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New Okhla Industrial Development Authority, Ghaziabad. v. Commissioner of Sales Tax, U. P. Lucknow. - SALES/TRADE TAX REVISION No. 1696 of 1991  RD-AH 1183 (15 October 2004)
Court no. 55
Trade Tax Revision no. 1696 of 1991.
Trade Tax Revision no. 1697 of 1991.
New Okhla Industrial Development Authority, Ghaziabad. Revisionist.
Commissioner of Sales Tax, U. P. Lucknow. ... Respondent.
Hon'ble Rajes Kumar, J.
The present revision under Section 11 of U. P. Sales Tax Act (hereinafter referred to as ''Act') is directed against the order of Tribunal dated 19.8.1991 relating to assessment year 1979-80 and 1980-81 respectively.
Applicant is an authority created under the provisions of U. P. Industrial Area Development Act, 1976 and alleged to have been engaged in the development of Industrial area. To provide facility in procuring Cement, applicant imported Cement and transferred it to various entrepreneurs who were establishing their Industrial Unit in the specified area and charged price for it. Applicant claimed that the Cement provided to the entrepreneurs was not the sale and the applicant was not dealer in respect thereof. Applicant had also sold tender Forms and claimed exemption on the basis of Circular dated 9.12.1980 issued by the Secretary, Financial Institutions, U. P. Government stating that the tender Forms sold by the Government Department, shall be exempted. Assessing Authority had not accepted the plea of the applicant and levied tax on the Cement supplied by the applicant to various entrepreneurs and also levied tax on the sale of Tender Forms. First appeal filed by the applicant was rejected. Applicant filed Second Appeal before the Tribunal, which was also rejected by the impugned order.
Heard Counsel for the parties.
Tribunal held that the applicant was registered under the U. P. Trade Tax Act as a dealer and had imported Cement from outside the State of U. P. which were transferred to various entrepreneurs for the price, therefore, treated such supply of Cement to various entrepreneurs as a sale. Tribunal further held that the Circular letter dated 9.12.1980 issued by the Secretary, Financial Institutions, Government of U. P. exempting the sale of Tender Forms by the Government Department is not applicable because, applicant was an authority created under the provisions of U. P. Industrial Area Development Act, 1976 and is not a Government Department. Tribunal held that the sale of Tender Forms were liable to tax under the Notification no. ST-II-3877 dated 8.8.1974 @ 7%.
Learned Counsel for the applicant contended that the main object of the applicant was making a planned development of the Industrial area and not to carry on any business, therefore, applicant did not fall within the ambit of dealer as defined under Section 2 [c] of the Act in respect of Cement supplied to the entrepreneurs. He submitted that the Cement was imported and supplied to the entrepreneurs to facilitate them to construct their Industries. In fact, they acted as a Purchasing Agent of the entrepreneurs in procuring Cement and supplied them. He further submitted that the Tender Forms were also not liable to tax in view of letter issued by the Secretary, Financial Institutions dated 9.12.1980. In support of his contention, he relied upon a decision in the case of Kanpur Development Board Vs. Commissioner of Sales Tax, reported in 14 STC page 493.
Learned Standing Counsel submitted that the applicant was engaged in various activities and one of the activity was to supply Cement to various entrepreneurs. Such supply was the sale within the meaning of Section 2 (h) of the Act and as such, applicant was dealer within the definition of Section 2 (C). He submitted that no evidence had been adduced to show that the applicant acted as an agent of entrepreneurs. Moreover, Agent is also included within the definition of dealer under Section 2 [c] He submitted that the Apex Court in the case of Karya Palak Engineer Vs. Rajasthan Taxation Board, Ajmer and others reported in JT. Today 2004 (6) SC page 384 held the supply by CPWD to its contractor for construction to its own building as a sale and therefore, supply of Cement to the entrepreneurs has been rightly held as a sale and liable to tax. He further submitted that the applicant is an authority constituted within the provisions of Section 3 of U. P. Industrial Area Development Act, 1976 and is an autonomous body and not is a Government Department and therefore, letter dated 9.12.1980 issued by the Secretary, Financial Institutions, Government of U. P. is not applicable to the present case and the dealer was liable to tax on the sale of Tender Forms under Notification no. ST-II-3877 dated 8.8.1974.
Having heard learned Counsel for the parties and perused the order of Tribunal and the authorities below. I do not find any force in the argument of learned Counsel for the applicant. In the case of Karya Palak Engineer Vs. Rajasthan Taxation Board, Ajmer and others (supra), Apex Court has held supply of Cement by CPWD to the contractors for construction of its own building for price as a sale. Relevant paragraphs of Apex Court decision are as follows:-
"17- The next contention urged on behalf of the appellant in the alternative is that on the facts of the cases in hand, there is no transaction of sale involved. For this strong reliance was placed on the relevant clauses of the agreement between the parties. In the case of appellants in C. A. nos. 8540-8544/2001 the same is found in clause 10 of the agreement. According to the learned Counsel for the appellants, as per the terms in the above said clause the materials supplied to the contractors remained to be the absolute property of the Union and the same could not be removed on any account from the site of the work and was at all times open to inspection by the concerned authorities, it is also submitted that any materials supplied, remaining unused in the works contract, were to be returned to the authority concerned and the contractors at all given point of time was only a ''custodian' of the material so supplied to him. On the basis of the above, it was contended that the title in the property supplied to the contractor never ever got transferred nor any specific consideration has passed for the supply of the goods."
"18- This Court had an occasion to deal with a similar clause where the Union of India entered into an agreement for the construction of certain works, wherein it agreed to supply materials such as cement, steel etc. (as in the case in hand) in the said case of M/S N. M. Goel & Co. Vs. Sales Tax Officer, Rajnandgaon and Anr. This Court held:-
"In order to be sale taxable to duty, there should be an independent contract- separate and distinct- apart from passing of the property, where a party purchases or procures goods from the government. Mere passing of property 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. Though in a transaction of this type there is no inherent sale but a sale inheres from the transaction. Clause 10 read in the proper light indicates that position. By use or consumption of materials in the work of construction, there was passing of the property in the goods to be assessee from the P.W.D. By appropriation and by the agreement, there was a sale as envisaged in terms of clause 10 of the contract."
"19- In case of Rashtriya Ispat Nigam Ltd. Vs. State of A. P. this Court relying on the said judgment of M/S N.M. Goel & Co. (supra) held:-
:"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 time required by the contractor to be used for the purpose of performing the contract only. The value of such quantity of materials and stores so supplied was specified at a rate and got set off or deducted from any sum due or to become due thereafter to the contractor....."
"20- An attempt to distinguish the judgment in Goyal's case on facts came to be rejected by this Court in the above case of Rashtriya Ispat Nigam Ltd."
"21- In the instant case also by the use or consumption of material supplied in the work of construction, there was passing of property and by virtue of receipt of value of such transferred property by way of adjustment in bills the consideration has also passed which in our opinion satisfied the definition of ''sale' in the local Sales Tax Act."
"22- In Cooch Behar Contractors Association Vs. State of West Bengal and Ors.aa this Court followed the decision in M/S N.M. Goel & Co. (supra) and considering a similar clause as is found in the appeal before us this Court held that the goods supplied to the contractor by the contractee and price recovered from the contractor by way of adjustment of value of such goods was held to be a contractual transferred price which is liable to levy of sales tax. Therefore, we do not find any merit in the argument that even on facts that there was no sale in the transfer of material supplied made be the appellant to its contractors. "
In view of decision of Apex Court, decision of this Court in the case of Kanpur Development Board Vs. Commissioner of Sales Tax (supra) is no longer a good law. Tribunal has rightly held supply of Cement to entrepreneurs as a sale. So far as levy of tax and sale of Tender Form is concerned, I do not find any error in the order of Tribunal. Sale of Tender Form is liable to tax under the Notification no. ST-II-3877 dated 8.8.1974. Letter dated 9.12.1980 issued from the Secretary, Financial Institution, Government of U. P. is not applicable in the present case because, the applicant was not a Government Department. Applicant is an authority constituted under the U. P. Industrial Area Development Act, 1976 and is an autonomous body.
In the result, both the revisions fails and are dismissed.
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