Works-contract supply of materials can be treated as a taxable sale; interest levy also needs a reasoned calculation order.

In a works-contract setting, supply of construction materials by the employer to the contractor for execution of the project, with price adjusted against the contractor's bill, may constitute a taxable sale and render the supplier a dealer under the Mizoram Sales Tax Act, 1989. The broader definitions of "dealer" and "sale" were applied to treat the transaction as involving transfer of property in goods for project execution, even where surplus materials were returnable. Interest on assessed tax may be levied later if omitted earlier, but the levy must be supported by a speaking order disclosing the calculation and break-up of the amount charged.

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Issues: (i) whether the petitioner's supply of construction materials to its contractor for execution of the project constituted a sale and made the petitioner a dealer under the Mizoram Sales Tax Act, 1989; and (ii) whether the interest levy on the assessed tax could stand when the order did not disclose the break-up of calculation.

Issue (i): whether the petitioner's supply of construction materials to its contractor for execution of the project constituted a sale and made the petitioner a dealer under the Mizoram Sales Tax Act, 1989

Analysis: The definitions of "dealer" and "sale" under section 2(10) and section 2(19) were read broadly. The Court treated the supply of materials by the employer to the contractor as part of the business of supplying goods in execution of the project. It held that the contractual arrangement involved transfer of property in goods for the purposes of the works, even if the materials were to be used only in the specified project and surplus materials were returnable. The Court relied on the principle that where materials are supplied by the employer for use in a works contract and the price is adjusted against the contractor's bill, a taxable sale can be inferred from the transaction as a whole.

Conclusion: The petitioner was liable to be treated as a dealer and the supply of construction materials to the contractor amounted to sale; the challenge to the sales tax assessment failed.

Issue (ii): whether the interest levy on the assessed tax could stand when the order did not disclose the break-up of calculation

Analysis: The interest was levied after the audit objection pointed out that it had been omitted earlier. The Court found no legal bar to levying interest subsequently, but held that the impugned order was defective because it did not furnish the calculation details and break-up of the amount levied. On that limited ground, the interest order could not be sustained in its existing form, and a fresh order with proper calculation was required.

Conclusion: The interest order was set aside and the matter was remitted for fresh consideration and a reasoned calculation of interest.

Final Conclusion: The sales tax assessments were upheld, but the levy of interest was interfered with only to the extent of requiring a fresh, properly reasoned calculation order; the writ petitions were disposed of accordingly.

Ratio Decidendi: In a works contract, supply of materials by the employer to the contractor for use in execution of the project, with the price adjusted against the contractor's bill, can amount to sale and attract sales tax, while an interest levy must be supported by a proper calculation and speaking order.

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