C KRISHNASWAMI RAO Vs. STATE OF MADRAS

JUDGEMENT

(1.) WE shall take up T.C. No. 206 of 1964 first. The assessee in this case was one Krishnaswami Rao. For the year 1959-60 he returned a turnover in respect of supply of bricks to the Neyveli Lignite Corporation. Against that total turnover he claimed an exemption on a turnover of over Rs. 53, 000 and odd, as covered by charges for transport. The exemption was denied by the Deputy Commercial Tax Officer on the ground that no bills had been issued in which charges of transport had been separately indicated and claimed. It was held by the assessing authority that the assessee supplied bricks, which the Corporation paid for at the rate of Rs. 39 per 1000 bricks. Accordingly the entire turnover was assessed to tax. An appeal was taken. Once again the appellate authority held that the assessee manufactured bricks and sold them to the Corporation and that the deduction in respect of transport charges was permissible only where the dealer specified and charged them in the bill separately, without including such charges in the price of the goods. At this stage a certificate was produced from the Executive Officer of the Corporation which was to the effect that the contract with the assessee was for the manufacture of bricks in the lands belonging to the Corporation and that the payment of Rs. 39 per 1000 bricks was made up of the cost of bricks being Rs. 24 per 1000 at the site of the kiln and the charge of transport being Rs. 15 for transporting the goods over a distance of 19 miles from the site of the kiln to the site of the works in the Neyveli Township.

(2.) THIS certificate was held by the appellate authority not to assist the assessee's contention and the appeal failed. At the further stage before the Sales Tax Appellate Tribunal, the assessee claimed exemption of the entire turnover on the ground that there was no sale of goods involved, that only a contract for the manufacture and supply of bricks was entered into between himself and the Neyveli Lignite Corporation. It was established that for the previous assessment year 1958-59, a similar claim had been examined and dealt with by the Appellate Tribunal in favour of the assessee. That circumstance was brought to the notice of the Tribunal at the hearing of the appeal leading to this revision petition. While the Tribunal did not dispute that the agreement between the assessee and the Neyveli Lignite Corporation for this assessment year was governed by the same contract entered into in the previous year, which contract was for a period of 3 years, it thought that by reason of the recent decision of the Supreme Court in Chandra Bhan Gosain v. State of Orissa a different view had necessarily to be taken and that the specific terms in the contract relied upon by the assessee did not serve to distinguish his case from the reported decision. Accordingly the Tribunal held that the agreement was not in the nature of a works contract but that the supplies of goods thereunder, could be regarded only as sales. The alternative contention that relief should be given at least to the extent of transport charges was also rejected.In this revision petition, two points have been urged. Firstly it is stated that the arrangement between the assessee and the Neyveli Lignite Corporation was in the nature of a works contract, that no sale was in fact involved and that therefore the entire turnover is not liable to sales tax.

(3.) AND the rate is given as Rs. 39. Under the special conditions of the contract, the contractor is directed to quarry the earth free of cost only from certain specified survey numbers and only from the locations indicated in those survey numbers. Certain further limitations with regard to excavations were imposed. The contractor had to put up kilns only at the places approved and if required the Corporation undertook to manufacture in its own workshop a moving chimney, the cost of which was to be borne by the contractor. The Corporation also undertook to supply the coal necessary for burning the bricks at a cost to be recovered from the contractor's bills. The contractor had to give an undertaking to use the coal only for the purpose of burning bricks required for supply to the Corporation. At the end of the three year period, during which a supply of one crore of bricks had to be made, the contractor had to clear the survey numbers of any structures put up by him and also level the ground as required by the Corporation. An important condition of the contract was that the rejected bricks and brick-bats were not to be sold to outsiders, but shall be dumped in excavated pits and ground levelled up, as and when the required clay in the particular area bad been removed to permissible limits. There are other conditions of the contract which deal with the manner in which the contract shall be carried out, particularly with regard to the use of the earth and the putting up of the kilns and other details.A perusal of these terms of the contract certainly does support the prima facie view that the contractor was called upon to perform a certain work, namely to utilise clay belonging to the Corporation and manufacture bricks out of it and supply those bricks only to the Corporation and to no other person. Practically all the materials required for the manufacture of the bricks were provided by the Corporation itself, which retained an overall control over the work of the contractor, right from the commencement of the process of manufacture down to the actual supply of the bricks.