KANPUR DEVELOPMENT BOARD Vs. COMMISSIONER SALES TAX

JUDGEMENT

(1.) The Judge (Revisions), Sales Tax, U. P., has, at the instance of an assessee, referred to this Court this statement of the case inviting its opinion on the following questions: Whether on the admitted facts of this case, the Kanpur Development Board can be said to be a 'dealer' within the meaning of Section 2(c) of the U. P. Sales Tax Act, and whether it can be assessed to payment of sales tax on the value of the materials supplied by it to its contractors ?

(2.) The assessee, the Kanpur Development Board, was constituted for certain specific purposes such as provision of water supply and public drains, development and maintenance of streets, regulation of traffic, town planning, organization of transport, river trading, adequate housing, location of markets and provisions of sites for hawkers and pedlers. It had to make constructions to carry out these objects and it entrusted the work to contractors. In order to avoid delay and also to secure the use of satisfactory materials in all constructions it arranged to supply the contractors with certain materials required by them in the constructions from its own stores on certain prices. The terms of the contracts with the contractors included the following :(

(3.) In accordance with these terms the Board supplied materials from its stores to the contractors and realized their price from them. It has been assessed to sales tax by the Sales Tax Officer on the ground that it is a dealer within the meaning of the Sales Tax Act and is liable to be assessed on the turnover of the sales made to the contractors. The Judge (Appeals), Sales Tax, set aside the assessment order, he being of the view that the Board did not carry on any business by selling materials to the contractors and was, therefore, not a dealer. The Judge (Revisions) noted the facts that all materials supplied to the contractors became their property, that the contractors had to pay their price through adjustment of their claims under the contracts and that the Board had a right to repurchase unused materials at the prevailing market price and held that the transaction amounted to sale. Then he noted the fact that the prices of the materials were worked out from the cost price including insurance, freight, cartage, octroi, sales tax, producers' tax, etc. and an allowance for normal price fluctuations and the fact that materials could be repurchased by the Board at the prevailing market prices provided that they were lower than the prices at which they were sold and concluded that this meant nothing but profit from the sales. In the result he held that the Board was a dealer and restored the assessment order of the Sales Tax Officer.