CALCUTTA COMPANY LIMITED Vs. COMMISSIONER OF SALES TAX

JUDGEMENT

(1.) THIS is an application under Article 226 of the Constitution for the issue of a writ of certiorari to quash a decision, dated 15th March, 1963, of the Commissioner of Sales Tax by which the Commissioner upheld in revision an order made by the Sales Tax Officer, Rajnandgaon, on 10th August, 1960, assessing the petitioner - company to sales tax in the sum of Rs. 23,524 -25 nP. for the period from 1st February, 1957, to 31st March, 1959, and imposing on it a penalty of Rs. 30,000 under Section 18(6) of the Madhya Pradesh General Sales Tax Act, 1958 (hereinafter referred to as the Act).

(2.) THE material facts are that during the period from 1st February, 1957, to 31st March, 1959, the petitioner 'supplied' sand from Sheonath riverbed to the Hindustan Steel (Private) Ltd., Bhilai Steel Project, Bhilai (hereinafter called the Project) under an agreement concluded between the petitioner and the Project on 13th April, 1956. In January, 1960, the Sales Tax Officer, Rajnandgaon, issued a notice under Section 18(6) of the Act informing the petitioner that it was a 'dealer' under the Act liable to pay tax in respect of the aforesaid period and had failed to apply for registration and thereby rendered itself liable to be assessed to the best of judgment and also made itself liable to penalty, and calling upon it to sho cause why it should not be assessed to tax and why a penalty should not be imposed. The petitioner appeared before the Sales Tax Officer and contested its liability to tax on the ground that under the contract between it and the Project it had only collected and transported sand from the quarry at the Sheonath riverbed to the site of the steel plant; that the supply of sand to the Project did not involve any sale but was in execution of a contract for the performance of certain services, namely, the conveyance of sand, at certain rates; and that it was the Project which held a lease from the Government for the extraction from the riverbed and the sand always remained the property of the Project. This contention was rejected by the Sales Tax Officer who took the vie that though the lease for quarrying was in the name of the Project, it was actually worked by the assessee itself ; that according to Clause 37 of the contract between the petitioner and the Project all quarry fees, royalties, octroi duties and ground rent for stacking materials were paid by the petitioner -contractor; that under that contract the petitioner was to organize extraction of sand at the quarry and its transportation over a distance of 10| miles to the Auxiliary Plant Site ; and that these terms of the contract made it clear that the ' ownership of quarry ', though for a temporary period only, was of the assessee. He accordingly held that the contract, which the petitioner had with the Project, was a contract for the supply of sand and not a works contract. The value of sand ' supplied' by the petitioner during the material period was computed by the Sales Tax Officer at Rs. 77,301 -83 nP. After allowing certain deductions, the Sales Tax Officer assessed the petitioner to tax at Rs. 23,524 -25 nP. He also imposed a penalty of Rs. 30,000 under Section 18(6) for the petitioner's failure to get itself registered and to submit returns.

(3.) THE petitioner contends that the agreement under which it 'supplied' sand to the Project was nothing more than an agreement for transport and carriage of sand ; that by that contract no title in the land vested in the petitioner and the 'supply' of sand by the petitioner to the Project did not involve any sale; that the sand always remained the property of the Project, the holder of the lease in respect of the quarry ; that the provisions in the agreement regarding the mode of payment, inspection and acceptance of sand by the Project only indicated that the transaction was not a sale ; that in these matters the petitioner acted like an agent of the Project; that the payment of royalties, rent etc. was made by the petitioner for and on behalf of the Project; that the petitioner was not liable to pay these amounts to the Government and what actually took place was that, according to the terms of the contract between the petitioner and the Project, the Project deducted a sum equal to the royalty payable by it to the Government from the sum payable to the petitioner by the Project ; that the royalty thus recovered from the petitioner was actually paid to the Government by the Project; that both the Sales Tax Officer and the Commissioner erroneously assumed that because of this convenient method of calculation and payment of royalty the petitioner became the owner of the sand; and that thus the petitioner, which was not a 'dealer' as defined in the Act and did not sell any sand to the Project, could not be assessed to any sales tax.