Directory time-limit and composite works contract principles exclude invalid reference and separate sales tax on materials.

Section 24(1) of the Orissa Sales Tax Act was treated as requiring the Tribunal to act promptly, but the 90-day period for drawing up and referring a statement of case was held directory rather than jurisdictional, so delay beyond that period did not invalidate the reference. The note also explains that a P.W.D. F-2 construction contract was not divisible into separate labour and sale contracts merely because materials were used in performance. In the absence of a distinct agreement to transfer title in movable goods, the materials formed part of the composite works contract and were not liable to sales tax as a separate sale.

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Issues: (i) Whether the 90-day period for the Tribunal to draw up and refer a statement of case under section 24(1) of the Orissa Sales Tax Act was mandatory or directory; (ii) whether the P.W.D. F-2 construction contract involved two separate contracts, one for labour and one for sale of goods, so that materials supplied under it were liable to sales tax.

Issue (i): Whether the 90-day period for the Tribunal to draw up and refer a statement of case under section 24(1) of the Orissa Sales Tax Act was mandatory or directory.

Analysis: The statutory expression used for the Tribunal's act of drawing up the statement of case and making the reference was construed in its setting as an injunction meant to secure prompt disposal, not as a condition going to jurisdiction. Since the applicant had no control over the Tribunal's time taken after filing the reference application, treating the period as mandatory would enable the reference to be defeated by delay for which the applicant was not responsible. The provision was therefore read as directory, while still requiring the Tribunal to act expeditiously.

Conclusion: The 90-day requirement was directory and the reference was not void merely because it was made after that period.

Issue (ii): Whether the P.W.D. F-2 construction contract involved two separate contracts, one for labour and one for sale of goods, so that materials supplied under it were liable to sales tax.

Analysis: A sale under section 2(g) of the Orissa Sales Tax Act requires an agreement for transfer of title in movable goods for consideration. A works contract for construction of roads does not, by itself, become a sale merely because materials are used in performance of the work. On the terms of the agreement, there was no independent covenant for sale and supply of movables; the materials passed only as part of, and as accretions to, the immovable work. The authorities could not split the composite construction contract into a taxable sale of materials in the absence of a distinct agreement to sell.

Conclusion: There were no two contracts and no taxable sale of materials under the P.W.D. F-2 agreement.

Final Conclusion: The reference was answered in favour of the assessee, holding that the Tribunal's delay did not invalidate the reference and that the construction contract did not attract sales tax on the materials used.

Ratio Decidendi: A statutory time-limit expressed in directory form does not nullify an adjudicatory reference made beyond the period, and materials used in a composite construction contract are not taxable as sales unless the contract contains a distinct agreement for sale of the movables.

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