Vs. C.S.T  INSC 84 (17 February 1993)
Singh (J) Kuldip Singh (J) Kasliwal, N.M. (J)
1994 SCC Supl. (2) 99
following question was referred for the consideration of the High Court under Section
44 of the Madhya Pradesh General Sales Tax Act, 1958 ('the Act'):
under the facts and circumstances of the case, the iron and cement supplied by
the PWD to the assessee for use in the works executed by the appellant for PWD
was sale and was liable to purchase tax under Section 7(1) of the Act." 2.The
High Court answered the question against the assessee and in favour of the
Sales Tax Department. This appeal by special leave is by the assessee against
the judgment of the High Court.
Section 7 of the Act which is relevant is reproduced hereunder "7. Levy of
purchase tax.- (1) Every dealer who in the course of his business purchases any
taxable goods from a registered dealer in circumstances in which no tax under
Section 6 is payable on the sale price of such goods or from any other person
and either consumes such goods in the manufacture of other goods for sale or
otherwise or disposes of such goods in any manner other than by way of sale in
the State or despatches them to a place outside the State except as a direct
result of sale or purchase 100 in the course of inter-State trade or commerce,
shall be liable to pay tax on the purchase price of such goods at the same rate
at which it would have been leviable on the sale price of such goods under
Clause 11 of the conditions of the contract entered into between the parties is
reproduced hereunder :
Stores supplied by Government.- If the specification or estimate of the work
provides for the use of any special description of materials to be supplied
from the Engineer-in- charge's store or if it is required that the contractor
shall use certain store to be provided by the Engineer-in-charge (such
materials and store, and the price to be charged thereof as hereinafter mentioned
being so far as practicable for the convenience of the contractor but not so as
in any way to control the meaning or effect of this contract specified in the
schedule or the memorandum hereto annexed) the contractor shall be supplied
with such materials and stores as required from time to time to be used by him
for the purposes of the contract only and the value of the full quantity of
material and stores so supplied at the rates specified in the said schedule or
memorandum may be set off or deducted from any sums then due or thereafter to
become due to the contractor under the contract or otherwise or against or from
the security deposit or the proceeds of sale thereof if the same is held in
Government securities the same or a sufficient portion thereof being in this
case sold for the purposes. All material supplied to the contractor shall
remain the absolute property of Government and shall not on any account be
removed from the site of work and shall at all times be open to inspection by
the Engineer-in-charge. Any such material unused and perfectly in good
condition at the time of the completion or determination of the contract shall
be returned to the Engineer-in- charge's store if by notice in writing under
his hand he shall so require but the contractor shall not be entitled to return
any material so supplied to him as aforesaid being unused by him or for any
wastage in or damage to any such materials."
bare reading of the above-quoted clause brings out the following binding
features of the contract :
The iron and cement to be used in the execution of the work were to be supplied
by the Engineer-in-charge. The value of the iron and cement so supplied was to
be deducted from the final bill of the contractor.
iron and cement supplied to the contractor were to remain the property of the
Government and were not to be removed from the site of the work. The material
was further open to inspection by the Engineer-in-charge.
Engineer-in-charge by a notice in writing under his hand could require the
contractor to return such unused material which is in good condition.
contractor was not supposed to return by himself any material so supplied to
him which is not used by him or for any waste or damage in the material.
is thus, obvious that the contractor had offered to pay the price of iron and
cement to be supplied to him by the Government as a part of the tender which
had been accepted by the Government. The cumulative effect of the conditions of
the contract culled-out above leave no manner of doubt that the 101 iron and
cement supplied by the Government and used by the contractor were an outright
High Court based its conclusions on the following reasoning:
so far as the contractor was concerned, the articles supplied were his property
for which the price, of course, was, to be deducted at a later stage at the
time of payment of the bills. He had no choice to return the unused materials.
There is no dispute that the assessee, who was a registered dealer, disposed of
the articles supplied in the manner as stated above, i.e.
using the same in the building works.
these circumstances, the view of the assessing authority that the dealer was
liable to purchase tax appears to be correct."
see no infirmity in the High Court judgment. We agree with the reasoning and
the conclusions reached therein. We find no merit in this appeal which is