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1995 Supreme(Mad) 271
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE THANIKKACHALAM AND THE HONOURABLE MR. JUSTICE JAYARAMA CHOUTA
State of Tamil Nadu - Appellant
Versus
Oswal Oils and Vanaspathy - Respondents
Tax Case (Revision) Petition No. 1011 of 1983
Decided On : 06 March 1995
The sale value of goods supplied under a works contract is not taxable under the Tamil Nadu General Sales Tax Act, 1959, unless there is an implied agreement to sell the goods.
Headnote:
TAMIL NADU GENERAL SALES TAX ACT, 1959 - SECTION 2(h), 12(3) - SALE OF TINS - WORKS CONTRACT - SALE VALUE OF TINS NOT TAXABLE - PENALTY NOT LEVIABLE.
Fact of the Case:
The assessee, a dealer in oil and vanaspathy, entered into an agreement with the State Trading Corporation to procure tins, fill them with palm oil, and supply them to customers as per instructions. The assessee was paid a consolidated sum of Rs. 1,050 per metric tonne for procuring the tins, filling them with oil, and transporting them to customers. The department sought to tax the sale value of the tins under the Tamil Nadu General Sales Tax Act, 1959, and levied a penalty under section 12(3) of the Act for non-disclosure of the sale turnover.
Finding of the Court:
The Tribunal held that the sale value of the tins was not taxable under the Act, as the contract between the assessee and the State Trading Corporation was a works contract and not a sale. The Tribunal also deleted the penalty levied by the department.
Issues: 1. Whether the sale value of the tins was taxable under the Tamil Nadu General Sales Tax Act, 1959? 2. Whether the penalty levied under section 12(3) of the Act was valid?
Ratio Decidendi: 1. The court held that the contract between the assessee and the State Trading Corporation was a works contract, as the assessee was entrusted with the task of procuring the tins, filling them with oil, and transporting them to customers for a consolidated sum. The court relied on the decisions in Government of Andhra Pradesh v. Guntur Tobaccos Ltd., A. A. Jariwala and Bros. v. State of Gujarat, State of Tamil Nadu v. Venkateswara Roller Flour Mills and Metal Industries, Deputy Commissioner (C. T.) v. Sri Ram Cotton Pressing Factory (P.) Limited, and S. Chandrasekaran v. State of Tamil Nadu to conclude that the mere passing of title to goods in the course of execution of a works contract does not make the transaction a taxable sale unless there is an implied agreement to sell the goods. 2. Since the court held that the sale value of the tins was not taxable, it held that the penalty levied under section 12(3) of the Act was not valid.
Final Decision: The court dismissed the department's petition, upholding the Tribunal's order that the sale value of the tins was not taxable and that the penalty levied was not valid.
THANIKKACHALAM, J.
The department is the petitioner herein. The assessee is a dealer of oil and vanaspathy. In the assessment year 1979-80, the State Trading Corporation of India has imported "palm oil" from foreign countries in ships. In order to get it transported to the various regions of India, the State Trading Corporation entered into an agreement with different parties. One such agreement was entered with the assessee herein. According to the agreement the assessee should procure tins with the capacity of 15.5 kgs. nett and fill up the tins with palm oil and supply the same to the customers as per the instructions by the State Trading Corporation. The company would be paid tinning charges including costs of the tins at the rate of Rs. 1, 050 per metric tonne. The department considered that in so far as the tins are concerned, the assessee sold the tins to the State Trading Corporation and, therefore, the sale turnover of tins is liable to be taxed under the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as "the Act"). Accordingly the assessing officer taxed the sale turnover of the tins. Since the assessee did not disclose the sale turnover relating to tins, the assessing officer levied penalty of Rs. 2, 12, 122 under section12(3) of the Act. On appeal, the Appellate Assistant Commissioner confirmed the order passed by the assessing officer. But in the matter of levying penalty the Appellate Assistant Commissioner held that no penalty is leviable under section12(3) of the Act. Aggrieved by the order of the Appellate Assistant Commissioner, the assessee filed an appeal before the Appellate Tribunal questioning the legality and validity of the order passed by the Appellate Assistant Commissioner in sustaining the addition made by the assessing officer. Aggrieved by the order of the Appellate Assistant Commissioner, the department filed an enhancement petition before the Tribunal. The Tribunal followed the decision of this Court in the case of Deputy Commissioner (C. T.) v. Sri Ram Cotton Pressing Factory (P.) Limited 1977 (39) STC 277 and in the case of State of Tamil Nadu v. Venkateswara Roller Flour Mills and Metal Industries 1974 (33) STC 369, and came to the conclusion that the sale value of the tins would not be amenable to tax under the Act. Accordingly, the Tribunal dismissed the enhancement petition filed by the department with regard to the restoration of penalty.
2. Aggrieved by this order, the department is in revision before this Court. According to the learned Additional Government Pleader (Taxes) the Tribunal was not correct in holding that the sale value of the tins is not amenable to tax under the Act. According to the learned counsel the agreement between the parties is discernible and the sale value of the tins would be liable to be taxed under the Act. Learned Additional Government Pleader further submitted that the sale value was reimbursed by the State Trading Corporation, and it would amount to sale of tins by the assessee to the State Trading Corporation. Relying upon the decision reported in the case of Government of Andhra Pradesh v. Guntur Tobaccos Ltd. 1965 AIR(SC) 1396, 1965 (16) STC 240, 1965 (2) SCR 167 (SC), the learned Additional Government Pleader (Taxes) submitted that the supply of materials used in the execution of the works is for a price in the present case. Therefore, the sale value of the tins is taxable under the Act. Therefore, according to the learned Additional Government Pleader (Taxes) the Tribunal was not correct in holding that no tax is leviable on the sale value of the tins. With regard to the enhancement petition, the learned Additional Government Pleader (Taxes) submitted that even though the Appellate Assistant Commissioner deleted the penalty in its entirely, the enhancement petition filed by the department is entertainable.
3. On the other hand the learned counsel appearing for the assessee while supporting the order passed by the Tribunal su
