TMI Blog2010 (4) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, at the instance of the applicant/Revenue, is made by the Maharashtra Sales Tax Tribunal, Mumbai under section 61(1) of the Bombay Sales Tax Act, 1959 vide its judgment dated 30th April, 2001 for the opinion of this court on the following eight questions of law: (i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the activity of the appellant does not amount to manufacture when it is carried out on goods supplied by its customers though the same activity amounts to manufacture if carried out on the appellant's own goods? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law, in holding that the impugned activity is apparently falling within the description of sale under the Works Contract Act? (iii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law, in holding that the activity which is declared as amounting to works contract, cannot be held as activity of manufacture under the Bombay Sales Tax Act, 1959? (iv) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in the law in hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rials supplied by the customers. Mostly aluminium alloys are manufactured on works contract basis. Aluminium is supplied by the customers. Some more materials such as silicon and copper are required in small quantities for carrying out the works contract and the same is added by the respondent for making aluminium alloy. This activity, was held by the assessing authority vide its assessment order dated October 21, 1991, as manufacturing process for the assessment period from April 1, 1988 to March 31, 1989 and the purchase tax under section 13AA was levied at Rs. 2,98,453 by applying proportionate ratio method. Consequential additional tax and interest under section 36(3)(b) of the BST Act, 1959 were also levied. Being aggrieved by the aforesaid assessment order dated October 21, 1991, the respondent-assessee preferred a first appeal before the Deputy Commissioner (Appeals) contending that the impugned activity is covered under the Works Contract Act and hence, there is no occasion attracting levy of purchase tax under section 13AA of the BST Act, 1959. The Deputy Commissioner (Appeals) vide his order dated March 31, 1993 accepted the contentions of the respondent-assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59 for the relevant period from July 1, 1982 to August 31, 1990 reads thus: 13AA. Purchase tax payable on goods in Schedule C, Part I, when manufactured goods are not sold.-(1) Where a dealer, who is liable to pay tax under this Act, purchases any goods specified in Part I of Schedule C, directly or through commission agent, from a person who is or is not a registered dealer and uses such goods in the manufacture of taxable goods, then, unless the goods so manufactured are sold by the dealer, there shall be levied, in addition to the sales tax, paid or payable, if any, or as the case may be, the purchase tax levied or leviable, if any, under the other provisions of this Act in respect of purchases of such goods, a purchase tax at the rate of two paise in the rupee on the purchase price of the goods, so used in the manufacture, and accordingly the dealer shall include purchase price of such goods in his turnover of purchases in his return under section 32, which he is to furnish next thereafter. Mr. Sonpal further submitted that whenever the respondent is doing works contract for their customers they are using certain quantity of silicon and copper as without that it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee were also altogether different and, therefore, the assessees could not take a plea that once they were charged under the Works Contract Act then they could not be held liable to pay under the BST Act, 1959 for the same transaction. He further submitted that both these Acts simultaneously provided the tax liability on the respondent-assessee and therefore, they were liable to pay the same. He further submitted that the respondent-assessee used their material for completing the works contract on behalf of their customers and therefore, to the extent of materials used by them, amounted to sale and thus, they were liable to pay purchase tax under section 13AA of the BST Act, 1959. Mr. Sonpal further submitted that the word manufacturer has wider connotation in fixing tax liability on the assessee. According to him, the apex court in the matter of B.P. Oil Mills Ltd. v. Sales Tax Tribunal reported in [1998] 111 STC 188 held that where any commodity is subjected to a process or treatment with a view to its development or preparation for the market, it would amount to processing. Paragraph No. 7 of the judgment reads thus (at page 190 of STC): 7. Two expressions ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing cloth would be manufacture within the meaning of section 2(17) of the Sales Tax Act. For the purposes of entry 39 of notification dated 28th December, 1959, issued under section 41(1) of the Sales Tax Act, manufacture for sale could be goods of the purchasing dealer himself or on behalf of some other person who gets his goods manufactured by the purchasing dealer for the purpose of sale. Mr. Sonpal, learned counsel for the Revenue, further submitted that in the present case undisputedly aluminium is converted into aluminium alloys where the assessee uses his own copper and silicon. This process results in manufacturing of a new product, i.e., aluminium alloys. Therefore, according to him, the respondent-assessee is liable to pay tax under section 13AA of the BST Act, 1959. On the basis of these submissions, Mr. Sonpal urged that this court may hold that the activity carried out by the respondent-assessee amounts to a manufacturing activity and thus, they are liable to pay purchase tax under section 13AA of the BST Act, 1959 as well as interest under section 36(3)(b). Per contra Mr. Joshi, learned counsel appearing for the respondent-assessee, submitted that the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny goods in relation to execution of works contract, effected in the State or in the course of inter-State trade or commerce or in the course of import including any sum charged for anything done by the seller in respect of the goods at the time of or before delivery thereof and will also include the cost of freight, transit or insurance and any taxes, duties, cesses and fees paid or payable in respect of such goods, whether charged separately or not. Bombay Sales Tax Act, 1959 Works Contract Act Section 2(28): sale means a sale of goods made within the State for cash or deferred payment or other valuable con-sideration, and includes any supply by a society or club or an association to its members on payment of a price or of fees or subscription, but does not include a mortgage, hypothecation, charge or pledge; and the words sell , buy and purchase , with all their grammatical variations and cognate expressions, shall be construed accordingly. Section 2(l): sale means a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract in the State; and the word sell with all its grammatical vari-ation and cognate exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax paid by him under the Works Contract Act. Entry (29A) under article 366 of the Constitution of India reads thus: (29A) 'tax on the sale or purchase of goods' includes- (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire-purchase or any system of payment by instalments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the social limits of that power and, perhaps, even of the constitutional limits of that power in dealing with unequals. In such class of cases 'building activity' really relates to a basic subsistential necessity. It would be wise and appropriate for the State to consider whether the requisite and appropriate classifications should not be made of such buildingactivity attendant with such social purposes for appropriate separate treatment. These of course are matters for legislative concern and wisdom. Relying on the judgment in case of Builders Association of India [1989] 73 STC 370 (SC), Mr. Joshi submitted that it is thus clear from the observations of the apex court that the applicant cannot impose sales tax on the material used by the respondent at the time of execution of works contracts. He further relied on the judgment of this court in the matter of Commissioner of Sales Tax v. Auto Comp Corporation reported in [2009] 26 VST 30. In this case, the question arose before this court was whether at the time of executing the works contract if the dealer is using steel plates supplied by the customer for manufacture of outer flange and its own material for inner flange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative charges on the purchase of the molasses from the sugar mills, the opposite parties cannot realise the trade tax under the provisions of the U.P. Trade Tax Act, 1948 on the same purchase of molasses. He further submitted that the honourable Supreme Court in the case of Commissioner of Central Excise, Meerut v. Kisan Sahkari Chinni Mills Ltd. reported in [2002] 125 STC 432 (SC); [2001] 6 SCC 697 has held that administrative charge levied by the State of U.P. under the provisions of the U.P. Sheera Niyantran Adhiniyam, 1964, on the sale and purchase of molasses is a tax. The learned counsel for the petitioner has also relied upon the decision of the honourable Supreme Court in the case of Commissioner of Central Excise, Lucknow, U.P. v. Chhata Sugar Co. Ltd. reported in [2004] 2 RC 614; [2004] 3 SCC 466. He further submitted that the honourable Supreme Court in the case of Gupta Modern Breweries v. State of Jammu and Kashmir reported in [2007] 8 RC 688; [2007] 6 SCC 317 has held that the administrative charges imposed is a tax and not a fee. 8.. He further submitted that the special enactment will prevail over general enactment and as the U.P. Trade Tax Act is a general Act r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he works contracts. In exercise of that power, the State of Maharashtra enacted 1985 Act which was repealed by the 1989 Act from the date of its inception. In the present case, the question arises: whether the State Government can impose tax under the Sales Tax Act in this case on the material used at the time of carrying out the works contract. In this case, the respondent is engaged in manufacture of non-ferrous alloys and simultaneously also undertakes the works contract in making non-ferrous alloys out of the materials supplied by the customers. At the time of carrying out the works contract, the respondent is required to add some material owned by it such as silicon and copper in small quantity. It is the case of the respondent that they are paying tax on material used in carrying out the works contract under the Works Contract Act and therefore, they are not liable to pay under the BST Act, 1959. Not only that the same is not within the sweep of clause (29A) of article 366 of the Constitution. Even the apex court in the matter of Builders Association of India [1989] 73 STC 370 considered this issue and held that the sales tax laws passed by the Legislature of the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, in a contract for sale/purchase the principal factor is sale/purchase and it is contract that is incidental. The seller in such a contract is interested in selling while the buyer is interested in purchasing what is offered by the seller. The contract is a result of such desire on the part of both. In a works contracts, any transfer of property in goods that may result, cannot by any stretch of imagination be said to be sale. It is to be noted that the definitions of dealer , purchase price , sale , sale price , tax , turnover of purchase , etc., given in the BST Act, 1959 and the Works Contracts Act have different meanings. They operate in different fields. A dealer under the BST Act means a person who, for the purpose of commission, remuneration or otherwise, does the work of purchasing or selling the goods. It is difficult to lay down a single or group of tests which can be called decisive to the intention of a person to carry on a business the activity which the person must indulge in is not merely the activity of selling in the sense of transferring property of goods, but it must be the activity of carrying on the business of selling or supplying goods . Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim upon the item, whereas the word sale as defined under the Work Contracts Act denotes a sale of services of contractor for completing the works contracts. The works contracts are not normal sale. In the normal sale there is a transfer of property in definite or ascertained goods. The goods remain same before and after the delivery of the goods. However, in a works contracts it does not happen. The goods before the delivery and after the execution of works contracts are different, many times in different form also. For example, at the site of construction of a building, before the construction (works contract) commences, the goods like cement, steel, sand, etc., are lying but after the construction a building (immovable goods) comes to an existence. In a contract of sale, the main object is the transfer of property and delivery of the possession to the buyer whereas no such thing happens in the works contract. This is the difference between the normal sale and the deemed sale in the indivisible works contracts. In a similar way, the words sale price in the BST Act denote consideration payable by the purchaser to the owner whereas under the Works Contracts Act, sale price ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
