TaxTMI 
TaxTMI 
1965 (11) TMI 136
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....ct tunnels, surge shafts and pipe tunnels etc. Treating the appellants as "dealer" the Sales Tax Officer, Jeypore, assessed tax under section 12(5) of the Orissa Sales Tax Act on the turnover of the appellants for the quarters ending on June 30, 1950, to December 31, 1951. The High Court of Orissa by order dated September 29, 1958, set aside the order of assessment holding that remuneration received by the appellants under a works contract was not exigible to sales tax under the Orissa Sales Tax Act. But, before the High Court decided the reference the Sales Tax Authorities also brought to tax the remuneration received under the contract for four more quarters. Those assessment proceed- ings were carried in appeal to the Sales Tax Tribunal of the State of Orissa. The Tribunal set aside the assessment of tax levied on the remuneration received by the appellants under the contract in so far as it related to construction work. But in the view of the Tribunal, the contract was a composite contract relating to construction, and to sale by the appellants to the State of Madras of certain plant, machinery and materials and that eight instalments of price, Rs. 1,00,000 received in each of ....
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....e" of Rs. 80,40,543 "which is calculated to cover the work in the specifications", and represents an estimate based on the appel- lants' "knowledge and experience of the reasonable and probable cost under efficient management", and is "adjustable in accordance with the alterations to the specification or to the quantities, and with variations in labour rates and cost of materials." But the contract also contains an arrangement under which the appellants were to procure certain plant, machinery, equipment and small tools, details whereof are to be found in Appendix 'B', Part II, under the heading "to be supplied by the contractor". The plant, machinery and equip- ment so procured were to be utilised by the appellants in carrying out the works contract, and in respect thereof an arrangement independent of the execution of the works contract was agreed upon by the parties to the contract. The covenants relating to this arrangement could not therefore be deemed to form part of the works contract; the property in the plant, machinery and equipment could not pass to the State of Madras as part of the execution of the works contract. As pointed out by this Court in the State of Madras v. ....
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....ructions that the Appendix List is not final or complete, and that deviation for items required for the contract and within the general intention of the list are to be accepted. The pro forma invoices will be certified by the company's auditors that they have examined the records of purchase of plant and machinery covered by the invoices and certify that the rates are reasonable and not in excess of the prevailing rates before being pre- sented to the Chief Accounting Officer for payment. The contractor will place his formal order when the pro forma invoices are met, and the final accounting for plant and its passing into the hands of the purchaser will take place on delivery at the site. The invoices to be rendered by the contractor for final adjustment of the advances to India will be checked and countersigned by the Director-General of India Stores Department. The contractors will remain responsible for transportation and insurance as far as the site. (b) The purchaser, through its agent the Chief Accounting Officer to the High Commissioner for India, will make an advance to the contractor of Rs. 2 lakhs to cover salaries including travelling." By paragraph 9 which bears t....
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....and the contractor will open a separate bank account..............................to be called the 'Madras Account' into which these sums will be paid. As soon as the money is received the contractor will place formal orders for the plant and equipment. He will pay the suppliers from the funds made available in the Madras Account, and will give the purchaser credit for any cash discounts received. He will also be responsible for arranging the transporta- tion and insurance of the plant and equipment to the site. The invoices to be rendered by the contractor in India will be checked and countersigned by the contractor's auditors. The purchaser, through its agent the Chief Accounting Officer, will make an advance to the contractor of Rs. 2 lakhs, and this sum will also be credited to the same Madras Account with the bank. This sum will cover the following expenditure: (i) Salaries, travelling expenses, kit allowances, insurance etc. of personnel despatched to the project. (ii) The salaries of the London clerical and technical staff of the contractor to the extent they are employed on the project. The staff involved will keep monthly time records and will charge the appro- pr....
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....ts: (1) that the contractors were to remain responsible for transportation and insurance till the plant reached the site of the Machkund Dam as provided in clause 8(a) of the agreement; (2) that under the agreement the contractors were to effect insurance in the joint names of the Government and the contractors, and that showed that they had insur- able interest in the goods; and (3) that no customs duty was included in the "target estimates" and if the State of Madras was obliged to pay any duty on equipment or materials provided for the contractor such payment would be accounted for separately in addition to the "final target", indicating thereby that the State of Madras was not liable to pay customs duty. Narasimham, C.J., agreed with Barman, J. He observed that the first two grounds in the judgment of Barman, J., justified the raising of the inference that there was a sale of plant and machinery, but the third ground was inconclusive. We are unable to agree with the learned Judges of the High Court. A covenant in the contract whereby the appellants undertook to deliver goods purchased by them on behalf of the State at the site where they were required by the latter ....