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TMI Blog1971 (12) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to as the assessee-to the Railway Board of railway coaches models 407, 408 and 411 is liable to sales tax under the Central Sales Tax Act. The Commercial Tax Officer, by assessment order dated March 28, 1964, in respect of the assessment year 1958-59, included the turnover in respect of the supply of these coaches. The Sales Tax Officer rejected the contention of the assessee that there was no sale involved in the execution of the works contract in view of certain decisions of the High Courts; e.g., McKenzies Limited v. The State of Bombay [1962] 13 S.T.C. 602., and Jiwan Singh v. State of Punjab [1963] 14 S.T.C. 957. In appeal, the Deputy Commissioner of Commercial, Taxes confirmed the order. In revision the Commissioner of Commercial Taxes also came to the same conclusion. He observed: "The contracts specifically mentioned that the underframes shall always remain the property of the Railway Board. On the other hand, the order placed with the assessee-company here was for the 'manufacture and supply' of railway coaches. The payment to the assessee-company is specifically referred to as 'price'. The conditions normally included in contracts for works are absent in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically procured for the purposes of completing the contracts." The Commercial Tax Officer submitted his report, and certain extracts may be reproduced below: "My findings revealed that as and when they purchased materials, they sent to the Railway Board 'an invoice' accompanied by a list of the details regarding the materials purchased. 90 per cent. of the value of these materials was then paid to the company after inspection of the materials by the Board's representative. Invoice No. 31009 of 15-10-1956 is obtained as a sample. This invoice shows that materials for the value of Rs. 2,60,374-12-0 were purchased by the company for 407 model coaches. The details of the materials are given in the list attached to the invoice. The invoice and the list were sent to the Board with a covering letter dated 15-10-1956 asking payment of Rs. 2,34,517-4-0 being 90 per cent. of the invoice amount. The amount of this invoice is included in the Board's remittance note No. 1290 of 30-10-1956 and a cheque was issued to the company for the total of several such invoices. The amount of the cheque received on 30-10-1956 was Rs. 22,90,719-0-0." He concluded: "(1) It is not possible to specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter No. 56/142/3/RE dated 8-1-57 the Railway Board are pleased to place an order on your works for the manufacture and supply of the following coaching stock on terms and conditions stated under para. 2 below: ------------------------------------------------------------------------------------ Item No. of Rly. Particular Price per coach Board's specification Nos. (without wheels Rolling Description of stock and required and axles and Stock Drawing No. underframes) Programme 1957-58 ------------------------------------------------------------------------------------ Broad Gauge Class III 55-B-14 Rs. 94,731 384 Coaches fully -------- 180 (Provisional)" furnished to CSC 1119 model '407' ------------------------------------------------------------------------------------ Following terms and conditions are relevant: (i) Price: (a) The price mentioned above is for stock without wheels and axles and underframes, and is provisional. Final price will be settled by negotiations after you have submitted your claim for the coaches ordered on you up to 1954-55 Rolling Stock Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e President of the Union of India. The Hindustan Aircraft Ltd., hereby undertake to hold at their works at Bangalore for and on behalf of the President of the Union of India and as his property in trust for him the stores and articles in respect of which advances are made to them under Railway Board's letters, Nos. 52/142/4/M dated 16th February, 1952, and 53/142/4/M dated 3rd March, 1953, and hereafter to be made to the Company under future orders from the Railway Board from time to time. 2.. The said stores and articles shall be such as are required for the purpose of the pending and future contracts and the advances made and to be made are without prejudice to the provisions of the contract as to rejection and inspection and any advance made against stores and articles rejected or found unsatisfactory on inspection shall be refunded immediately to the President of the Union of India. 3.. The Company shall be entirely responsible for the sale custody and protection of the said articles and stores against all risks till they are duly delivered to the President of the Union of India or as he may direct and shall indemnify the President of the Union of India against any los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract are as follows: (1) The Railway books capacity of the assessee for the purpose of construction of railway coaches. (2) Advance on account is made to the extent of 90 per cent. of the value of the material on the production of a certificate by the inspecting authority. (3) The material used for the construction of coaches before its use is the property of the Railway. This is quite clear from para. 1 of the indemnity bond set out above. No other meaning can be given to the words in the bond to the effect that "the Hindustan Aircraft Ltd. hereby undertake to hold at their works at Bangalore for and on behalf of the President of the Union of India and as his property in trust for him the stores and articles in respect of which advances are made to them". It seems to us clear that the property in the materials which are used for the construction of the coaches becomes the property of the President before it is used. (4) It seems that there is no possibility of any other material being used for the construction as is borne out from the report written by the Commercial Tax Officer. (5) As far as the coaches of models 407 and 408 are concerned, the wheelsets and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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