. The Uttar Pradesh Sales Tax Act, 1948 defines the sale under section 2(h) which reads as under: (h) 'sale' with its grammatical variations and cognate expressions, means any transfer of property in goods (otherwise than by way of a mortgage, hypothecation, charge or pledge) for cash or deferred payment or other valuable consideration, and includes (i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (ii) a transfer of property in goods (whether as goods or in some other forms) involved in the execution of a works contract; (iii) the delivery of goods on hire purchase or any system of payment by instalments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held that in order to be sale taxable to duty, not only the property in the goods should pass from the PWD to the appellant but there should be an independent contract separate and distinct apart from mere passing of the property where a party purchases or procures goods from the Government. Mere passing of property from the PWD to the appellant would not suffice. There must be sale of goods. The primary object of the bargain judged in its entirety must be viewed. It was further held that for purpose of performance, the contractor was bound to procure materials. But in order to ensure that quality materials are procured, the PWD undertook to supply such materials and stores as from time to time required by the contractor to be used for the purpose of performing the contract only. The value of such quantity of materials and stores so supplied was specified at the rate and got set-off or deducted from any sum due or to become due thereafter to the contractor. It was further held by the honourable Supreme Court that the said transaction of providing cement by the PWD to the company was a sale. The similar controversy came again for consideration before the apex court in Rasht ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered as sale and was not held to be liable to levy of tax under the provisions of the Sales Tax Act. The honourable apex court held that a lottery having been held to be in essence a chance for a prize, the sale of a lottery ticket can only be a sale of that chance. There is no other element. Every right can be sub-divided into lesser rights. When these lesser rights culminate in a legally recognisable right, it is the latter which defines the right. The right to participate in the draw is a part of the composite right of the chance to win and it does not feature separately in the definition of the word lottery . It is an implicit part of the right to win. It is not a different right. The separation is specious since neither of the rights can stand without the other. A draw without a chance to win is meaningless and one cannot claim a prize without participating in the draw. In fact, the transfer of the chance to win assumes participation in the draw. There is no value in the mere right to participate in the draw and the purchaser does not pay for the right to participate. The consideration is paid for the chance to win. There is therefore no distinction between the two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be entitled to return any such materials unless with such consent and shall have no claim for compensation on account of any such materials so supplied to him as aforesaid not being used by him or for any wastage in or damage to any such materials. Provided that the contractor shall in no case be entitled to any compensation or damages on account of any delay in supply or non-supply thereof of all or any such materials and stores. Provided further that the contractor shall be bound to execute the entire work if the materials are supplied by the Government within the scheduled time for completion of the work plus 50 per cent thereof (scheduled time plus 6 months if the time of completion of the work exceeds 12 months) but if a part only of the materials has been supplied within the aforesaid period, then the contractor shall be bound to do so much of the work as may be possible with the materials and stores supplied in the aforesaid period. For the completion of the rest of the work, the contractor shall be entitled to such extension of time as may be determined by the Engineer-inCharge whose decision in this regard shall be final. The conditions resemble in both the cases. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding upon the authorities. [See Commissioner of Sales Tax v. Indra Industries [2001] 122 STC 100 (SC); [2000] UPTC 472 (SC)]. I have already discussed in the preceding paragraphs about the applicability of the judgment recorded in N. M. Goel's case [1989] 72 STC 368 (SC); [1989] 1 SCC 335. So far as Sales Tax Appeal No. 85 of 2001 is concerned, the assessment in this case was made on the basis of the aforementioned agreement and the judgment of the assessing authority was rescinded, by the learned Tribunal. I have already discussed in detail with regard to the applicability of the provisions of the Sales Tax Act with regard to this agreement. As such, in view of the above discussion I am of the view that the present appeal is liable to be allowed. In view of the foregoing discussion, the Revisions Nos. 58 of 2006, 59 of 2006, 60 of 2006, 61 of 2006, 62 of 2006 and 63 of 2006 are squarely covered by the aforesaid judgments of the honourable apex court. Therefore, the transactions between the revisionist and the contractor come within the meaning of the word sale under the provisions of section 2(h) of the Act. I do not find any ground for interference in these matters. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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