TaxTMI 
TaxTMI 
2010 (4) TMI 986
X X X X Extracts X X X X
X X X X Extracts X X X X
....under the Works Contract Act? (iii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law, in holding that the activity which is declared as amounting to works contract, cannot be held as activity of manufacture under the Bombay Sales Tax Act, 1959? (iv) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in the law in holding that the impugned goods have not been used for the manufacture of finished goods? (v) Whether, on the facts and in the circumstances of the case and upon the true and correct interpretation of section 13AA of the Bombay Sales Tax Act, 1959, as it existed during the relevant period, the Tribunal was justified in law, in holding that it will not be legal to hold that such purchases would qualify for the levy of purchase tax under the said section? (vi) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the action of revision is not just and proper and in doing away the levy of purchase tax as made by the revision order? (vii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law, in de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee preferred a first appeal before the Deputy Commissioner (Appeals) contending that the impugned activity is covered under the Works Contract Act and hence, there is no occasion attracting levy of purchase tax under section 13AA of the BST Act, 1959. The Deputy Commissioner (Appeals) vide his order dated March 31, 1993 accepted the contentions of the respondent-assessee and deleted the purchase tax levied under section 13AA of the BST Act, 1959 and also consequential additional tax and interest under section 36(3)(b). The aforesaid order dated March 31, 1993 passed in the first appeal was examined by the Additional Commissioner who noticed that the relief granted by the Deputy Commissioner (Appeals) deleting the purchase tax was wrong. Hence, an action under section 57 of the BST Act, 1959 was taken and levy of the purchase tax under section 13AA along with consequential levy of additional tax and interest was restored by the Additional Commissioner vide its order dated January 10, 1996. Being aggrieved by the aforesaid order dated January 10, 1996, the respondent/assessee preferred Appeal No. 30/1996 before the Maharashtra Sales Tax Tribunal, Mumbai. The Tribunal vid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in the manufacture, and accordingly the dealer shall include purchase price of such goods in his turnover of purchases in his return under section 32, which he is to furnish next thereafter." Mr. Sonpal further submitted that whenever the respondent is doing works contract for their customers they are using certain quantity of silicon and copper as without that it is not possible for them to do the same. He further submitted that on perusal of section 13AA of the BST Act, 1959 in order to attract tax under this section, the following are the requirements: (1) dealer liable to pay tax under the BST Act, 1959; (2) purchases of goods covered by Schedule C, Part I; (3) use of such goods in the manufacture of taxable goods; (4) non-sale of goods so manufactured would result in levy of purchase tax under section 13AA of the BST Act, 1959. According to Mr. Sonpal, the dealer treated himself as manufacturer of aluminium alloy wherein all raw materials belonged to him. Therefore, even in case some material is supplied by the buyer and part of the material was used by the assessee it should also be treated as a manufacturer for the purpose of the BST Act, 1959. The word "manufacture"....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urt in the matter of B.P. Oil Mills Ltd. v. Sales Tax Tribunal reported in [1998] 111 STC 188 held that where any commodity is subjected to a process or treatment with a view to its development or preparation for the market, it would amount to processing. Paragraph No. 7 of the judgment reads thus (at page 190 of STC): "7. Two expressions 'manufacture' and 'manufacturer' are also relevant in the context. The expression 'manufacture' is defined in clause (e1) and the expression 'manufacturer' is defined in clause (ee) of section 2 of the Act. 'Manufacture' is defined to mean producing, making, mining, collecting, extracting, altering, ornamenting, finishing or otherwise processing, treating or adapting any goods; not including such manufactures or manufacturing processes as has been prescribed; and 'manufacturer', in relation to any goods is defined to be a dealer who makes the first sale of such goods in the State after their manufacture and includes a dealer who sells bicycles in completely knocked down form. Proviso to clause (e) of sub-section (1) of section 3A of the Act empowers the State Government to, from time to time by not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ourt may hold that the activity carried out by the respondent-assessee amounts to a manufacturing activity and thus, they are liable to pay purchase tax under section 13AA of the BST Act, 1959 as well as interest under section 36(3)(b). Per contra Mr. Joshi, learned counsel appearing for the respondent-assessee, submitted that the respondent-assessee was manufacturing non-ferrous alloys on its own materials. It also undertook job-works of converting aluminium of the customers into aluminium alloys by adding a small quantity of silicon and copper to the aluminium supplied by the customers as per requirements of the customers. That activity of job-work was statutorily determined to be an activity covered by a separate enactment providing for levy of sales tax on indivisible works contract. According to him, the respondents were paying tax for their job-works under the Works Contract Act and therefore, there was no question of imposing any tax under section 13AA of the BST Act, 1959. He further submitted that it was clear from the definitions of "dealer", "purchase price", "sale", "sale price", "tax" and "turnover of purchases" as defined under the BST Act, 1959 as well as under the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....purchase", with all their grammatical variations and cognate expressions, shall be construed accordingly. Section 2(l): "sale" means a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract in the State; and the word "sell" with all its grammatical vari-ation and cognate expressions shall be con-strued accordingly. Section 2(29): "sale price" means the amount of valuable consideration paid or payable to a dealer for any sale made including any sum charged for anything done by the dealer in respect of goods at the time of or before delivery thereof, other than the cost of insurance for transit or of installation, when such cost is separately charged. Section 2(m): "sale price" means (i) the amount of purchase price of the goods or, as the case may be, the value of the goods, brought or transferred from a place outside the State where such goods are sold in the same form in which they were purchased, brought or transferred; and(ii) where the goods have been sold in the form other than the form in which they were purchased or as the case may be, brought or transferred from a place outside the State, then the purchase price....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made;" Mr. Joshi, learned counsel for the respondent-assessee, also pressed into service the judgment of the apex court in the matter of Builders Association of India v. Union of India reported in [1989] 73 STC 370. In this case, the apex court considered the amendment enlarging definition to include a deemed transfer of property in the goods involved in the works contract, etc., by which entry (29A) was introduced in the Constitution. In this judgment, the apex court held thus (at page 403 of STC): "We, therefore, declare that sales tax laws passed by the Legislatures of States levying taxes on the transfer of propert....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oner of Sales Tax v. Auto Comp Corporation reported in [2009] 26 VST 30. In this case, the question arose before this court was whether at the time of executing the works contract if the dealer is using steel plates supplied by the customer for manufacture of outer flange and its own material for inner flange then the transfer of property in materials used for production of inner flange in execution of contract for conversion of steel plates, amounts to sale under the Works Contract Act. In this case, it has been held that the steel plates belonged to the customer and the dealer only converted the steel plates into the assembly flange. In converting these steel plates into the assembly flange the dealer undoubtedly used some of its own materials but the contract of conversion of steel plates under the assembly flange was single and indivisible and the passing of the property in the goods of the dealer used in the conversion was incidental to the main contract which was the works contract. Passing of such property in the goods was not "sale" as defined under section 2(28) of the Bombay Sales Tax Act, 1959. Relevant portion of the judgment reads thus (at page 36 of 26 VST): ". . . T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....odern Breweries v. State of Jammu and Kashmir reported in [2007] 8 RC 688; [2007] 6 SCC 317 has held that the administrative charges imposed is a tax and not a fee. 8.. He further submitted that the special enactment will prevail over general enactment and as the U.P. Trade Tax Act is a general Act relevant to the levy of tax on sale and purchase of goods in the State of U.P. it will not apply to the petitioner in respect to the purchase of molasses from the sugar factories as the sugar factory recovers administrative charges from the petitioner and passes them on to the Government under the special enactment, i.e., U.P. Act No. 24 of 1964. The learned counsel for the petitioner has relied upon the decision of the honourable Supreme Court in the cases of Belsund Sugar Co. Ltd. v. State of Bihar reported in [1999] 9 SCC 620, Gobind Sugar Mills Ltd. v. State of Bihar reported in [1999] 115 STC 358; [1999] 7 SCC 76 and Beg Raj Singh v. State of U.P. reported in [2003] 1 SCC 726. He further submitted that in the case of D.S.M. Group of Industries v. Chairman, Trade Tax Tribunal, U.P. reported in [2004] 134 STC 155 (All); [2002] UPTC 955, the honourable single judge of this court has h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ST Act, 1959. Not only that the same is not within the sweep of clause (29A) of article 366 of the Constitution. Even the apex court in the matter of Builders Association of India [1989] 73 STC 370 considered this issue and held that the sales tax laws passed by the Legislature of the State levying tax on transfer of property in the goods involved in execution of works contract are subject to the restrictions and conditions mentioned in each clause or sub-clause of article 286 of the Constitution of India. Considering these observations of the apex court, we are of the opinion that the present case is clearly covered by the judgments of the apex court in the matter of Builders Association of India [1989] 73 STC 370 and Auto Comp Corporation [2009] 26 VST 30 (Bom). It is common that whenever a contractor takes works contract like repairing of building and/or construction of building in which he has to use some quantity of his own material for completion of job. If a contractor uses small quantity of its own material and the same is transferred to the customer after completion of works contract it does not amount to sale of goods. The scope of the meaning of words cannot be so enla....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the intention of a person to carry on a business "the activity which the person must indulge in is not merely the activity of selling in the sense of transferring property of goods, but it must be the activity of carrying on the business of selling or supplying goods". Whereas, a "dealer" under the Works Contracts Act means a person who executes the works contracts by taking the entire material from the owner for doing certain alterations and/or processes. It is, thus, clear that the definitions of "dealer" under both the Acts are altogether different. Under the BST Act a person and/or other establishment deals with the goods for sale and purchase whereas under the Works Contracts Act a person carries on the works contracts for their clients accepting their goods. With this understanding of the concept of the word "dealer" appearing in two different legislations, if one turns to the text of section 13AA of the BST Act, 1959, then one would find, it opens with the word "where a dealer, who is liable to pay tax under this Act, (i.e., BST Act, 1959) . . ." Meaning thereby a dealer is that person who is known to be a dealer under the BST Act, 1959 and not under the Works Contracts....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... This is the difference between the normal sale and the deemed sale in the indivisible works contracts. In a similar way, the words "sale price" in the BST Act denote consideration payable by the purchaser to the owner whereas under the Works Contracts Act, "sale price" denotes a price of goods used at the time of carrying out the works contracts. Under the works contracts usually the goods change their form after completion of works contract and for that the contractor charges mainly his labour charges along with other expenses including the price of small quantity of goods used by him while executing the works contracts. It is, thus, clear from the abovementioned discussion that the definitions of the words "dealer", "purchase price", "sale", etc., operate differently in both enactments. They do not overlap on each other as such they cannot be made to overlap through the process of judicial interpretation. As such, the submissions made by Mr. Sonpal do not hold water. The authorities as stated hereinabove relied upon by Mr. Sonpal, learned counsel for the applicant, are also not applicable in the facts and circumstances of the present case. The question that arises for consi....