Allahabad High Court
Engineering Projects (India) Limited vs Commissioner Of Sales Tax on 10 January, 2007
Author: Rajes Kumar
Bench: Rajes Kumar
JUDGMENT Rajes Kumar, J.
1. Present revision under Section 11 of U.P. Sales Tax Act (hereinafter referred to as "Act") is directed against the order of Tribunal dated 7th June, 1994 for the assessment year 1976-77 and 77-78 both under the U.P. Trade Tax Act.
2. Tribunal has decided both the appeals for both the assessment years by common order. Since in both the revisions common questions are involved, same are being disposed of by common order.
3. Brief facts giving rise to the present revisions are that the applicant is a Government of India enterprises and is controlled by the Government of India, Ministry of Heavy Industries, New Delhi. Applicant was involved in executing the contracts in the nature of works contract and supply etc. Applicant head office is at New Delhi. During the years under consideration, applicant had executed five contracts executed between the Head Office of the applicant and five different companies, namely, M/s Kisan Sahkari Chini Mills, Bisalpur, Pilibhit, M/s Kian Sahkari Chini Mills, Badaun, M/s Bharat Pumps Compressors Limited, Naini, Allahabad, U.P. State Electricity Board, Panki, Kanpur, Northern Railway, Transmission Line, Aligarh. All the contracts were claimed to be works contracts. It was claimed that 'with M/s Kisan Sahkari Chini Mills, Bisalpur, Badaun two contracts were for designing, manufacturing, supplying, erections and commissioning of sugar mill plant. The contract with M/s Bharat Pumps Compressors Limited, Naini, Allahabad was for erecting, testing, commissioning of plant and machinery. The contract with U.P. State Electricity Board, Panki, Kanpur was for erection, and commissioning of Panki Coal Handling Project and Panki Ash Handling Plant. The contract with Northern Railway, Aligarh was for erection of transmission line. It was claimed that all the contracts were a composite, indivisible contracts being turn-key contract. However, it was submitted that the materials were supplied from outside the State of U.P. directly at the site of the various parties where they were used in the commissioning, fabrication and erection of the plant. It was submitted that such supplies were either directly by the Head Office, Delhi or by the vendors, who were asked to dispatch the goods at the site and the transfers were made by way of transfer of documents. Submission was that there was no intra-State sales of the material. Assessing authority had not accepted both the aforesaid pleas of the applicant. Assessing authority held that in the contracts there were separate stipulation of price for the supply of the materials and for the labour charges and therefore, the contracts were divisible contracts for the labour and material and were not the works contracts. With regard to the second submission, assessing authority held that no evidence had been adduced to prove that the goods were supplied by transfer of documents. According to the assessing authority goods were transferred after taking the delivery inside the State of U.P. Therefore, there were intra-State sales. First appeals filed by the applicant were dismissed. Applicant filed two second appeals before the Tribunal, which were also dismissed.
4. Heard Sri Bharatji Agrawal, learned Senior Advocate appearing on behalf of the applicant and Sri B.K.Pandey, learned Standing Counsel.
5. Learned Counsel for the applicant submitted that the nature of all the five contracts are similar. He submitted that though there was a separate stipulation of price for the supply of the material and the labour charges but the scope of the works mentioned in the contracts suggest that they were for designing, manufacturing, supplying, erection and commissioning and thus, all the contracts were works contracts.
5. In support of the contention he relied upon the decisions of the Apex Court in the case of Commissioner of Sales Tax, M.P. v. Purshottam Premji, reported in 26 STC, 38, State of Tamil Nadu v. Anandam Viswanathan, reported in 73 STC, 1, State of Maharashtra v. Sarvodaya Printing Press Fine Art Printer, reported in 114 STC, 242.
6. As an alternative plea he submitted that all the materials have been supplied from outside the State of U.P. either by the Head Office or on the instructions of the Head Office, Delhi by vendors at the site of the customer party and the delivery of the goods were taken by the parties directly in U.P. He submitted that the separate bills were raised by the applicant for the supply of the material and in respect thereof Form "C" were received from the customer party. He submitted that there were inter-State sales or subsequent inter-State sales from Delhi and in respect of such transactions, Delhi Head Office has already been subjected to assessment. He referred the copy of some of the bills, annexed alongwith the revision petition. On these facts, it was submitted that the sales were inter-State sales by the Head Office to the customer parties and were not intra-State sales.
7. Having Heard learned Counsel for the parties, I have perused the order of Tribunal and the authorities below and have also perused the copies of the contracts, filed alongwith the supplementary affidavit.
8. Since the learned Counsel for the applicant submitted that the terms of all the contracts are almost same and he has made the submission on the basis of one contract dated 24.03.1975 entered into between M/s Kisan Sahkari Chini Mills Limited and M/s Engineering Project (India) Limited, New Delhi, thus, issue involved are to be adjudicated on the basis of the terms of the said contract. Some of the relevant clauses of the agreement are referred hereinbelow:
CONTRACT PRICE 1.1 The Sellers agree to design, manufacture, supply, erect, supervise the erection and commissioning of the Plant and Machinery specified in Schedule 'A' annexed to and forming part of this Agreement at a total price of Rs. 4,89,29,000/- (Rupess Four Crores Eighty-nine Lakh Twenty Nine Thousand only) (hereinafter referred to as the contract price) as per the break-up given below:
i. Charges for providing basic designs of the layout and for rendering Engineering and Technical services and know-how Rs. 2,00,000.00 (Rupees Two Lakh only).
ii. Charges for erection, supervision of erection and commissioning of the plant and machinery. Rs. 11,50,000/- (Rupees Eleven Lakh Fifty thousand only).
iii. Price of machinery and equipment as per Schedule 'A' inclusive of freight, packing, handling, forwarding and other consumables, hereinafter described.... Rs. 4,75,79,000/-(Rupees Four Crore Seventyfive Lakh Seventy nine Thousand only).
SCOPE OF SUPPLY The Sellers shall design, procure, manufacture, supply and erect the plant and machinery detailed in Schedule 'A' annexed to and forming part of this agreement in conformity with the specifications laid down therein so as to be ready for commissioning of the plant within the time provided for in Clause 4.1 and according to the progressive delivery schedule to be drawn up by the 'Sellers' in consultation with the Purchasers. Deliveries of major equipments shall be indicated by the Seller within 180 days from the date of signing of this Agreement While preparing the delivery schedule, the Sellers shall ensure that the items which are to be erected first shall be sent with same priority and delivery shall be maintained thereafter accordingly, but Motors, Pumps, Brass-tubes and Boiler-tubes may be despatched earlier than in the Delivery Schedule. The said delivery schedule shall indicate the approximate value, major assembly item-wise, of the plant and machinery described therein and shall be submitted to the purchasers within 180 days from the date of signing of this Agreement and no departure therefrom shall be made except as may be mutually agreed. PROVIDED THAT nothing contained in this clause shall be deemed to permit extension in the ate of commissioning of the plant on account of any such departure. PROVIDED FURTHER that in case the Purchasers require any additional items of plant and machinery or ask for any major change in the specifications of the plant and machinery as given in the Schedule 'A' annexed to and forming part of this Agreement within three months from the date of signing of this Agreement, the Sellers hereby agree to make such supplies, additions, modifications, alterations or changes and the Purchasers shall bear the cost of the same to be mutually decided, and PROVIDED FURTHER THAT SUCH addition or deviations shall be subject to discussions and shall be such as are mutually decided upon taking into consideration also the delays, if any, which are likely to occur in the event of giving effect to such proposed additions or deviations.
ERECTION, DIRECTIION AND SUPERVISION OF ERECTION & COMMISSIONING 3.1 The sellers agree to erect, supervise the erection of and commission the plant and machinery to be supplied by them as specified in Schedule 'A' annexed to and forming part of this Agreement, to the satisfaction of the Purchasers.
3.2 The Sellers shall employ at their own cost all necessary labour and suitably skilled workmen for erection and commissioning of the plant and machinery and shall have the entire work supervised by qualified and experienced personnel. Any defect in the said erection or damage or loss to the plant and machinery caused during erection shall be rectified and made good forthwith by the Sellers at their own cost and expense.
DELIVERY & COMMISSIONING 4.1 The Sellers agree to start the supply of plant and machinery detailed in Schedule 'A' annexed hereto and forming part of this Agreement from May 1,1976 so always that the plant is ready for commissioning for commercial use by 31st August, 1977, in which respect time and period is of the essence of the Agreement DESPATCH OF MACHINE AND EQUIPMENT 5.1. The Sellers shall depute their representatives at the Purchasers' factory site Bisalur district Pilibhit to take delivery of the machinery and equipment who shall be fully responsible for handling, unloading, transport and proper storage of the machinery and equipment.
7.1. As soon as the plant is ready for commissioning, the Sellers shall notify the Purchasers and specify a date and time not less than ten days later than the date of the notice when the Sellers intend to carry out the steam and water trials. Unless otherwise agreed by the Purchasers and the Sellers, the Sellers shall begin the said trial on the date and time so notified and the Purchasers shall attend their carrying out. If the Purchasers fail to attend the said trials as required by this clause, or if it is agreed between the Purchasers and the Sellers that the Purchasers shall not do so then the Sellers shall carry out such trials in the absence of the Purchasers and shall forthwith notify the Purchasers of the results thereof and the results so notified shall be acceptable by the Purchasers.
7.2. After the said trials have been completed to the satisfaction of the Purchasers and the Sellers and on furnishing a certificate by the Purchasers to the effect that all the Plant and Machinery mentioned in the Schedule 'A' has been delivered, erected and executed according to the terms and conditions of this Agreement, the Sellers shall be absolved of the guarantee given in Clause 16.
7.3. The performance trial under Clause 8 will be conducted in the presence of authorised representatives of:
(a) Purchasers;
(b) Sellers;
(c) The National Federation of Co-operative Sugar Factories Ltd., New Delhi.
(d) The Chief Director of Sugar & Vanaspati, Govt. of India.
7.3.2 If the trials referred to above are found satisfactory and on furnishing of the certificate mentioned above in Clause 7.3.1., the plant shall be deemed to be formally taken over; provided that if before the performance trial hereinbefore mentioned the sugar factory is operated continuously for 15 days satisfactorily and produce commercial white sugar for three continuous days, the plant will be deemed to have been taken over by the Purchasers but such taking over shall not absolve or relieve the Sellers from fulfilling the guarantee performance as provided by Clause 8 after the date of such take-over.
9. Perusal of the agreement reveals that the separate price was stipulated for the supply of material and for labour work. Thus, it was a divisible contract for work and supply and not composite contract. As per own admission of the applicant, separate bills were raised for the material. Copies of some of the bills are annexed alongwith the revision petition. Thus, the plea of the applicant that the contract was indivisible works contract can not be accepted.
10. All the decisions cited by the learned Counsel for the applicant referred hereinabove are not supporting the submissions of learned Counsel for the applicant. In all the cases, contract was composite and indivisible contract for the supply of the material and labour charges. The value of the material and the labour charges were not separately stipulated. Thus, these case are not applicable in the present case.
11. Now coming to the alternative plea. I find substance in the argument of learned Counsel for the applicant. The goods appears to have been despatched from outside the State of U.P. at the destination of the parties. The claim is that some were directly supplied by the Head Office, New Delhi and the some were supplied by the vendor on the instructions of the Delhi Head Office and during the course of the movement of the goods, same were transferred by endorsement of documents. It is claimed that in respect of the such supplies, Form C" were provided by the customers and the Delhi Head Office has been subjected to assessment. There does not appears to be any material to show that the delivery of the goods had been taken by the applicant inside the State of U.P. and thereafter, they were supplied to the customers. Perusal of the order of the Tribunal and the authorities below show that this aspect of the matter has not been examined properly and, therefore, it requires reconsideration.
12. In my opinion, proper examination can be made by the assessing authority. The assessing authority is directed to examine whether the goods were supplied from outside the State of U.P. in the course of inter-State sales either directly or by way of transfer of documents during the course of movement of goods. Assessing authority may also examine whether the entire supplies of goods were from outside the State of U.P. or within the State of U.P. Assessing authority may also examine whether the delivery of goods had been taken by the applicant in the State of U.P. and thereafter, goods were supplied or delivery of the goods had been taken by the customer directly within the State of U.P. The assessing authority after ascertaining the correct nature of transaction proceed to assess the transactions.
13. In the result, revision is allowed in part. Order of the Tribunal and authorities below are set aside and the matter is remanded back to the assessing authority to pass assessment order afresh after making proper enquiry in accordance to law in the light of the observations made above.
15. The applicant is directed to file the certified copy of the order before the assessing authority within two weeks. The assessing authority thereafter, shall complete the assessment proceedings within three months thereafter. It is made clear that no fresh notice may be issued to the applicant fixing the date of hearing.