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TMI Blog2011 (2) TMI 1308X X X X Extracts X X X X X X X X Extracts X X X X ..... writ petition? What is the scope of judicial review in contractual matters? These are the prominent questions, which have to be answered in this appeal. The material facts, leading to this appeal, may, in brief, be set out as follows: Pursuant to a tender notice, dated September 30, 2009, issued by respondent No. 2, namely, Inspector General of Prisons, Assam, inviting tenders with samples from intending suppliers/recognized manufacturers/ dealers or their agents for supply of woollen blankets/materials for wardens' uniform for the jails of Assam, the writ petitioner (who is respondent No. 1 herein), the appellant (who was respondent No. 4 in the writ petition) and some others submitted their respective tenders for supply of woollen blankets. On October 20, 2009, when the tenders were opened, the lowest bidder's tender was found to be non-responsive inasmuch as he had not submitted separate tenders for different types of supply materials mentioned in the said tender notice. The writ petitionerrespondent No. 1's bid was found to be the second lowest and the appellant was found to be the third lowest bidder. As the lowest bidder's tender was found to be non-responsive, respondent No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing the communication, dated November 27, 2009, aforementioned, the appellant deposited a sum of Rs. 2,82,000 as security deposit and the deed of contract was accordingly executed on December 8, 2009 and, on the same day, a work order was placed with the appellant asking the appellant to supply 12,000 woollen blankets. By an interim order passed in the second writ petition, the supply of woollen blankets by the appellant was, however, kept suspended. During the progress of the writ proceeding, it surfaced that the bid of respondent No. 1 had been rejected by the State respondents/authorities concerned on, broadly speaking, two grounds, namely, (i) non-submission of the "sales tax clearance certificate" and (ii) the omission of respondent No. 1 to place "earnest money" in favour of the Inspector General of Prisons, Assam, inasmuch as respondent No. 1 was found, according to the State respondents/authorities concerned, to have placed the "earnest money" in favour of the IGP. The contention of respondent No. 1, in the writ petition, was that in its application, made to the postal authorities, respondent No. 1 had applied for pledging of the "earnest money" in favour of the Inspector ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of these facts, the State respondents/authorities concerned ought not to have denied the allotment of the contract to the writ petitioner-respondent No. 1 by contending that the writ petitioner-respondent No. 1 had not furnished the requisite "sales tax clearance certificate" despite the fact that the writ petitioner-respondent No. 1 was the lowest valid tenderer inasmuch as the lowest tenderer's tender had been found, as already indicated above, nonresponsive and invalid. The contentions of the writ petitioner-respondent No. 1 found favour with a learned single judge of this court inasmuch as the learned single judge, referring to the decision, in Global Energy Ltd. v. Adani Export Ltd. AIR 2005 SC 2653 and Bidhu Bhusan Choudhury v. Union of India, reported in [2000] 1 GLT 342, observed that the rejection of the writ petitioner's tender as invalid on the ground of omission to give complete description of the pledging authority, in the pledging documents, is not justified and is illegal inasmuch as the postal authority had, later on, clarified that the document, in question, stood pledged in favour of the Inspector General of Prisons, Assam. In so far as the requirement of furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n only of the petitioner's tender on this ground has to be declared as unjustified. 19. In this context the reference to section 8 of the General Clauses Act by Mr. Chaliha in my considered view has no application inasmuch as in the case in hand, the court is not scrutinizing a provision of any enactment but is examining the purport of a tender clause only. . . . 24. Selection of a party to execute a supply work through tender process would normally require selection of the party who has quoted the lowest price and in this case the petitioner's quotation was lower than respondent No. 4 to whom the work order was issued. Considering the lower quotation of the petitioner, he has a better right in my view to secure the contract in question and under such circumstances the work order granted in favour of respondent No. 4 is declared to be illegal." The learned single judge, thus, held that though the tender of the writ petitioner was considered invalid for non-submission of the "sales tax clearance certificate", the fact remains that when none of the tenderers had produced the "sales tax clearance certificate", rejection of the writ petitioner's tender alone, on the said ground, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te for supply of blankets was lower than that of the appellant, Dr. Saraf points out that as per clause 17 of the tender conditions, the tenderers were required to quote their rates inclusive of all taxes and charges. Drawing our attention to the tender documents of the writ petitioner, which formed part of the writ petition, Dr. Saraf points out that these documents clearly reveal that the rate, quoted by the writ petitioner, did not include VAT payable on the woollen blankets offered to be supplied. Dr. Saraf further points out that since the woollen blankets are taxable at four per cent and if the element of tax, so payable, is taken into consideration, the rate, quoted by the writ petitioner, would become higher than that of the appellant, but this aspect of the case appears to have completely escaped attention of the learned single judge while taking the view that the writ petitioner-respondent No. 1 herein was the lowest valid tenderer. The learned single judge, thus, according to Dr. Saraf, fell into error in not taking into account the fact that the tender notice required quoting of rate by the tenderer inclusive of VAT and since the writ petitioner had not included, withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions embodied in the tender notice. Mr. Kataki contends that in a tender process, there cannot be any implied term and a notice inviting tender cannot be interpreted on the basis of what the authorities might have intended and that the requirement of law is that the conditions, incorporated in a notice inviting tender, must be read as they appear in the notice inviting tender. In support of his submissions, Mr. Kataki places reliance on Commissioner of Police v. Gordhandas Bhanji AIR 1952 SC 16. Controverting the submissions made on behalf of the appellant that since the rate, quoted by the writ petitioner, was not inclusive of VAT, the same was not in conformity with the conditions of the tender notice and if the element of VAT payable was taken into account, the rate, quoted by the writ petitioner-respondent No. 1, would become higher than the rate quoted by the appellant, Mr. Kataki submits that there was a declaration by the writ petitioner, in the tender documents, that the writ petitioner would abide by all the terms and conditions of the tender notice and, hence, even though the rate, quoted by the writ petitioner, was exclusive of VAT, the said declaration given by the wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice had not been complied with by the writ petitioner as indicated above and, hence, the rejection of the writ petitioner's bid was wholly correct and justified and the interference, in the writ petition with the decision to award the contract, in question, in favour of the appellant, was not called for and may, therefore, be corrected in this appeal. Repelling the submissions made on behalf of the writ petitionerrespondent No. 1, Dr. Saraf submits that a VAT registration certificate, under the scheme of composition of VAT payable for execution of works contract, cannot be equated to the normal sale and supply of woollen blankets, for, supply of woollen blankets, according to Dr. Saraf, is not a works contract. Dr. Saraf contends that the VAT registration certificate, which the writ petitioner had submitted, suffered from two incurable defects inasmuch as the VAT registration certificate, submitted by the writ petitioner, was not the normal certificate of registration evidencing registration of the appellant as a dealer as envisaged in the VAT Act, 2003, for sale of goods and, secondly, the VAT registration certificate, which the petitioner had submitted, was in respect of works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be set aside only when there is a patent error on the face of the record, or the judgment is against the established or settled principle of law. If two views are possible and a view, which is reasonable and logical, has been adopted by a single judge, the other view, howsoever appealing such a view may be to the Division Bench, it is the view adopted by the single judge, which should, normally, be allowed to prevail. Though a writ appeal is an appeal in principle, as indicated hereinbefore, the fact remains that a writ appeal too is an appeal and is, therefore, a continuation of the original order passed in exercise of writ jurisdiction by a single judge of this court and, thus, when a writ appeal is continuation of the original proceeding, there is no absolute bar in allowing new pleas to be taken in a writ appeal, particularly, when such a plea is of law and can help the court reach a correct decision in the appeal and also when a new plea relates to such facts, which are not disputed and are already available on record and can help the court in deciding the appeal completely and effectively. This apart, a writ appeal being a continuation of the original order, the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pped from raising the issue, namely, (i) whether the said registration certificate was an appropriate registration certificate as envisaged by the tender notice and (ii) whether a payment, made under the composition scheme, as indicated hereinbefore, amounts to a "tax clearance certificate"? The objection, raised, in this regard, by Mr. Kotoky, that the appellant has raised a new plea, cannot, therefore, hold water. Since it is necessary for us to examine, in the factual scenario of the present case, the appellant's plea as to whether the VAT registration certificate, furnished by the writ petitioner, was an appropriate VAT registration certificate in the context of the terms and conditions of the tender notice at hand, or not, we would also examine the plea of the writ petitioner-respondent No. 1 herein to the effect that the appellant had not fulfilled the conditions of the tender notice inasmuch as the appellant had not deposited the "earnest money" as required by the tender notice. Before proceeding to examine the rival contentions of the parties, we need to point out that judicial review means court's power to review the action of other branches or levels of the Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad they known that such a relaxation would be permitted (See TATA Cellular v. Union of India reported in [1994] 6 SCC 651 and Asia Foundation & Construction Ltd. v. Trafalgar House Construction (I) Ltd. reported in [1997] 1 SCC 738). In the above backdrop of the ambit and scope of judicial review in contractual matters, we, now, turn to the question as to whether the requirement of furnishing of a "sales tax clearance certificate", in the tender process, in question, would mean VAT clearance certificate, because the Assam General Sales Tax Act, 1993, stood repealed and replaced by enactment of the Assam VAT Act, 2003, on the date of the floating of the present tender notice. For the purpose of reaching a correct decision on this aspect of the appeal, it is, to our mind, necessary to clearly understand as to what VAT means and what difference, if any, lies there between VAT, on the one hand, and sales tax, on the other. VAT is a tax on every sale with a facility of set-off on tax paid on purchases. Value added tax (VAT) is the tax levied by a State Government on sale or purchase of goods within the State and by its very nature, VAT is an indirect tax on sale of goods, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing, but a sales tax. Even the preamble to the Assam Value Added Tax Act, 2003, states that it is an Act to provide for imposition and collection of tax on the sale of goods in the State of Assam and for matter connected therewith and incidental thereto. Hence, the finding of the learned single judge to the effect that there was no requirement of furnishing of VAT clearance certificate and though the other tenderers had furnished VAT clearance certificate instead of "sales tax clearance certificate", yet none of the tenderers having furnished "sales tax clearance certificate", the rejection of the writ petitioner's tender on the ground of non-submission of "sales tax clearance certificate" was unjustified, is, we regret, erroneous. The learned single judge has proceeded on the basis that a "sales tax clearance certificate" was something different from a VAT clearance certificate thereby failing to take note of the fact that VAT is also a sales tax and it is only the system of levy that has undergone change and not the nature of tax. Coupled with the above, we may turn to clause 7(a) of the tender notice, which had set out the requirement of submission of "tax clearance certif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writ petitioner's own letter, dated October 20, 2009, annexed to the writ petition, the writ petitioner's quoted rate was Rs. 234, per woollen blanket, with a note, which read, "all rates are excluding VAT." This shows that the writ petitioner's quoted rate of Rs. 234, per blanket, did not include the VAT payable. On the other hand, the rate, quoted by the appellant and on the basis whereof, the contract has been awarded to the appellant, was Rs. 235, which was inclusive of VAT. Admittedly, woollen blankets are taxable at four paise in a rupee under the Assam Value Added Tax Act, 2003. On the price of Rs. 234 per blanket, the VAT payable, if added to the offered rate of the writ petitioner, would raise the offer of the petitioner to the tune of Rs. 243.36 per blanket. The fact that the writ petitioner's quoted rate of Rs. 234, per blanket, would rise to Rs. 243.36, if VAT is added thereto, has not been disputed, before us, on behalf of the writ petitioner-respondent herein. Viewed in this light, it becomes crystal clear that the rate, quoted by the writ petitioner-respondent No. 1, of Rs. 234, per blanket, which was exclusive of VAT, cannot be said to be lower than the rate quoted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment may, by notification published in the Official Gazette and subject to such conditions and restrictions, as may be specified therein, permit any dealer liable to pay tax on sales effected by way of transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract, to pay, at his option, in lieu of the amount of tax payable by him under this Act, an amount by way of composition at the rate specified in the notification, but not exceeding five percentum of the total contract value of the works contract. Rule 13(13) of the Assam VAT Rules, 2005, provides that every dealer, who opts for composition scheme under section 20 of the Assam VAT Act, 2003, or a casual dealer shall apply for registration in form 4 and shall be granted a registration certificate in form 5 and shall be assigned a general registration number, which shall be written in the registration certificate. Other dealers have to apply for registration in form 2 and certificate shall be supplied in form 3. From the certificate of registration annexed to the writ petition, it is clear that the same is in respect of the composition scheme and the item/commodity mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the payee of the price is not transfer of chattel qua chattel, the contract is one for work and labour. The test is whether or not the work and labour bestowed, and in anything that can properly become the subject of sale; neither the ownership of the materials, nor the value of the skill and labour as compared with the value of the materials is conclusive, although such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract is in substance one for work and labour or one for sale of the chattel. The primary test is whether the contract is one whose main object is transfer of property in a chattel as a chattel to the buyer, though some work may be required to be done under the contract as ancillary or incidental to the sale or it is carrying out of work by bestowal of labour and services and materials are used on execution of such work." Coupled with the above, "Benjamin on Sale" (Eighth Edition, Volume 34, page 6), has observed that, where the employer delivers to a workman either all or the principal materials of a chattel on which the workman agrees to do works, there is a bailment by the employer, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essence of the contract or the reality of the transaction as a whole has to be taken into consideration. The predominant object of the contract, the circumstances of the case and the custom of the trade provide a guide in deciding whether transaction is a 'sale' or a 'works contract'. Essentially, the question is of interpretation of the 'contract'. It is settled law that the substance and not the form of the contract is material in determining the nature of transaction. No definite rule can be formulated to determine the question as to whether a particular given contract is a contract for sale of goods or is a works contract. Ultimately, the terms of a given contract would be determinative of the nature of the transaction, whether it is a 'sale' or a 'works contract'. Therefore, this question has to be ascertained on facts of each case, on proper construction of terms and conditions of the contract between the parties." From the above observations, made in Kone Elevators (India) Ltd. [2005] 140 STC 22 (SC); [2005] 3 SCC 389, what clearly surfaces is that the question as to whether a contract is a "contract for sale" or a "contract for work", depend upon the nature of obligatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction, whether it is a 'sale' or a 'works contract'. Therefore, this question has to be ascertained on facts of each case, on proper construction of terms and conditions of the contract between the parties." From the above observations, made in Kone Elevators (India) Ltd. [2005] 140 STC 22 (SC); [2005] 3 SCC 389, what clearly surfaces is that the question as to whether a contract is a "contract for sale" or a "contract for work", depend upon the nature of obligations to be discharged under the contract and the surrounding circumstances. If the intention is to transfer for a price a chattel in which the transferee had no previous property, then, the contract is a "contract for sale". Thus, the main object, in a "contract for sale" is the transfer of property and delivery of possession of the property, whereas the main object in a "contract for work" is not the transfer of the property, but it is one for work and labour. The test, which is often applied, is when and how the property of the dealer in such a transaction passes to the customer. Is it by transfer at the time of delivery of the finished article as a chattel or by accession during the procession of work on fusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause 6 of the tender notice states that the intending tenderer shall deposit earnest money at two per cent of the estimated value of the articles tendered for. In the present case, the quantity of woollen blankets to be supplied was fixed and the appellant had offered three different qualities of woollen blankets priced differently. The appellant, however, deposited the earnest money taking into consideration the price of woollen blanket, which Rs. 271. However, the State respondents/authorities concerned accepted the appellant's offer to supply woollen blanket at Rs. 235 per blanket. The earnest money, required to be deposited for the supply of blanket at Rs. 235, per blanket, was much less than the earnest money, which the appellant had already deposited. It also needs to be noted that the appellant submitted only one tender and the appellant, therefore, was not required to deposit earnest money for different types of woollen blankets, which the appellant had offered, when it was clear (and it is not in dispute) that only one type of woollen blanket would be accepted and ordered for. Situated thus, we find no force in the submission of Mr. Kataki that the appellant had not fulf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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