UNION OF INDIA Vs. STATE OF RAJASTHAN

JUDGEMENT

(1.) THESE four petitions are not only identical but the parties are also common and therein the identical point of law for consideration of this Court has been raised. THESE matters in fact and substance are identical as these four writ petitions are against assessments of sales tax made for four different assessment years. Hence these four petitions are taken up for hearing together and are being disposed of by this common order. For the disposal of these matters, the facts and the grounds raised to challenge the assessment orders of the sales tax passed by respondent No. 3 are taken from Writ Petition No. 2020 of 2001. The petitioners to carry out enormous construction works in connection with the developmental works carried out by the Ministry of Defence throughout the State of Rajasthan, they have to undertake the construction work of buildings for housing, offices and the residential accommodations of their officers and staff besides other defence work. In order to get these works done, the petitioners award contracts to various contractors and also supply to them building materials such as cement and steel. The petitioners purchase cement and steel from various reputed concerns not only within the State of Rajasthan but also from outside the State. The petitioners state that they are to pay to the sellers of such materials, sales tax leviable on such sales apart from the actual price of the goods sold. So far as the purchase of building materials within the State is concerned, the petitioners pay to the sellers thereof the sales tax on the value of such building materials within the meaning of the Rajasthan Sales Tax Act, 1994 (hereinafter, referred as "the Act of 1994" ). The purchase of goods from outside the State of Rajasthan falls within the ambit of inter-State trade and commerce, the non-petitioners are not authorised to levy sales tax on the purchase of such goods as provided under article 286 of the Constitution of India. This way and the manner the petitioners are purchasing the building materials, namely, cement and steel from various suppliers/sellers within and outside the State of Rajasthan and in order to get the constructions works undertaken through their contractors and supplying these goods to these contractors. The price of the goods so supplied to the contractors are completely adjusted in the final bill of the contractors and the contractors are paid the total construction value minus the price of the building materials supplied to them. The petitioners are also deducting from the final bill of the contractors sales tax as per the prescribed rate and the same is deposited with the sales tax department. It is the case of the petitioners that they are not required under the law to get themselves registered with the non-petitioners as dealer within the meaning of section 2 (14) of the Act of 1994. The fact that the petitioners are making purchase of goods from various suppliers/sellers and making such goods available to their contractors is informed to the non-petitioners, vide their letter dated March 16, 2001. The reference has also been made to the condition No. 10 of IAWF-2249, general conditions of contract that after issue of the building materials to the contractors under Schedule "b" the materials shall be under joint custody of the petitioners and contractor with double lock arrangement and the contractor is bound to use the cement in the particular work for which the same are issued as per the directions of the engineer in-charge. The position of cement consumed and stock available is being daily submitted by the contractor to the department. Since the consumption of Schedule "b" stores for other purposes is not permitted and for any misuses or even excess consumption of Schedule "b" materials in the work, the contractor is liable to return the excess issued/consumed quantity to the department failing which the recovery at the rate of double market price as per contract conditions is being effected from his payment. The materials included in the Schedule and which are required to be supplied by the petitioners to the contractor for execution of the Government work are supplied to the contractor for a fixed price which is settled before the execution of the contract between them. The price of such goods to do not vary on the basis of actual market rate prevailing on the date the materials are supplied to the contractor. The petitioners submitted again that the costs of the Schedule material supplied to the contractor are adjusted from the bills of the contractor but the ownership of such goods supplied never change hands and always remains with the department. The reference has been made to the fact that the value of the work includes inter alia, the cost of the stores included in the Schedule incorporated in the works done by the contractor. The contractor is not required to purchase this material from the Government on the prevailing market rate. So what it is submitted that the event of sale never took place between the Government and the contractor with regard to the Schedule material supplied by the petitioner to the contractor. The petitioner then made reference to article 285 of the Constitution and submits that under this provision the property belonging to the Union exempts from payment of tax by the State Government. The Schedule "b" stores is a property belonging to the Union, it is exempted from levy of tax at the hands of State Government in view of article 285 of the Constitution of India and no demand for tax can be raised by the Commercial Taxes Officer of the State against the property belonging to the Union and any such demand is wholly unconstitutional, ultra vires and violative of article 285 of the Constitution of India.

(2.) RESPONDENT No. 3 issued a notice dated January 25, 2001 calling upon the petitioner to give details of the cement supplied to the contractors. This pertains to the period from 1997-98 to December, 2000. The petitioner, vide letter dated February 19, 2001 objected this action of respondent No. 3 on the ground that the cement is used for the defence work only and remains in the joint custody of department and contractor and even if it is issued to the contractors it is exempted for payment of any kind of tax. In response to that letter the representative of the petitioner appeared before respondent No. 3 and pleaded that no tax can be levied on the property belonging to the Union and any levy of the tax on the property belonging to the Union is without any authority of law and violative of article 285 of the Constitution. The respondent No. 3 issued a notice under section 77 (1) of the Rajasthan Sales Tax Act to the petitioners calling upon them to appear before him with necessary information with regard to the purchase of cement made by the department for the years 2000-2001. In response to that notice, the petitioners furnished the necessary details with regard to the purchase of cement in the year 1997-98, 1998-99, 1999-2000 and 2000-2001. RESPONDENT No. 3 called upon the petitioners for finalisation of the assessment of the sales tax on January 18, 2001. The petitioner's representative appeared before respondent No. 3 and submitted the detailed representation reiterating therein the request that the tax cannot be assessed against the petitioner for the said years. Again on March 23, 2001 the representative of the petitioner appeared before respondent No. 3 and submitted a clarification that there is no sale of cement to the contractors by anyone and no question does arise for demand of payment of sales tax on this material. It is the grievance of the petitioner that on March 23, 2001 though the representative of the petitioner was present but the order of the assessment of the tax was passed by respondent No. 3 either on March 23, 2001 or even on any date after March 23, 2001. This order appears to have been made after March 23, 2001 but it was of ante-dated, i. e. , March 19, 2001. Under the said order, respondent No. 3 has assessed an amount of Rs. 5,64,733 as tax. On this tax, 200 per cent penalty was imposed which comes to Rs. 11,29,446 and a further sum of Rs. 90,357 as interest thereon and thus total amount assessed to a sum of Rs. 17,84,556. Hence these petitions.

(3.) IN the result all these four petitions are disposed of in the terms that for resolving of the dispute arises between the petitioners, Union of INdia through the Secretary, Defence, Ministry of Defence, Government of INdia, New Delhi, and the State of Rajasthan through the Secretary, Finance, Government of Rajasthan, Jaipur; a committee of senior officers under the Chairmanship of the Chief Secretary of the State of Rajasthan is to be constituted and this committee has to consider and decide these matters within a period of three months from the date of constitution of the committee. The Chief Secretary of the State of Rajasthan is directed to constitute this committee under his Chairmanship within a period of 15 days from the date of receipt of copy of this order. IN the committee in addition to the Chairman, the other members may be the Secretary to the Finance Department and Law Secretary. This committee to decide these matters after hearing the representative of both the parties. IN case this committee ultimately fails to resolve this dispute it has to give a reasoned decision and the copy of the same may be given to both the parties. On the request of either of the parties, it has to consider the matter for giving its clearance for the litigation. The compliance of this order be reported to the court. It is a dispute between the Union of INdia and the State of Rajasthan, the parties are to bear their own costs.