SAILESH CHANDRA NANDI Vs. SUPERINTENDENT OF TAXES

JUDGEMENT

(1.) THE writ petitioner, Sailesh Chandra Nandi, proprietor of a business run under the name and style of "nandi and Nandi" at Agartala in West Tripura, has filed these two writ petitions challenging the orders of assessments passed by the Superintendent to Taxes, Agartala, for the years ending March 31, 1978 and March 31, 1979. The grievance of the petitioner relates to levy of tax on the value of goods supplied in execution of a contract. The case of the petitioner is that the contract executed by the petitioner was an indivisible work contract and not a contract of sale and, as such, no tax could be levied on the value of the materials used in execution of the said contract. This submission did not find favour with the Superintendent of Taxes who was of the opinion that the petitioner was liable to pay tax on the value of materials used in execution of the contract as the same were purchased by the petitioner at a concessional rate of tax by issuing "c" forms. The assessments were confirmed on appeal by the Assistant Commissioner of Taxes. The Assistant Commissioner also held that disposal of taxable materials bought by using "c" forms has to be considered as sale and tax levied thereon. The appeals were accordingly rejected. Further appeal was preferred before the Tripura Sales Tax Tribunal. The Tribunal considered the dispute from a different angle. It considered as to whether the contract in question was an indivisible works contract or a composite contract for work and sale of goods. On consideration of the terms of the contract, it came to a finding that it was a contract of sale and the job-work thereunder, namely, erection and installation was only incidental to the contract of sale. It did not decide the correctness of the stand taken by the Superintendent of Taxes and the Assistant Commissioner of Taxes that as the goods in question were purchased on payment of sales tax at concessional rate by issuing "c" forms under the Central Sales Tax Act, 1956 there was implied sale of such goods. The petitioner has challenged the aforesaid order of the Tribunal on the ground that the Tribunal was not justified in arriving at the aforesaid finding. According to the petitioner the contract in question was an indivisible works contract and the supply of materials was only incidental. As such, there was no sale of materials used in the execution of the said works contract which could be subjected to sales tax. The further contention of the petitioner is that no sale can be implied from the fact that the goods in question were purchased on payment of tax at concessional rate by issue of declaration in form "c" to the effect that such goods were intended for sale. I have heard Mr. B. Das, learned counsel for the petitioner. Also heard Mr. M. Nath, learned counsel for the respondent. Two questions arise for consideration. First, whether any tax can be levied under the Tripura Sales Tax Act, hereinafter "the Act", on a dealer on the value of goods used by him in a works contract on the ground that the same were purchased at a concessional rate of tax on the strength of "c" forms issued under the Central Sales Tax Act. The second is whether the contract in question between the petitioner and the Tripura Jute Mills Ltd. was a pure works contract or a composite contract consisting of two contracts - one for sale of materials and the other for work and labour.

(2.) SO far as the first question is concerned, we find that it is squarely covered by a decision of this Court in Studio Sen and Sen v. State of Tripura [1990] 79 STC 168; [1989] 2 GLR 392. The question for determination in that case was whether sales tax can be levied on a supposed sale of materials used in execution of an indivisible works contract. The petitioner was a photographer. Some materials were purchased by him at concessional rate of tax by issuing "c" forms. Such materials were used in preparation of photographs. The admitted legal position was that there was neither any sale of the materials used in the preparation of the photographs nor of the photographs themselves. The sales tax authorities, however, levied tax on the estimated sale value of materials used in the preparation of the photographs by assuming that the goods imported at concessional rate of tax for resale had been disposed by the petitioner by way of sale transaction. This Court held at page 173 of 79 STC; 397 of 2 GLR :

(3.) " N and N", that is, Nandi and Nandi in the aforesaid clauses refers to the petitioner and "tjml" is the abbreviation of Tripura Jute mills Limited. From the nature of the works, the items of works and the terms and conditions of the contract, it is clear that the contract is for supply, delivery, erection and commissioning of lighting system (indoor and outdoor) along with sub-distribution board. Execution of this contract also involves use of some materials. The essence of the contract is erection and commissioning of the lighting system with sub-distribution board. It is to be erected and installed at the site mentioned in the contract. The supply of any material including cables, fittings, etc. , required for the purpose of the aforesaid work of erection and installation of lighting system has also to be made by the petitioner. The price stipulated in the contract is inclusive of erection and commissioning charges. The erection and commissioning of the lighting system is as much an essential part of the contract as the supply of materials. In fact, the contract is for erection and commissioning of the lighting system, etc. Till that is done the contract is not complete. Though the petitioner has also to supply lighting panels, cables and fittings required for the purpose of the lighting system and while fixing the value of the contract the value of all these materials has been taken into consideration as also the value of erection charges, etc. , the contract is basically a contract for erection and commissioning of the lighting system. The contract is one and indivisible contract for erection and commissioning of lighting system, etc. The contract is complete when the erection is done and the system is commissioned. These are the salient features of the contract. The question that has to be decided now is whether under the said circumstances the contract in question can be said to be a works contract or a contract for supply of goods and materials. There are some well-recognised tests which have been laid down by the Supreme Court and the various High Courts which afford guidelines for determining as to whether a contract is a works contract or the contract for supply of goods. One of the important tests, as observed by the Supreme Court in Vanguard Rolling Shutters and Steel Works v. Commissioner of Sales Tax [1977] 39 STC 372, is to find out whether the contract is primarily a contract for supply of materials at a price agreed to between the parties for the materials so supplied and the work or service rendered is incidental to the execution of the contract. If so, the contract is one for sale of materials and the sale proceeds would be exigible to sales tax. On the other hand, where the contract is primarily a contact for work and labour and materials are supplied in execution of such contract, there is no contract for sale of materials but it is a work contract. The circumstances that the materials have no separate identity as a commercial article and it is only by bestowing work and labour upon them, as for example, by affixing them to the building in case of window leaves or wooden doors and windows that they acquire commercial identity, would be prima facie indicative of a works contract. So also where certain materials are not merely supplied but fixed to an immovable property so as to become a permanent fixture and an accretion to the said property the contract prima facie would be a works contract. These are some of the basic tests that are often applied by the courts to decide whether in a particular case the contract is a works contract or not.