TMI Blog1999 (3) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... ar, treating such supply as sale . 3.. The petitioner floated tenders for civil works for construction of various sections of power plants, residential colonies, etc., at Vindhyanagar, on rate contracts. As per the terms of the civil works contract as given in the award letter, the petitioner undertook to provide its own iron and steel, cement, etc., of requisite quantity at the specified rate and the value of such material was to be set-off/deducted from the bills payable to the contractors for the works actually done by them in accordance with terms and conditions and specifications of the contract. 4.. The petitioner-corporation obtained a provisional registration certificate dated 23rd November, 1982 under section 16-B of the M.P. General Sales Tax Act, 1958 (for short, the Act ). The petitioner-corporation filed a consolidated return on 25th March, 1985 for the period 1983-84 on the basis of financial year followed by it in which nil turnover in respect of sales was shown. The assessment proceedings were taken up by Assistant Commissioner of Sales Tax. The petitioner was asked to furnish details and on furnishing details of the works got done through contractors and pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the controversy in the matter, much will depend upon the terms and conditions of the contract entered into between the petitionercorporation and the contractor for construction of the power house. Clause 15(b) of the Civil Contracts (General Conditions of Contracts-Civil Works) which is relevant for our purposes is reproduced as under: 15(b): Material to be supplied by the corporation: Materials to be supplied by the corporation are shown in Schedule B which also stipulates quantum, place of issue and rate(s) to be charged in respect thereof. (1) If after acceptance of the tender the contractor desires the corporation to supply any other materials, such materials may be supplied by the corporation, if available, at rates to be fixed by the Engineer-in-Charge. The corporation reserves the right not to issue any such materials. The non-issue of such materials will not entitle the contractor for any compensation whatsoever either in time or in cost. 2(a). The corporation may issue all the materials to be issued to the contractor under the contract at its site stores or nearest rail head. In case the materials are issued at the nearest rail head the cost of the transportat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on different materials: (a) Cemen t 3 per cent of estimated quantity of cement to be used in items of work. (b) Reinforcement steel 5 per cent of estimated quantity based on bar banding schedules. (c) Structural steel As stipulated in technical specification (d) Cut-pieces of reinforcement rods of length 3.0 metres and above may be accepted by the corporation and credit given at the issue rates. 6.. Surplus materials returned by the contractor shall be credited to him by the Engineer-in-Charge at rates not exceeding those at which these were originally issued to him after taking into consideration any deterioration or damage which may have been caused to the said materials whilst in the custody of the contractor. 7.. If on completion of works the contractor fails to return surplus materials out of those supplied by the corporation, then in addition to any other liability which the contractor would incur the Engineer-in-Charge may by a written notice to the contractor, require him to pay within a fortnight of receipt of the notice for such unreturned surplus materials at double the issue rates. 8.. Empty cement bags The recovery of cement is inclusive of cost of ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through contractors. The company supplied to the contractors for use in construction bricks, coal, cement, steel, etc., for a consideration which in addition to the cost price of the company included some additional amounts which were charged by the company. Question was whether the supply of building materials amounted to sale and the company was a dealer for the purposes of sales tax under the Orissa Sales Tax Act, 1947. It was held that the supply constituted sale . The company supplied the building material to the contractors at agreed rates. There was concurrence of the four elements which constitute a sale: (1) the parties were competent to contract; (2) they had mutually assented to the term of contract; (3) absolute property in building materials was agreed to be transferred to the contractors; and (4) price was agreed to be adjusted against the dues under the contract. It was also observed that no serious argument was advanced in that case that the supply of building material belonging to the company for an agreed price did not constitute a sale. After discussing all the case laws on the subject, their Lordships came to the conclusion that this supply made by M/s. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply made by the Central P.W.D. to the contractor amounts to sale. Their Lordships also referred to another decision of the apex Court in the case of State of Himachal Pradesh v. Associated Hotels of India Ltd. [1972] 29 STC 474 and in the case of Brij Bhushan Lal Parduman Kumar v. Commissioner of Income-tax [1978] 115 ITR 524 held as under: Therefore, from the above decisions it follows that in order to be sale taxable to duty, not only the property in the goods should pass from the contractor to the Government, or the appellant in this case 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. Merely passing of property from the contractor to the Government would not suffice. There must be sale of goods. The primary object of the bargain judged in its entirety must be viewed. In the instant case, clause (10) is significant as we have set out hereinbefore. For the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m any sums then due or thereafter to become due to the contractor under the contract or otherwise, or against or from the security deposit, or the proceeds or sale thereof if the same is held in Government securities, the same or a sufficient portion thereof being in this case sold for the purpose. All materials so supplied to the contractor shall remain the absolute property of Government and shall not be removed on any account from the site of the work, and shall be at all times open to inspection by the Engineerin-Charge. Any such materials remaining unused and in perfectly good condition at the time of the completion or determination of the contract shall be returned to the Engineer-in-Charge at a place directed by him, if by a notice in writing under his hand he shall so require ; but the contractor shall not 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court also in the case of Hindustan Steel Ltd. v. Commissioner of Sales Tax [1996] 101 STC 282 wherein similar clause 51(1) of the general conditions of the contract was there and in that also, the Hindustan Steel Ltd. undertook to supply the steel and cement to the contractor for construction of the plant. Clause 51(1) of that agreement also reads almost identically as the clause (1) of the case of Goel Co. [1989] 72 STC 368 (SC) and clause 15(b) of the case of the present petitionercorporation: 51(1) If the specification or estimate of the work provides for the use of any special description of materials to be supplied from the Engineer s store, or if it is required that the contractor shall use certain stores to be provided by the Engineer, the contractor shall be supplied with such materials and stores as required from time to time to be used by him for the purpose of the contract only and the value of the full quantity of materials and stores so supplied at the rates specified in the said schedule or memorandum may be set off or deducted from any sums then due. All materials supplied to the contractor shall remain the absolute property of the employer, and shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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