TMI Blog2012 (8) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... tended 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 view of aforesaid it is held transaction to supply and laying down the pipe being inseparable, it would constitute works contract and to such a works contract, the liability to pay Central Sales Tax would arise only after 11.05.2002 and since the transaction in the present case pertains to the period prior to 11.05.2002, the applicant would not be liable for Central Sales Tax. - SALES TAX REFERENCE NO. 9 OF 2005 - - - Dated:- 13-8-2012 - J.P. DEVADHAR R.Y.GANOO, JJ. Mr. Praful C. Joshi for the applicants Mr. Vinay Sonpal. A pannel Counsel for the respondent State JUDGMENT : (PER R.Y. GANOO, J ) 1. The applicants namely M/s. National Organic Chemical Industries Ltd. filed Reference Application No. 24 of 2002 before the Maharashtra Sales Tax Tribunal, Mumbai (For short said Tribunal ) praying for a reference be made to this Court in regard to the judgment dated 29th November, 2001 passed by the said tribunal in Seco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1997 passed by the Assessing Authority was challenged by filing an appeal under Section 9(2) of the said Act and Section 55(6) of the Bombay Sales Tax Act, 1959. The Deputy Commissioner of Sales Tax (Appeals), Nagpur heard and decided the said appeal. He passed an order dated 28th April, 2000. Reading of the order dated 28th April, 2000 indicates that the contention of the applicants that the contract with Assam Gas was indivisible interstate works contract and as such no liability under the said Act could be fastened was rejected. By the said order, balance demand to the tune of ₹ 28,08,327/were ordered to be recovered. The applicants were aggrieved by the aforesaid order dated 28th April, 2000. They, therefore, filed Second Appeal No.805 of 2000 before the said tribunal. The said tribunal by its judgment and order dated 29th November, 2001 confirmed the view taken by the Assessing Officer as well as Deputy Commissioner of Appeals and rejected the contention of the applicants that the transaction with Assam Gas was an indivisible interstate works contract. Said Tribunal gave directions to redetermine the tax liability by indicating the manner in which the tax liability shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the manner in which the clause 3 scope of work was worded and the manner in which the parties were to act in terms of the said clause, it was clear to the parties that the pipes would be carried to the site where they were to be laid and the pipes would be laid ultimately to see that the pipelines is created for transportation of natural gas. 10. Learned advocate Mr. Joshi had drawn our attention to clause 9 payment terms and had submitted that the applicants were to get monies from Assam Gas on the basis of the work done at various stages and not in two parts namely supply of pipes being one part and installation of the said pipes as per the requirements of Assam Gas as second part. Learned advocate Mr. Joshi had thereafter taken us through clause 15 and had submitted that by the said clause, the arrangements were arrived at to see that the material will be provided by the Assam Gas to the applicants depending upon the requirement of the applicants. Learned advocate Mr. Joshi had also pointed out that clause no.21 responsibilities of contractors where it is specifically mentioned that the materials, labour, tools and equipments are to be furnished by the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the performance of the works contact and the rate charged was on the basis of the terms which are mentioned in Annexure I of the said agreement. Learned advocate Mr. Joshi submitted that the authorities below while passing the orders erred in relying upon the invoices which were raised for the limited purpose of complying with the excise duty provisions. 14. Learned advocate Mr. Joshi had submitted that the authorities below had erred in not considering the various terms of the said agreement which would go to show that the said agreement was indivisible. He further submitted that reliance placed on the work order dated 8th September, 1994 and the invoices raised by the applicants for the purposes of compliance of excise duty provisions was erroneous. 15. Learned advocate Mr. Joshi had submitted that the reaching of pipes at the site was not as and by way of as a result of the sale in favour of the Assam Gas but the said pipes reached at site for the performance of the works contract and to complete the project as mentioned in the said agreement. Learned advocate Mr. Joshi submitted that on proper interpretation of the said agreement, the invoices raised by the applicants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the submission of the applicants before the authorities below that the invoices raised for the purposes of complying with the Excise duty provisions would not determine the nature of the contract should have been accepted by the authorities. He submitted that by not accepting this contention, the authorities have erred. Learned advocate Mr. Joshi had also relied upon the judgment in the case of State of Rajasthan Anr. Vs. Man Industrial Corporation Ltd. reported in 24 STC 349(SC). This judgment was relied upon to show that the goods which were used in the performance of the contract would pass on the completion of the work and not before. He relied upon this judgment to contend that the property in the pipelines would pass in favour of Assam Gas only after the work of laying of pipes would be complete in accordance with the terms of the said agreement. 19. Learned advocate Mr. Joshi had, therefore, submitted that the reference is required to be answer in favour of the applicants by holding that the transaction with Assam Gas was indivisible. He further submitted that if contract with Assam Gas is treated as indivisible, no tax liability can be imposed upon the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to raising of credit notes by the applicants in regard to the material which ultimately was not used for installation. According to him, raising of credit notes by the applicants in regard to certain material which was returned by the Assam Gas as the one not utilized while performing the contract goes to show that the said material was sold by the applicants to Assam Gas. 24. Learned advocate Mr. Sonpal had relied upon the judgment delivered by the State Taxation Tribunal, Rajasthan in the case of Indian Hume Pipe Ltd. Vs. State of Rajasthan and Ors. to submit that if a contract can be divided into two parts as supply of goods and rendering services, a liability under the Sales Tax Act would be attracted. 25. Learned advocate Mr. Sonpal had relied upon the judgment of Karnataka High Court in the case of H.Y. Jadhav Vs. State of Karnataka reported in 1981, 48 STC 496 Kar. This case involved supply of ballast to the railways and stacking the same. In this case, the Karnataka High Court ultimately came to the conclusion that a contract under which an assessee agrees to supply jelly (Ballast) to the purchaser with the condition that jelly (ballast) would be stacked in the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to be supplied by the contractor and the company will be liable for clearance of R.O.W. Supply of all on line Non HDPE materials, MS line from trunk line Tee point to PRS station with a valve, flange only . 27. We have perused the clause 3 'scope of work'. We have also perused the other clauses which are referred to in the earlier part of the judgment and in particular clause 9 'payment terms', clause 15, clause 21 and clause 23. We have also perused the Annexure I by which the parties had agreed to the rates forming the consideration in the contract. After having gone through the relevant clauses, we are inclined to observe that the said agreement between the applicants and the Assam Gas was a works contract and it could not be divided into two parts namely contract to supply the pipes and a contract to lay down the pipelines. The use of HDPE pipes was an integral part of the performance of the contractual obligation by the applicants in as much as the applicants were required to lay down the tranches and lay down the pipes which would be reaching at site. In order to comply with the contractual obligation cast on the applicants, the applicants were required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be accepted to hold that the pipes were merely sold to Assam Gas. If that would have been the understanding between the parties, the terms of the Annexure I would have been different in as much as the installation rate rupees per meter would not have been quoted to form a part of the total amount payable in respect of a particular description of a pipe. Annexure I also indicates the expected quantity of pipes which would be required for the purposes of laying down the pipeline as per the terms of the agreement. The amount of money payable was dependant upon total quantity of pipes which would be used to create the pipeline. Same is the case as regards the various items which are mentioned at Sr. No.2 to 7 in Annexure I. We are, therefore, inclined to accept the submission of learned advocate Mr. Joshi that monies payable to the applicants were in regard to the work to be carried out in its entirety. Learned advocate Mr. Joshi's submission with reference to the raising of invoices is required to be accepted to hold that the transaction between the applicants and Assam Gas was indivisible for the purposes of determining the liability under the said Act. A typical invoice at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id work order which stated as under. All the terms and conditions will be incorporated in the agreement to be executed between you and the Assam Gas Company Ltd. which is under preparation . 31. A reading of this clause would go to show that the real terms on which the parties were to act and the real terms which would bind the parties for the purposes of tax liability were the terms to be incorporated in the said agreement. Reading of the orders passed by the authorities below including the said tribunal clearly indicates that due weightage to the various clauses of the said agreement was not given by the authorities and the authorities wrongly interpreted the transaction between the parties as a divisible contract and accordingly fastened the liability under the said Act upon the applicants. In our view, the demand raised against the applicants under the Central Sales Tax on the basis of the said agreement was not proper. 32. It is true that the distinction between a divisible contract and an indivisible contract came to an end after the 46th Amendment to the Constitution of India, however, liability to pay Central Sales Tax covered by property in goods involved in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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