TMI Blog2011 (2) TMI 1308X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax collected, at the successive stages, will be equivalent to the tax, which would be payable if it were to be charged once on the final value or price of the produce. Section 2(56) of the Assam VAT Act, 2003, defines VAT to mean a tax on sale of any goods, at every point, in the series of sale made by the registered dealer, with the provisions of credit of input tax paid at the points of previous purchase thereof. In short, VAT is nothing, but a modern system of sales tax. By quoting a rate "exclusive of VAT", the writ petitioner had not only failed to fulfil the terms of the tender notice, but it also goes without saying that since the writ petitioner had itself mentioned its rate as "exclusive of VAT", the rate, quoted by the writ petitioner, shall have to be calculated by taking into account the element of VAT. On taking into account the element of VAT, when the rate, quoted by the writ petitioner, becomes higher than the rate quoted by the appellant, the finding of the learned single judge, that the rate quoted by the writ petitioner was lower than that of the appellant, cannot, but be termed as erroneous and calls for interference therewith. In the case at hand, con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mples 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. 1, who claimed to be the second lowest bidder, filed a writ petition, under article 226 of the Constitution of India, which gave rise to W. P. (C) No. 4858 of 2009, seeking issuance of appropriate writ(s) commanding the State respondents/ authorities concerned to allot the work, in question, to the writ petitioner, (i.e., respondent No. 1 herein). This writ application was, however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 General of Prisons, Assam, and the said application was accordingly endorsed by the Superintendent of the Office of the Inspector General of Prisons, Assam, and, hence, the description of the pledging authority as IGP, which was shorter version of the term Inspector General of Prisons , appearing in the relevant NSC/KVP, ought not to have been treated to have disqualified the writ p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owest 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 furnishing of the sales tax clearance certificate was concerned, the learned single judge took the view that the tender documents did not require furnishing of VAT clearance certificate and, in the absence of VAT clearance certificate, the writ petitioner s tender could not have been treated as invalid and as far as sales tax clearance certificate is concerned, since none of the te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, was unjustified. The learned single judge further held that the work, allotted in favour of the appellant, was illegal inasmuch as the writ petitioner s quoted rate for supply of blanket was lower than that of the appellant and the writ petitioner, therefore, had a better right to secure the contract, in question. Aggrieved by the decision so reached in the writ p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments 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, within its quoted rate, the VAT, which was payable on supply of blankets the writ petitioner s quoted rate could not have been taken to be lower than that of the appellant, particularly, when the addition of the tax element of four per cent would clearly make the writ petitioner s quoted rate much higher than that of the appellant. Dr. Saraf contends that since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice 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 writ petitioner shall be construed to mean that the rate, which had been quoted by the writ petitioner, was a rate inclusive of VAT and not exclusive of VAT even though the writ petitioner had mentioned, in the tender documents, that its offered rate was exclusive of VAT. As regards the appellant s contention that appropriate VAT registration certificate was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contract, which is different from normal sale and supply of materials, such as, supply of woollen blankets. Thus, according to Dr. Saraf, the VAT registration certificate, granted to the writ petitioner under the provisions of composition, is not a normal VAT registration certificate and, more so, when such registration certificate relates to works c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 decision, in a writ petition, does not operate as an estoppel for either party in raising a question of law or in placing reliance on a document or paper already available on record. A reference may, in this regard, be made to the case of Bongaigaon Refinery Petrochemicals Ltd. v. Girish Chandra Sarma reported in [2007] 7 SCC 206, wherein the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oky, 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 Government. In the judicial review of a contractual matter, the writ court will not sit as a, appellate court or as an appellate forum over the decision of the authorities concerned to award the contract in favour of any tenderer unless the decision-making process is unfair, non-transparent, arbitrary, motivated, biased, or contrary to the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 is recovered from the buyer by the seller, and the tax, so collected by the seller, is deposited in the account of the State Government. The globalization of trade, investment and services necessitated reforms in the economic structure of the State. VAT is the modern system of indirect tax, which has been adopted by a large number of cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 certificate . Clause 7(a) of the tender notice reads as under: 7(a) All tender must be accompanied by up to date Income-tax/ VAT registration certificate/sales tax clearance certificate including PAN card. From a bare reading of clause 7(a) of the tender notice, it becomes clear that the conditions, embodied therein, nowhere, spea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther 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 by the appellant or the rate at which the appellant had offered to make supply of blankets. The submissions made, in this regard, by Mr. Kataki, to the effect that notwithstanding the rate, quoted by the writ petitioner to be exclusive of VAT, the same should be considered to be inclusive of VAT, because, there is a declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 therein civil work. The registration has been granted in form 5, wherein the general registration number is mentioned. In the present case, the items are woollen blankets, which can, by no stretch of imagination, be said to be civil work. Thus, the certificate of registration, which the writ petitioner submitted with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pared 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 a contract for work and labour, or for work, labour and materials (as the case may be) by the workman. Materials added by the workman, on being affixed to or blended with the employers materials, thereupon vests in the employer by accession and not under any contract of sale. Whether the workman supplies e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 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 prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 fusion to the movable property of the customer? If it is the former, it is a sale , if it is the latter, it is a works contract. In judging, therefore, whether the contract is for a sale or for work and labour , the essence of the contract or the reality of the transaction, as a whole, has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 fulfilled the conditions of the notice inviting tender in respect of deposit of earnest money. Because of what have been discussed and pointed out above, we are clearly of the view that as petitioner-respondent No. 1 had not fulfilled the essential conditions of the tender notice, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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