TaxTMI 
TaxTMI 
2008 (11) TMI 643
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.... works contracts. Mr. Roy Chowdhury, the learned senior counsel, appearing on behalf of the petitioner, has strenuously urged before us that the petitioner is not liable to pay tax under section 6C of the Bengal Finance (Sales Tax) Act as has been specifically stated under clause 10 of the agreement/works contract, the petitioner was only to get the benefit of supplied goods from the Government and to carry out the construction work as specifically stated in the agreement in question. It is to be noted that the constitutional validity of levy of purchase tax under section 6C of the 1941 Act was questioned before this Tribunal and the Full Bench of the Tribunal in a decision in Nepal Chandra Banerjee v. State of West Bengal reported in [1992] 86 STC 130 (WBTT) upheld constitutional validity of imposition of purchase tax under section 6C of the 1941 Act. Subsequent thereto, the aforesaid judgment was affirmed by the honourable Supreme Court in a decision Cooch Behar Contractors Association v. State of West Bengal reported in [1996] 103 STC 477. The question arose before the learned Tribunal that whether the petitioner has purchased the materials from the contractee on the basis....
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....me of finalization of respective dues. (ii) The goods/materials supplied were ascertained goods and to be appropriated by the contractor for execution of the specified work. The contractor could not use any part of those materials for any other work or purpose. (iii) The contractor had no right to remove those goods from the site of the work. (iv) All such materials supplied by the Department would remain the absolute property of Government so long as those were not utilized in the concerned construction. (v) Unused materials if in good condition after completion of the work were to be returned to the Government if the engineer-in-charge in writing asked for such return. (vi) The full value of the utilized quantity of the supplied material was to be set-off or deducted from any sum due to the contractor under the contract or from the security deposit. Mr. Roy Chowdhury has submitted that a works contract can never be divisible and has further submitted that although a building contract is a single instrument even then the supply of material for construction and other payment in respect of the work done by the contractor cannot go together. It is to be taken into a....
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....upply of these materials is sale within the meaning of section 2(n) of the M.P. General Sales Tax Act then the appellant would be liable for payment of entry tax as it has been assessed. The question, therefore, is whether there was sale and whether the property in the goods in question passed to the appellant or continued to remain with the PWD although the PWD had in the final bill debited the prices of the goods so supplied to the appellant under clause (10) of the contract. The Full Bench found that there was sale and as a result of that the duty was leviable. The question, therefore, is whether there was sale of goods in view of the contract between the parties whereunder the custody and control of the goods remained with the PWD and goods were only used in the construction under the contract. Therefore, from the above decisions it follows that in order to be sale taxable to duty, not only the property in the goods should pass from the contractor to the Government, or the appellant in this case but there should be an independent contract-separate and distinctapart from mere passing of the property where a party purchases or procures goods from the Government. Merely p....
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....transfer of property in goods supplied, when such goods are supplied to the contractor free of cost, that is to say, without deduction or adjustment of the prices thereof from the bills or dues of the contractor. We have arrived at this conclusion on the basis that payment of price by whatever name it is called is the clinching factor. Such prices are amounts received or receivable as valuable consideration as contemplated in Explanation 1 to section 6D of the 1941 Act. Had the contractor purchased such goods from other sources or otherwise acquired the same for consideration, property therein would naturally vest in him. Similarly, obtaining such supplies from the owner/contractee on payment of price, whether pre-fixed or post-fixed, must have to bring about the same kind of result, namely, vesting of property in the goods in the contractor. The only difference in the second case is that the vesting takes place when the goods are used or consumed in the work. This is so, because of the inherent peculiarity of a works contract and the terms of the agreement which are obviously aimed at ensuring that the goods of the desired quality having been supplied are used in the work and not ....
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.... clause (10) set out hereinbefore. Therefore, in our opinion, there was a sale which was liable to tax'. Though this case was sought to be distinguished before the Tribunal by contending that ratio must be treated as one given per incuriam it was rightly rejected by the Tribunal. We are, therefore, in agreement with the conclusion reached by the Tribunal that 'having considered all aspects of the matter, we hold that a sale within the meaning of section 2(g) of the 1941 Act, namely, a transfer of property in goods supplied by the owner/contractee to the contractor for use in the execution of a works contract takes place in the cases under our consideration, when such goods are actually used in the construction work provided prices of such goods are deducted from or adjusted against bills or dues of the contractor'." The three-judge Bench of the Supreme Court in Karya Palak Engineer, C.P.W.D., Bikaner v. Rajasthan Taxation Board [2004] 136 STC 641 decided the question which was reproduced hereunder (at page 643): "5. The statutory question involved in these appeals pertains to the question whether a supply of materials by the Union of India to its contractors under ag....