TMI Blog1976 (7) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... y be briefly stated as follows: The assessee is a private limited company. It carries on business at Tezpur as contractor and order supplier. It is a registered dealer under the Act, the registration No. being TEZ/939/A/P. By order dated 23rd March, 1966, the Superintendent of Taxes, Tezpur, made assessment for the periods ending 30th September, 1963, and 31st March, 1964, including Rs. 2,36,842 and Rs. 2,24,794 as the value of tax-free purchases under declaration under rule 80 of the Assam Sales Tax Rules (hereinafter referred to as the Rules). The assessee purchased the materials worth these two amounts during the two periods tax-free under declaration for purpose of execution of contract in the State of Assam. The Superintendent of Taxes included these two amounts in the net turnovers of the assessee, as according to the Superintendent of Taxes, the assessee instead of using the materials purchased free of tax in the execution of contract, utilised the materials in manufacturing other goods and sold the finished products to the customers. The assessee filed appeals against the said order of assessment before the Assistant Commissioner of Taxes, Gauhati, who rejected the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever that the appellant when he accepted orders for manufacture of the goods, he did so as a contract for sale of goods. The appellant was a manufacturing dealer or a producerdealer. Since the transactions did not amount to work or labour contract, the appellant became liable to pay taxes on the value of the materials which he had purchased tax-free for use in the execution of contract but in fact used them in the manufacture of articles to be sold to the customers." Section 15 of the Act, as amended and applicable to the case, is quoted below: "15. Net turnover.-The net turnover shall be determined by deducting from a dealer's gross turnover during any given period- (1) his turnover during that period on- (a) the sale of goods exempted under section 6 and section 7; (b) sale to a registered dealer of (i) goods specified in the purchasing dealer's certificate of registration as being intended by him for- (a) resale in the State, or....................................... (c) use in the execution of any contract, (ii) containers and other materials for the packing of such goods: Provided that the goods which are purchased free of tax and are used by a dealer for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of contract in the State", the following are added with effect from 1st April, 1962 "Zinc, whitemetal, solders, coppers, hardwares, millstones, aluminium sheets, hardware stores, oxygen, acetylene gases, belting, jointing solution, brass sheets, rods and pipes." It was submitted on behalf of the assessee before the Board that the assessee was not a manufacturing concern but a contractor, pure and simple, who receives orders from customers and supplies things according to their specifications. That the goods worth Rs. 2,36,842 and Rs. 2,24,794 were purchased tax-free under declaration for use in the contract work were actually used by the assessee in the execution of contracts entered into by the assessee with different customers. That the assessee in its factory at Tezpur did not manufacture standard goods for general sale in the market but obtained orders from customers for construction of iron gates, water tanks, etc., strictly according to the specifications cited by them. Thus it was contended on behalf of the assessee that the goods purchased taxfree were utilised by the assessee in the execution of contract works and, therefore, the taxing authority erred in law in includin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... execution of contract as stated in the registration certificate, then these amounts could not be included in the net turnovers of the assessee. The assessee's contention is that they have utilised these goods in preparing iron gates, water tanks, etc., according to the specifications as ordered by the customers. According to the assessee, the customers give specifications of iron gates, water tanks, etc., place orders and then in pursuance of those orders the assessee prepares and constructs those iron gates, water tanks, etc., with the materials purchased tax-free and thus the materials, it is submitted, purchased tax-free, are really used in execution of the contracts or orders placed by the customers. For proper appreciation of this submission we are required to consider the definition of "contract" as laid down in the Act, which we find in section 2(2) of the Act and it reads as follows: "2. (2) 'contract' means any agreement for carrying out for cash or deferred payment or other valuable consideration- (a) the preparation, construction, fitting out, improvement or repair of any movable property, or of any building, road, bridge or other immovable property, or (b) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of an iron gate, for example, there is an agreement of transfer for money consideration of the goods involved in the execution of the contract, that is, the making of the iron gate. It is also submitted on behalf of the department that in view of the decisions in Pandit Banarsi Das Bhanot v. State of Madhya Pradesh(1), which followed the decision in State of Madras v. Gannon Dunkerley Co. (Madras) Ltd.(2), it would be for the authorities under the Act to determine whether the agreement in question is, on its true construction, a combination of an agreement to sell and an agreement to work, and if they come to the conclusion that such is its character, then it will be open to them to proceed against that part of it which is a contract for the sale of goods, and impose tax thereon. This may be a sound submission on the basis of the definition of "sale" as given in section 2(12) of the Act. But, considering the proviso to section 15(1)(b), the position becomes a bit difficult. In the instant case, the proviso has been utilised and for that purpose it must be established that the goods purchased tax-free were used by the dealer for the purposes other than those specified in his ..... X X X X Extracts X X X X X X X X Extracts X X X X
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