Rajasthan High Court - Jaipur
Alcobex Metals Pvt. Ltd. vs The Commercial Taxes Officer on 7 April, 2000
Equivalent citations: 2000(2)WLN153
JUDGMENT Rajesh Balia, J.
1. This revision is against the judgment dt. 30.6.1993 passed by the Rajasthan Sales Tax Tribunal, Ajmer in respect of assessment year 1988-89. The order relates to rejection of rectification application moved by the petitioner for rectifying the mistake which is alleged to be apparent from record.
2. The brief facts and circumstances in which the present case arises as noticed in the order passed by the Rajasthan Sales Tax Tribunal dt. 15.12.1992 are that there was a works contract between appellant dealer and the B.H.E.L. for the fabrication of Cupro-Nickle-Tubes. The appellant dealer did the job work in respect of the fabrication of the above tubes and supplied the same to the B.H.E.L. prior to 22.4.1988. The dealer in fabrication of the said tubes used Nickle valued Rs. 2,47,987/-. The other commodities used in execution of the said works contract were supplied by the B.H.E.L. for whom the job was executed. The assessing authority held that in execution of the works contract property in Nickle worth Rs. 2,47,987/-passed on to B.H.E.L. and it amounted to sale of Nickle by the petitioner-dealer. He, therefore, levied tax on the sales of Nickle at said amount and interest u/s. 11B on the additional demand. He also levied penalty u/Ss. 16(1)(i) and 16(1)(e) amounting to Rs. 37,500/-. The amount on account of penalty u/s. 16(1)(e) included penalty for violation of the provisions in respect of Nickle as well as in respect of sale of other electrical goods as raw-material. By its order dt. 15.12.1992 the Tribunal had rejected the plea of the assessee that transfer of property in goods used in execution of works contract about fabrication of any goods prior to 22.4.1988 was not eligible to tax because fabrication works was not included in definition of works contract prior to 22.4.1988. Tribunal was of the view that definition of works contract was always there, relying on the Judgment of this Court in M/s. Sood Enterprises's case in D.B. Civil Writ No. 1698/89 decided on 18.11.1990, according to which two definitions of works contract during the intervening period, Sections 2(e) and 2(u), were in existence. There was no hiatus and tax could have been levied, even prior to that in respect of goods involved in execution of works contract. However the Tribunal. deleted penalty u/s. 16(1)(i) and tax on the packing material. Penalty u/s. 16(1)(e) was also deleted in respect of turn over of Nickle in question but sustained penalty u/s. 16(1)(e) in respect of sale of electrical goods as raw-material. Thus it partly allowed the appeal of the assessee.
3. The assessee filed a rectification application alleging that there was a mistake apparent on the face of record inasmuch as from the perusal of the statutory provisions as were applicable prior to 22.4.1988 the Fabrication contract in question did not fall within the ambit and scope of term works contract falling within the ambit of tax levy. That application has been rejected by the order under revision on the ground that jurisdiction of Tribunal in respect Of rectification of its own order being limited, and noticing the relevant legislative changes and the definitions, it held that it was not a case of mistake apparent from the record, but is question of elaborate arguments on the issue on which Tribunal was persuaded to take one opinion.
4. In the first instance it needs to be clarified that while considering rectification application distinction has to be kept in mind between the case where consideration of conceivably two rival opinions is required to be evaluated before reaching the conclusion about the alleged error in the order which has already come into existence on the one hand and the case where for the purpose of finding the existence of any error, mere reference has to be made to different provision of law whose meaning is clear and unambiguous. In the former case consideration of opinions or contentions on contentious issues does not provide foundation for exercise of jurisdiction for rectification inasmuch as the mistake which is to be discerned and discovered by farming opinion by weighing rival views on which conceivably there may be two opinions cannot be a mistake apparent from the record. However in the latter case, merely because a long chronology of events has to be seen or number of provisions of the statute are to be seen for the purpose of consideration whether the conclusion reached is in consonance with the plain meaning of the law flowing from the reading of the statute itself would not make it any less a mistake apparent from the record. Mistake apparent from record is definitely something wider than mistake which can be pointed out as typographical error or inadvertent, or clerical mistake, which every Tribunal has inherent powers to correct. A mistake which is not to be discovered after a elaborate discussion of rival contentions but is clear from chronology of events or plain meaning of statutory provisions or conclusion has been reached without considering the relevant provisions of law do fall within such mistake which can be corrected by rectification. Therefore the question of this nature raised in this case cannot be examined and decided without having looked at the relevant provisions themselves which in my opinion the Tribunal has apparently failed to do.
5. It is to be noticed that the case of the assessee in rectification application is founded neither on erroneous exercise of Jurisdiction nor on the ground that in fact the decision of this Court requires reconsiderations on applicability about the said principle of works contract of the nature which were before the Court. His case is simpliciter that plain reading of the provisions as they existed prior to 22.4.1988, the contract of fabrication does not fall within the definition of works contract at all. He also points out that M/s. Sood Enterprises case related to building Contract and the provision which the Court construed related to building Contract. He merely relies on the basic reading of the language of statute itself and nothing more. In the process, because of successive amendments, various provisions has to be read from amending enactments for the purpose of making out as to what were the existing provisions in force prior to 22.4.1988 when the Contract of Fabrication was executed. After finding that a question would arise whether can there possibly be any argument that the contract in question would not fall within the definition of contract of works contract eligible to tax which could be considered a mistake apparent from the record to justify exercise of power of rectification. But before such examination, it will be premature to say whether this is a case in which rectification ought not to be granted by closing the mind to reach the provisions.
6. In order to consider the background of this controversy one has to remind oneself that until amendment of Constitution by 46th Amendment took place in 1982 inserting Clause 29A in Article 366 of the Constitution and the extended meaning was given to tax on sale or purchase of goods amplifying the legislative field of State legislature to impose tax on sale or purchase, it was settled law that transfer of property, in goods used in execution of works contract does not result in 'sale of goods' which can be subjected to tax on sale or purchase by the State. Power to levy sales tax was confined to sales coming within the purview of Sale of Goods Act, 1930. It is for the first time by inserting the Clause 29A in Article 366 of the Constitution, tax on transfer of property in goods, whether as goods or in some other form, as goods involved in execution of works contract was included in the definition of tax on sale or purchase of goods' and it became permissible for State legislature to levy tax on transaction falling in the amplified definition. However insertion of extended definition itself would not result in levy of tax directly. It required necessary, legislative action by the concerned State Legislature, if so desired to levy tax on transfer of property in goods involved in execution of works contract. The extent of such levy depended on the provisions made in that regard in the State Sales Tax Laws. Reference in this connection may be made to Builders Association of India and Ors. v. Union of India and Ors. :
The 46th Amendment does not more than making it possible for the States to levy sales tax on the price of goods and materials used in works contracts as if there was a sale of such goods and materials.
7. In pursuance of this amendment the legislative activity came into existence for the purpose of levying sales tax on the transfer of property in good involved in execution of works contract. The extent of levy on transfer of property in goods involved in execution of works contract would depend on the legislative policy as disclosed in the respective State legislative enactments.
8. In the light of aforesaid background the provisions of the Rajasthan Sales Tax Act for the purpose of examining the question at hand need the examination. Until no definition of works contract found place in the said Rajasthan Sales Tax Act levying tax on sales or purchase of goods within the State of Rajasthan. However, contract has been defined under Clause (e) of Section 2(e) which reads as under:
(e) Contract" means any agreement for carrying out for cash or deferred payment or other valuable consideration:
(i) the construction, fitting out, improvement or repair of any building, road, bridge or other immovable property;
(ii) the installation or repair of any machinery affixed to a building or other immovable property; or
(iii) the overhaul or repair of any motor vehicle; until that date the definition of contract did not include.
9. The aforesaid three categories of contracts namely (i) construction of building, road and other property (ii) installation or repair of any machinery affixed to a building or property or (iii) overhaul or repair of any motor vehicle. Any other works or contract was not envisaged to fall within the definition to bring it under levy. But by amending Section 2(e) w.e.f. 1.4.1987, Section 2(e) defined contract or 'works contract' instead of defining word contract only.
10. This amendment in existing definition of works contract w.e.f. 1.4.1987 again did not include any works contract falling outside aforesaid three categories. Obviously fabrication in question for third party did not fall in any of the three categories and this conclusion does not require any argument.
11. Thereafter by 22.4.1988 Rajasthan Sales Tax (Amendment) Act, 1988 (Act No. 9 of 1988) Clause (e) of Section 2 was omitted and in its place Clause (u) was retrospectively inserted w.e.f. 1.4.1987. Clause (u) which was inserted on 22.4.1988 w.e.f. 1.4.1987 read as under:
(u) "Works contract" includes any agreement for the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, overhauling, repair or commissioning of any movable or immovable property for cash, deferred payment or other valuable consideration but excludes a works contract purely of labour or service.
12. This amendment was brought into existence by Rajasthan Sales Tax (Amendment) Act, 1988 (Act No. 9 of 1988) retrospectively. Existing Clause 2(e) was omitted with immediate effect. The definition of works contract in the aforesaid form was inserted w.e.f. 1.4.1987. It also need no argument that if this definition were to govern the case of the present case, the works contract includes agreement for fabrication of any sort and the same would fall within the definition of works contract so as to attract the levy.
13. However yet another event has taken place in the form of enactment of Rajasthan Sales Tax (Second Amendment) Act, 1988 which was enacted on 15th October, 1988. By this second amendment the Clause (u) of Section 2 which was inserted for the first time by the first Amendment Act No. 9 of 1988 on 22.4.1988 with retrospective effect from 1.4.1987 was omitted and deemed always to have been omitted. Thus, Clause (u) of Section 2 as inserted on 22nd April, 1988 was totally rendered ineffective for any purposes whatever. This was followed by inserting new Clause (u) w.e.f. 22nd April, 1988, and defined works contract as under:
(u) "works contract" includes any agreement for the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, over-hauling, repair or commissioning of any movable or immovable property for cash, deferred payment or other valuable consideration but excludes a works contract purely of labour or service.
14. Thus position which emerges from aforesaid legislative history of enacting definition of works contract is that upto 28.4.1988 only Section 2(e) was operative defining the contract or works contract for the purpose of levy of tax on transfer of property in goods involved in the execution of a works contract of the kind mentioned therein, which on bare reading without any argument leads to only conclusion that fabrication of tubes for other parties did not fall in the definition of 'works contract, but was confined only to the matter of construction, repairs or installation of building road or other movable machineries installed for repairs of building and the repairs or overhauling automobiles.
15. On 22.4.1988 new definition of works contract was inserted, in the first instance retrospectively w.e.f. 1.8.1987 which included agreement for fabrication of goods of any sort, which again would certainly have taken without any argument within its ambit, the execution of works contract of the nature in question from 1.4.1987. However the said provision having been omitted by Act No. 13 of 1988 with retrospective effect from its inception (1.4.1987), no effect could be given to it by anyone to the said provision as its position became of still-born legislation. The simultaneous insertion of Clause (u) of Section 2 of the Act by the Second Amendment Act, 1988 was only w.e.f. 22.4.1988. That is to say that provision became effective after the property of goods in question have already been transferred to the B.H.B.L. in the present case. If the provisions are read in proper chronology the conclusion is irresistible without argument that during the period from 1.4.1987 to 22.4.1988. The 'job work' of fabrication of any goods was not included in the definition of works contract for the purpose of Act and only activity included in the definition were execution of construction of buildings of roads of concerning repair of machinery attached to repair of automobile. Other contract did not fall within the purview of levy of tax on sale or purchase under the Rajasthan Sales Tax Act.
16. Thus the petitioner had made out a case that a mistake in the order of Tribunal dt. 15.12.1992 existed by pointing out that before levying tax on turn over relating to transfer of property in 'Nickle' used in execution of contract for fabrication of tubes, has not taken into account the statutory provision that existed as on the date contract was executed, the execution of work by him of the nature of fabricating goods for others did not fall within the purview of 'works contract' and said mistake is discoverable on plain reading of the statutory provision without any elaborate argument and on which there could not be possible two opinions. The said mistake apparently need to be rectified for which necessary jurisdiction vested with Tribunal.
17. So far as case of M/s Sood Enterprises v. Union of India is concerned, the Court was never called upon to decide and could not have been called upon to decide whether any contract not falling within the definition of works contract has come into force from time to time would still be governed by provisions of the Act. It may be seen that before the Court, the issue was taxability of tax on goods involved in execution of a building contract and question was that there being no definition of works contract prior to insertion Of Section 2(u) of the First Amendment Act, no tax could at all be levied prior to 22.4.1988 on the works contract and that retrospective effect could not be given to the said definition inserted by First Amendment Act. The Court referred to insertion of definition of works contract' vide Section 2(u) with effect from 1.4.1987 and held that it is constitutionally permissible to give effect retrospectively to a taxing statute and found that Section 2(e) did exist prior to insertion of Section 2(u) on 22.4.1988 retrospectively. Therefore period prior to 22.4.1988 was covered by definition of contract or works contract u/s 2(e). That being the position the court found that there was no gap and the definition of 'works contract' did exist throughout the period of 1.4.1987 upto 22.4.1988 and tax in respect of goods involved in execution of works contract could have been levied even prior to that date. It also notified that Section 2(e) was deleted only on 22.4.1988, and that too not retrospectively. Therefore between 1.4.1987 to 22.4.1988 two provisions remained effective as a result of first amendment, one Section 2(e) and another Section 2{u) which was inserted retrospectively. On deleting of Section 2(u), as inserted by first amendment with retrospective effect by second amendment, also retrospectively w.e.f. 1.4.1987, did not leave the field uncovered by legislature between 1.4.1987 to 22.4.1988 because of Section 2(e). The contract in question was falling within Section 2(e) was never in doubt or dispute which the Court was called upon to decided. The controversy that has been raised by the assessee in this case was never before the Court nor the fact of omission of Section 2(u) as had been inserted, retrospectively from 22.4.1988, by the subsequent amendment Act No. 13 of 1988 was before the Court therefore from decision in M/s Sood Enterprises ho assistance in respect of any of the conclusion could be drawn while considering the question the mistake that has been pointed by the learned Counsel for the appellant is a mistake apparent from record could be gathered from plain reading of successive amendments that has been brought into definition of the 'works contract' for the purposes of 'tax on sales or purchases' in the Rajasthan Sales Act. As the provision of works contract were in force prior to 22.4.1988, it is seen that the company in question has executed the contract of fabrication of goods like Tubes did not apparently find place within the definition of works contract and would not have been governed by the levy of tax until insertion of Section 2(u) which came to be final inserted only w.e.f. 22.4.1988 by the Amendment Act No. 13 of 1988. infructuating the earlier retrospective amendment.
18. I am of the opinion that as the Tribunal committed an apparent error in refusing to enter this enquiry into the provisions of law as existed on the relevant date before rejecting the application for rectification application solely on the ground of requirement of reaching number of provision.
19. As a result this revision is allowed. The order under revision is set aside and the application for rectification of the order of Tribunal dt. 15.12.1992 is allowed, by holding that there did exist a mistake apparent from the record in the order of Tribunal by which it levied tax on the works contract of fabrication, which was completed prior to 22.4.1988 without considering the provision of law particularly definition of 'works contract' applicable as on that date and further hold that contract of fabricative 'Cupro Nickle' Tubes' did not fall within the definition of works contract as was operative on the date the work of Fabrication was executed and the property in Nickle used in its execution passed onto the BHEL. Therefore levy of tax and consequential interest thereon is set aside.
20. There shall be no order as to costs.