State Taxation Tribunal - West Bengal
Modern Decorators vs Commercial Tax Officer And Ors. on 2 February, 1990
Equivalent citations: [1990]77STC470(TRIBUNAL)
JUDGMENT
B.C. Chakrabarti, Chairman
1. The case arises out of a writ application under Article 226 of the Constitution of India filed jointly by two partnership firms, namely Messrs. Modern Decorators and Messrs. Calcutta Decorators. Subsequently, however, the name of the applicant No. 2 has been struck out vide Order No. 6 dated 10th January, 1990.
2. The case of the applicant, namely, Messrs. Modern Decorators may be briefly put as follows :
The applicant is a partnership firm and has been carrying on business as decorators for over 50 years. The business of the applicant consists, inter alia, of constructing, erecting and raising pandals, barricades, rostrums, etc., in and upon land, earth, road, building, roof-top, etc., according to and on the basis of orders placed by various customers. The pandals or rostrums, etc., are constructed and/or erected with the aid of bamboo, sal balla, ropes, tarpaulin, decorating cloth and other materials. The said materials belong to the decorators and at no point of time there is any transfer of property by the decorator in favour of the customer. After the expiry of the specified period, the pandals, barricades, rostrums or pavilions are dismantled by the decorators with their own men and labour and the materials are taken back to the godown of the applicant for subsequent use according to orders. The customers are never given the right to use the materials in any manner they like. The decorators are paid only the service charges for constructing and/or raising or erecting such pandals, etc., and no consideration is paid by the customers for the materials supplied and brought by the decorators for such construction. The pandals, etc., as constructed by the decorators, are attached to the earth and as such, they form part of the immovable property.
3. After the Forty-sixth Amendment of the Constitution, the State Legislature has substituted the definition of "sale" to mean any transfer of property, in goods for cash or deferred payment or other valuable consideration and includes any transfer of the right to use any goods for any purpose whether or not for a specified period. The expression "sale price" also suffered a change. After the amendment of the Bengal Finance (Sales Tax) Act, 1941, consequent upon the Forty-sixth Amendment of the Constitution, the Commissioner of Commercial Taxes issued a trade circular dated 7th December, 1984, stating that a person engaged in a business of letting out movable property on hire, lease or rental for use of another person, is also treated as a dealer under the Bengal Finance (Sales Tax) Act, 1941. Acting on the said trade circular, the Commercial Tax Officer, Manicktola Charge, issued a notice dated 5th November, 1985, purported to be under Section 14(1) of the Bengal Finance (Sales Tax) Act, directing the applicant to produce all books of accounts relating to the business on November 7, 1985. After the said notice, the applicant prayed for an adjournment of the hearing but on 18th November, 1986, a search was conducted from the office of the Assistant Commissioner of Commercial Taxes, Central Section on the basis whereof several documents, as per the seizure list, were seized on the plea that there are reasons to suspect that the applicant is attempting to evade payment of sales tax. The application then goes on to state that the seizure was unwarranted and illegal and that, at any rate, the retention of the books of accounts beyond the period of one year without adequate reasons therefor being communicated to the applicant, was bad in law and liable to be quashed.
4. In the present application the applicant has challenged the attempted imposition of sales tax in respect of the business of the applicant carried on as decorators. The notice issued by the respondent No. 4 under Section 14(1) of the Bengal Finance (Sales Tax) Act and the subsequent seizure are all bad in law. The applicant never, in course of the business, did effect any sale within the amended meaning of the expression so as to be exigible to sales tax.
5. The application is opposed by the respondents. At the outset it may be stated that we need not go into the question of the propriety of seizure or the alleged retention of the papers seized on 18th November, 1985. It appears from the affidavit-in-opposition that the seized documents have all been released in terms of the order of the High Court. In fact, in view of the release of the books seized by the respondents. Dr. Pal, appearing on behalf of the applicant, did not raise this issue during hearing of the case before us.
6. The case of the respondents in brief is that in view of the amended definition of "sale", the work done by the applicant becomes exigible to tax. The further submissions made by the respondents in opposing the applicant will appear in course of our judgment to follow.
7. The main point for consideration in this case is whether the erection of pandals, pavilions, rostrums, etc., come within the meaning of "sale", as now defined. The expression "sale", after the Forty-sixth Amendment of the Constitution, as defined in Sub-clause (ii) of Section 2(g) of the Bengal Finance (Sales Tax) Act, 1941, reads as follows :
"(ii) any transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration, or..."
The first contention urged by Dr. Pal, is that the pandals or rostrums constructed by decorators being fixtures attached to the earth, become a part of immovable property and cannot, therefore, come within the meaning of goods as contemplated by the Bengal Finance (Sales Tax) Act, 1941. The expression "immovable property", as defined in the Bengal General Clauses Act, 1899, includes land, benefits to arise out of land and things attached to earth or permanently fastened to anything attached to the earth, while movable property is defined as property of every description which is not immovable property. The mere fact that a pandal is constructed on the land of the customer or on the roof-top of his house, in our view, does not make it an immovable property even though temporarily it is fastened to the earth or building on which it is erected. In the case of Board of Revenue, Madras v. K . Venkataswami AIR 1955 Mad. 620, a question was referred to the Full Bench of the Madras High Court, namely, whether the lease of properties relating to a touring cinema, though collapsible and capable of being removed but permanently fastened to the earth, when in use, is chargeable to stamp duty. The answer given by the Full Bench was in the negative. Chief Justice Rajamannar pointed out that the answer to the question depends upon whether the equipment of the touring cinema would fall within the category of immovable property. The court had no hesitation in saying that it did not. In the very nature of things, properties of that nature could not be immovable property. Though the observations were made in the context of a question as to whether such a transaction was chargeable to stamp duty under the Stamp Act, the principle clearly indicates that the answer to the question as to whether it was immovable property, lay in the nature of things, namely, that it was collapsible and capable of being removed. Precisely, the contention of the applicant is that the goods or materials with which pandals, etc., are erected, are dismantled after the specified period and removed by the applicant to be stored in its godown. The transaction being of the nature as above, we are unable to agree with Dr. Pal that it is in the nature of an immovable property and therefore, not exigible to sales tax.
8. Dr. Pal then contended that the services rendered by decorators cannot come within the meaning of sale, as amended by Section 2(g)(ii) of the 1941 Act. His contention is that the materials and goods with which pandals, rostrums, pavilions, etc., are erected, are not transferred and that the customer has no right to use any such goods or materials in any manner they like. In other words, his contention is that the erection of pandals, etc., is really in the nature of a service of a complex character not really involving a transfer of the materials even for a limited period. In support of the contention, reliance was placed in the case of Bank of India v. Commercial Tax Officer, reported in [1987] 67 STC 199 (Cal). That was a case relating to lease of bank lockers. After the amendment of the definition of "sale", the department issued notices to a number of banks for the purpose of levying tax on the transfer of the right to use the bank lockers which amounted to sale. The banks filed writ petitions challenging the notices and contending that the facility granted to the customers of the bank was not a sale. The fact situation of that case, however, is different. A bank locker leased out to a customer stands on a different footing from a pandal or a rostrum erected by a decorator under orders of the customer. In that case it was held that the bank had built a strong room, installed a steel cabinet with safety lockers with double locking system ; access to the lockers is checked and controlled by the bank authorities and constant guard is provided over the property. The locker cannot be opened by the customers unless the bank opens the locker with a master key. Customers have to obtain admission to the vaults only when the bank allowed it. The bank had a Hen on the goods stored in the locker for the rent payable by the customer. In the context of these facts, it was held that the subject "hired out" was a complex one and not merely a transfer of right to use goods, but a rendering of various services along with a limited right to use the locker. The lease of bank lockers, therefore, was held not to come within the meaning of sale as contained in Section 2(g)(ii) of the Bengal Finance (Sales Tax) Act, 1941. The case of State Bank of India v. State of Andhra Pradesh, reported in [1988] 70 STC 215 (AP) was also referred to in this context. The decision in this case follows the decision referred to earlier, namely, Bank of India v. Commercial Tax Officer [1987] 67 STC 199 (Cal). While Dr. Pal conceded that the bank lockers, referred to above, was not a case strictly on the point, yet the principle laid down therein, in substance, supports the case of the applicant, namely, that the applicant while constructing a pandal or rostrum, etc., do not let out or transfer the materials for the use of the same by the customer. It is argued that the customers do not have a right to use the different materials in any manner they liked for the period of hire but that the materials were necessary to be used for the erection of the pandal which alone the customer had ordered to be erected. Therefore, the applicant's contention is that the work done by the decorators in erecting a pandal or so, cannot come within the definition of sale of goods in respect of the materials used in the construction.
9. Mr. Chakraborty, appearing on behalf of the respondents, however, contended that the applicant admits the liability in regard to supply of various articles by way of hire and that the letting value of the different articles with which pandals are erected, are goods capable of being subjected to sales tax. We are unable to accept this contention of the respondents. As we have already indicated, it is not the materials which the decorators let out to the customers. They use the materials for the erection of the pandal--a service of a complex nature rendered by the applicant-decorator to its customers. The position might have been different if the decorator merely lets out the different articles to the customer and the customer erects the pandal with his own men and labour. In such a situation it might be possible to say, if at all, that the letting value of the materials should be taken into consideration for the purpose of assessing sales tax liability. But it is nobody's case that such is the practice prevailing in the trade. The decorators themselves erect the pandals for a consideration and after the specified period dismantle the same and remove the articles to their own godown. Such being the case, we are unable to accept the contention of the respondents that pandals erected by decorators come within the meaning of "sale of goods".
10. Dr. Pal, also, drew our attention to the statement of objects and reasons for introducing the Constitution (Forty-sixth Amendment) Bill, 1981. In particular, he drew our attention to item 6 of the statement which reads as follows :
"6. Device by way of lease of films has also been resulting in avoidance of sales tax. The main right in regard to a film relates to its exploitation and after exploitation for a certain period of time, in most cases, the film ceases to have any value. It is, therefore, seen that instead of resorting to the outright sale of a film, only a lease or transfer of the right to exploitation is made."
The statement of objects referred to above, in our view, is only by way of illustration. This apart, it is unnecessary to refer to the statement of objects and reasons in interpreting the statute if the statutory provision itself is unambiguous. We have already observed that the services rendered by decorators in erecting pandals or rostrums, cannot come within the meaning of sale of goods as defined. In that view of the matter, the demand for sales tax in respect of pandals, rostrums, pavilions, etc., erected by decorators, must be left out of consideration for the purpose of assessing tax liability. But it is common knowledge that besides erection of pandals, etc., the decorators too often let out various other articles for use by the customers in any manner they like, such as, tables, chairs, carpets, crockery and such other articles. The expression "goods" has been defined in Section 2(d) to include all kinds of movable property other than actionable claims, stocks, shares or securities. Strictly speaking, the materials used in the erection of the pandals are not transferred. The customer has not the right to use the materials necessary for the construction for any purpose. They have merely the right to use the pandals as such. Therefore, the erection of pandals at the instance of customers do not amount to sale within the meaning of Section 2(g)(ii).
11. An unreported decision in the case of Orient Decorators v. State of West Bengal, being Matter No. 1764 of 1985 of the High Court at Calcutta, was referred to by Dr. Pal. That was a case relating to demand for sales tax in respect of pandals erected by the writ petitioners at the instance of customers. The respondents, it appears, did not appear to oppose the writ petition. It was held that a pandal erected by the decorators at the instance of their clients at a particular fixed place, is not "goods" within the meaning of Section 2(d). It was, however, further held that so far as other goods are concerned with which the decorators transact their business by giving them on hire, then such transactions, if they relate to movable properties, may come within the definition of "sale", as given in Section 2(g)(ii) of the Bengal Finance (Sales Tax) Act, 1941. We, however, do not consider it necessary to come to a positive finding whether a pandal qua pandal is "goods" or not. But, we find that the hiring of pandals erected by decorators at the instance of customers for a specified period, cannot come within the meaning of "sale" so as to be exigible to sales tax. The argument that the letting value of the different materials with which pandals are erected are "goods" in our view, makes no difference because it is not the materials that are transferred for use by the customers as such. It is the totality of the service rendered by the decorator, namely, the erection of pandals, etc., that falls for our consideration. We, however, make it clear that the various other items which decorators in course of their trade let out to their customers, such as, tables, chairs, etc., are "goods" within the meaning of the Act and they may come within the definition of "sale" as amended.
12. In the circumstances, the application succeeds in part. A writ in the nature of prohibition be issued commanding the respondents to forbear from giving any effect to and/or taking any steps in pursuance of the notice dated 6th November, 1985, issued by the respondent No. 4 under Section 14(1) of the Bengal Finance (Sales Tax) Act, 1941 and the Trade Circular No. 2/84 dated the 7th December, 1984, issued by the respondent No. 2 and prohibiting the respondents from charging any sales tax for erection of pandals etc., by the applicant for their customers in connection with their business of decorating. Other items of goods let out by the decorators to the customers on hire, however, shall come within the meaning of "sale" and may be assessable to tax if the turnover exceeds the taxable limit. With the directions as above, the case is disposed of. There will be no order for costs.
P.C. Banerji, Technical Member
13. I agree.
L.N. Ray, Judicial Member
14. I agree.