KISAN TRADERS Vs. RAJASTHAN TAXATION TRIBUNAL

JUDGEMENT

(1.) BY way of instant two writ petitions under article 226 of the Constitution of India petitioner seeks direction to quash the order of the Rajasthan Taxation Tribunal Bench, Jodhpur dated October 14, 1998 and restore the order of the Rajasthan Tax Board, Jaipur dated May 22, 1997.

(2.) THE petitioner, M/s. Kisan Traders a registered partnership firm is carrying on the business of ginning and pressing of cotton. It undertakes job-work fastening of ginned and pressed cotton bales with iron strips and hooks. THE petitioner purchased hessian and press patti as a packing material. THEy are used during the pressing of the cotton bales. THE say of the petitioner is that it is charging for the job-work done, i.e., ginning and pressing. It is not charging for hessian and press patti which is used as incidental packing material and also the pressing of cotton after ginning. It is further averred that the said incidental packing materials are necessary and without them the cotton cannot be pressed and made a bale. THE rate of these incidental packing material is reduced from the gross rate of bales while issuing the bill for job-work. On October 13, 1992 the Assistant Collector, Taxation Officer, Rai Singh Nagar, made assessment for the years 1990-91 and 1991-92. Later it was discovered that the tax had not been paid on the value of the iron strips and hooks which were used for fastening the cotton bales. Thus notices under section 12 of the Rajasthan Sales Tax Act, 1954 (hereinafter referred to as "the RST Act") was issued. THE reassessment order was passed creating the liability for the assessment year 1990-91 and 1991-92. In appeal Deputy Commissioner maintained the tax liability of Rs. 21,222 and interest in the sum of Rs. 16,555 but set aside the penalty amount of Rs. 42,444 for the assessment year 1990-91. In case of assessment year 1991-92 maintained the tax liability in the sum of Rs. 20,740 and the interest of Rs. 11,205 but set aside the penalty amount of Rs. 41,480. THE assessee as well as the department preferred an appeal against the order of the Deputy Commissioner (Appeals) dated November 27, 1995. THE Tax Board by its judgment dated May 22, 1997 dismissed the two appeals of the department so far as it relates to challenge penalty. THE appeal filed by the assessee challenging the tax liability and the interest was allowed. In the opinion of the Deputy Commissioner (Appeals) it was not permissible for the assessing authority to reopen the case under section 12 of the Act. THE department carried the matter in revision before the Rajasthan Taxation Tribunal. THE Tribunal held that after the 46th Amendment in clause (29A) in article 366 of the Constitution, the department is not required to prove that the sale of the material involved in the execution of the works contract has taken place. THE Tribunal found that the goods were supplied or delivered in the execution of the works contract and, therefore, there is a presumption that the transfer of the property of such goods has taken place. In view of the finding the Tribunal allowed the revision petition filed by the department and set aside the order of the Tax Board.

(3.) LEARNED counsel has also referred to a decision of apex Court in Rainbow Colour Lab v. State of Madhya Pradesh reported in [2000] 118 STC 9. In the said case the question involved was whether the job rendered by a photographer in taking photographs, developing and printing films would amount to a works contract "as contemplated under article 366(29A)(b) of the Constitution read with section 2(n) of the Madhya Pradesh General Sales Tax Act, 1958 for the purpose of levy of sales tax on business turnover of the photographers". The Court considering the law after the 46th Amendment held that now it was open for the State to divide the works contract into two separate contracts by a legal fiction, firstly contract for sale of goods involved in the works contract and consequently the supply of labour and service. The Court observed that division of works contract under the amended law can be made only if the contract involved a dominant intention to transfer the property in goods and not in contracts where the transfer of property takes place as an incident of a contract of service. The relevant observations are extracted as follows : "Thus, it is clear that unless there is sale and purchase of goods, either in fact or deemed, and which sale is primarily intended and not incidental to the contract, the State cannot impose sales tax on a works contract simpliciter in the guise of the expanded definition found in article 366(29A)(b) read with section 2(n) of the State Act. On facts as we have noticed that the work done by the photographer which, as held by this Court in Kame's case [1977] 39 STC 237, is only in the nature of a service contract not involving any sale of goods, we are of the opinion that the stand taken by the respondent-State cannot be sustained."