MULAY BROTHERS Vs. STATE OF M P

JUDGEMENT

(1.) THE petitioner-firm is seeking a declaration that it is not covered either under the M. P. General Sales Tax Act, 1958 (hereinafter referred to as "the Sales Tax Act"), or the M. P. Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (hereinafter referred to as "the Entry Tax Act") and, therefore, it is not liable to be registered under any of these Acts or to pay any tax. The petitioner is also seeking quashing of the notice dated June 8, 1987, issued by the Sales Tax Officer (respondent No. 2), under Section 29 (1) of the Sales Tax Act for production of account books from the beginning of the business till todate, and the order of the Sales Tax Officer (respondent No. 3) dated September 10, 1987, to submit particulars about all the purchases made between the period December 1, 1986 to March 31, 1987 and April 1, 1987 to August 31, 1987, in regard to its work at Malajkhand, which according to the petitioner is a pure labour contract for excavation of rock and earth for levelling the ground.

(2.) THE petitioner is a partnership firm, having its head office at Aurangabad in the State of Maharashtra where it is registered as a dealer under the Bombay Sales Tax Act, 1959 and has taken work at Malajkhand, district Balaghat in the State of Madhya Pradesh. The petitioner is a contractor and undertakes labour/works contracts in different parts of India. The contract undertaken is exclusively in the nature of labour contract. The petitioner, on December 1, 1986, entered into an agreement with the Hindustan Copper Ltd. , a Government of India undertaking (hereinafter referred to as "the Government Co. ") which is extracting copper ore by employing the open cast method, for which excess earth above the level from where copper ore is located, is to be removed. The work of removal of excess earth, i. e. , excavation and removal of about 2 million cubic metres of waste rock and earth has been entrusted to the petitioner. The total contract is valued at Rs. 5. 30 crores, which is to be executed within a period of 20 months from the date of its execution. The terms and conditions are incorporated in the said agreement and the petitioner is not required to sell, supply or consume any material in execution of the work. For execution of the work, besides engaging labour, the petitioner has to use various machineries, like scrapers, bulldozers, loaders, pukling excavators and tippers. For working its machineries, the petitioner requires diesel about 4 to 5 thousand litres, and lubricating oil 150 litres per day and also spare parts for operation and maintenance of its machineries. There is no sale of the diesel, lubricating oil or spares to the Government company, but the same were exclusively required for operation and maintenance of machineries. The petitioner is purchasing diesel, lubricating oil and spares in the State of Madhya Pradesh and in the State of Maharashtra and other places. Some of these materials are required to be transported to the State of Madhya Pradesh from outside the State and has to pass through Rajegaon check-post in Balaghat district. The petitioner, not being a dealer within the meaning of Section 2 (d) of the Sales Tax Act and the petitioner not executing any works contract, as defined in Section 2 (m) of the Entry Tax Act, it is not necessary for the petitioner to get registered under any of these Acts, nor submit any return or pay any tax. The petitioner-firm was surprised to receive the notice dated June 8, 1987, under Section 29 (1) of the Sales Tax Act for production of the account books from the beginning of the business till today before the Sales Tax Officer, Balaghat (respondent No. 2 ). The petitioner raised a written objection that the firm and its activities in the State of M. P. do not make it liable for payment of any tax under these two enactments. In spite of clarifying the matter, the Sales Tax Officer, Chhindwara (respondent No. 3) required the petitioner to get itself registered under both these Acts. This was also objected to by the petitioner, yet, the Sales Tax Officer directed the petitioner to furnish full details of all the purchases made from outside the State between the period December 1, 1986 to March 31, 1987 and April 1, 1987 to August 31, 1987, including the bringing of bulldozers, trucks, dumpers and earth removing equipments at Malajkhand, which is without jurisdiction and uncalled for. Therefore, the petitioner filed this petition, seeking the aforesaid reliefs. The respondents, in their return, admitted the factual position stated by the petitioner-firm about the contract given to it at Malajkhand by the Government company and the agreement entered into with that company, but contended that in view of the amendment of Article 466 of the Constitution, the State Governments are empowered to levy tax on the goods supplied for the execution of the works contract and accordingly the definition of "sale" in Clause 2 (n) of the Act was amended with effect from July 1, 1984, so as to include transfer of goods in the execution of the works contract. As the petitioner started its work after July 1, 1984, it is liable to be included within the meaning of "dealer" under Section 2 (d) of the Act. Any raw material or incidental goods utilised for the work is also liable for entry tax under Section 3 (1) (b) of the Entry Tax Act. The works contract of the petitioner is fully covered by the incidence of taxation under both these Acts. Therefore, proceedings were started by the Sales Tax Officer, Balaghat, and the Sales Tax Officer, Flying Squad, Chhindwara. There is no illegality or infirmity in the proceedings. The petitioner is liable to be taxed for the works contract being executed in the State of Madhya Pradesh under both these enactments. The check-posts have been erected at different places to check evasion of tax under these enactments. Therefore, the notice dated June 8, 1987 and the order passed for production of accounts on September 10, 1987 are valid and legal and require no interference, since the petitioner-firm failed to get itself registered. Under the definition of the "works contract" under Section 2 (m) of the Act, labour contract is also included. The turnover of the petitioner is more than Rs. 50,000 per annum. Besides no final order has yet been passed by the Sales Tax Officer and the petition is premature. Against the order that may be passed, the petitioner has a right of appeal under these Acts. Therefore, the petition is liable to be dismissed with costs.

(3.) BEFORE going into the merits of the case, we have to consider the preliminary objection raised by the learned Deputy Advocate-General that the petition not being against any final order and merely against the notice issued for production of documents and the order passed for that purpose, it is premature. Against the final order of assessment that may be passed by the Sales Tax Officer, the petitioner has a right of appeal under Section 38 of the Sales Tax Act. The objection is misconceived, since the petitioner is challenging the notice and the order directing production of the account books, on the ground that the firm is not liable to the incidence of taxation under the Sales Tax Act and the Entry Tax Act, and the notice issued and the order passed by the Sales Tax Officer are illegal and without jurisdiction. It is not necessary for the petitioner to get itself registered as a dealer under the Sales Tax Act or the Entry Tax Act, or to submit any return or to pay tax under these two enactments, as its activities at Malajkhand in the State of Madhya Pradesh do not bring it within the purview of these enactments. The Supreme Court in Calcutta Discount Co. Ltd. v. Income-tax Officer [1961] 41 ITR 191 ; AIR 1961 SC 372, has held :