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1961 (7) TMI 61 - HC - VAT and Sales Tax

Issues Involved:
1. Entitlement to tax-free purchase of earth-moving machineries and related items.
2. Applicability of sales tax exemption for contractors based on Supreme Court precedent.

Issue-wise Detailed Analysis:

Issue 1: Entitlement to Tax-Free Purchase of Earth-Moving Machineries and Related Items

The petitioner, a contractor registered under section 9 of the Orissa Sales Tax Act, 1947, sought to include various items such as earth-moving machineries, motor-trucks, and related spares in their registration certificate for tax-free purchase. The Sales Tax Officer, Collector of Commercial Taxes, and the Board of Revenue denied this request, stating these items were not used as materials in the execution of the contract. The petitioner argued these items were essential for contract execution, but the authorities maintained that only materials that physically form part of the contract work qualify for tax exemption. The court upheld this view, stating that the expression "for use in the execution of the contract" implies materials that become part of the work itself and pass as property to the contracting party. Consequently, the court answered the first question in the negative, affirming the authorities' decision.

Issue 2: Applicability of Sales Tax Exemption for Contractors Based on Supreme Court Precedent

The second question addressed whether a contractor for earthwork, not liable as a dealer under the Sales Tax Act per Supreme Court ruling, could claim tax exemption for goods used in contract execution. The petitioner argued that the definition of "dealer" in section 2(c) of the Act included contractors, and thus they should be entitled to the exemption. However, the court noted that subsequent legislative amendments excluded contractors from the definition of "dealer." The court also referenced the Supreme Court decision in State of Madras v. Gannon Dunkerley & Co., and similar rulings from other High Courts, which held that contractors are not dealers as they do not sell materials used in contracts. Therefore, the court concluded that the petitioner, not being a dealer, was not entitled to the benefits under section 5(2)(a)(ii) of the Act, answering the second question in the negative.

Conclusion:

Both questions were answered in the negative, affirming that the petitioner was neither entitled to purchase the specified items tax-free nor eligible for the sales tax exemption as a contractor. The reference was answered accordingly, with each party bearing their own costs.

 

 

 

 

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