IN THE HIGH COURT OF KERALA AT ERNAKULAM
ST.Rev..No. 153 of 2009()
1. V.GOVINDANKUTTY,
... Petitioner
Vs
1. STATE OF KERALA,
... Respondent
For Petitioner :SRI.V.P.SUKUMAR
For Respondent : No Appearance
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice C.K.ABDUL REHIM
Dated :07/08/2009
O R D E R
C.R.
C.N.RAMACHANDRAN NAIR &
C.K.ABDUL REHIM, JJ.
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S.T. Rev. No.153 of 2009
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Dated this the 7th day of August, 2009.
ORDER
Ramachandran Nair, J.
The question raised in the S.T. Revision case filed by the
petitioner is whether the supply of track ballast for the Railways in
terms of the order issued by the Railways is a civil work for the
petitioner to opt for payment of tax at compounded rate under Section 7
(7) of the KGST Act. It is seen from the records that the Assessing
Officer accepted petitioner’s claim that the Railways’ order is a works
contract. However, according to the officer it is not a civil contract
falling under Section 7(7) of the KGST Act. He has in fact permitted
payment of tax at compounded rate under Section 7(7A) which
provides for other contracts. In appeal filed by the petitioner, the first
appellate authority as well as the Tribunal confirmed the assessment
and hence this revision. We have heard counsel appearing for the
petitioner and Government Pleader appearing for the respondents.
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2. During preliminary hearing, we wanted to know the exact
nature of work done by the petitioner for the Railways and in this
regard we called for copy of the purchase order/work order issued by
the Railways, which is produced by the counsel before us today. Even
though the name of work in the heading is written as “Collection and
training out of track ballast in Wadakancheri Depot”, we find that the
order is essentially one for supply, stacking and delivery of stone
ballast on either side of the Railway track in terms of the instruction
issued by the Engineer. The order in the Form given by the Railway is
as follows:
————————————————————————————-
S.N. Description of work App.Qty. Rate Unit Amount
————————————————————————————-
1. Collection and supply of approved 12000 3811 10cum. 4573200
quality machine crushed track
ballast as per latest revised speci-
fication from outside the Railway
limit and stacking for measure-
ments at locations in Wadakancheri
station yard with all lead and lifts,
loading and unloading, conveyance
from the place of availability,
crossing the track wherever required
etc. complete using contractor’s
labour, vehicle and consumables.
(Payment by stack measurements
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without any deduction for voids)
2. Loading of ballast stacked at 12000 550 10cum. 660000
Wadakancheri station yard to
Railway wagons and hoppers by
using contractor’s machanised
equipment, labour etc. and un-
loading the ballast in Trichur/
Chalakudi P.Way sections as
directed by the Engineer-in-
charge of the work.(The work
may be carried out during night
also for which no extra payment
is admissible). (Payment by stack
measurements without any
deduction for voids.)
————————————————————————————-
From the above it is clear that rate fixed for stone ballast supplied by
the petitioner is based on the quantity supplied in cubic metres, the
agreed rate of which is mentioned in the supply order. Under item 1 of
the the supply order, petitioner is required to bring and stock the stone
ballast of the required size at the Wadakkancherry Station in the
Railway track. Measurement will be taken for the purpose of making
payment at the rate at which the order is issued. The next item of work
given to the petitioner is loading the stone ballast stacked at the
Railway Station in the Railway wagons and hoppers by using
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contractor’s equipments, men and labour, transport it through the
Railway line and unload it in the permanent way sections between
Thrissur and Chalakkudy. It is to be noted that training out which is
laying the stone ballast in a pattern, is not required to be done by the
petitioner, even though the heading of the work order mentioned so.
On the other hand petitioner has to only train the ballast into the track
side in terms of the instruction given by the Site Engineer. Obviously
the purpose is to replenish the deficiency in stone ballast on Railway
track as part of maintenance work. However, the little technical work
of laying the unloaded ballast in the required pattern to call it training
out is the work probably done by the Railways and it is not part of the
work assigned to the petitioner. Therefore, the petitioner’s claim that
work involves training out of the supplied stone ballast and so much so,
it is maintenance of Railway track which is a civil work falling under
Section 7(7) is unacceptable. We are of the view that the order is just a
purchase order and the stacking is provided at a particular station to
verify the actual quantity supplied by the petitioner and the balance
work also forming part of the supply order requires the petitioner to
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carry the goods in the wagons or hoppers supplied by the Railway and
deliver it on either side of the Railway track specified in the supply
order in terms of the instruction of the Site Engineer. Therefore, this is
sale of goods with instruction to deliver the commodity at a particular
spot. The sale price includes not only the rate paid for stacking at the
Railway Station, but includes the cost of delivery i.e. labour, whether
mechanised or otherwwise, used for delivering it on the sides of the
Railway track. Explanation 2(i) to Section 2(xxvii) providing for
turnover takes in any sums charges for anything done by the dealer in
respect of the goods sold at the time or before the delivery thereof. So
much so, the labour and the other cost incurred by the petitioner until
delivery of goods including the cost of delivery will form part of the
turnover attracting sales tax. In view of this finding by us, we hold that
the order given by the Railway is one for pure supply i.e. sale of goods
and not for executing any works contract as claimed by the petitioner
and found by the officer. Two decisions of the Karnataka High Court,
an old one in STATE OF MYSORE V. S.R.BHIDE ((1969) 24 STC
446) and the later decision in H.Y.JADHAV V. COMMISSIONER OF
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COMMERCIAL TAXES, KARNATAKA ((1994) 94 STC 205) were
cited before us. While the earlier decision holds the view that training
out is a works contract, a different view was taken in the later judgment
whereunder the transaction was found to be sale of goods. We do not
think we should express our opinion as to whether training out which is
laying stone ballast on Railway track in a particular pattern is a works
contract or not because in this case the question does not arise and we
have already noticed that it is only a pure sale of goods and training
out, if any, was done by the Railway. However, it is to be seen from
Section 7(7) that Railway track maintenance is also treated as a civil
work by the Legislature. Certainly the training out is a maintenance
work of the Railway track as it helps to retain the sleepers on the track
and the Railway lines intact. In fact, the department cannot have a case
that the training out is not a maintenance work when Railway track
maintenance is included in the definition clause of “civil works” under
Section 7(7). However, assessment as a contract for Railway track
maintenance can be claimed only when indivisible work order is issued
for track maintenance and not when order is issued for payment for the
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ballast supplied at a rate fixed for every cubic metre and a separate rate
for delivery charges. Even though we dismiss the revision petition
holding that the work is not a civil work as claimed by the petitioner
for payment of tax at compounded rate under Section 7(7) of the KGST
Act, we simultaneously hold that assessment of the work as “other
contract” under Section 7(7A) is also not correct. However, since the
assessment has become final, we do not want to disturb the same. The
S.T. Revision case is accordingly dismissed, but with direction to the
officer not to repeat the mistake for later years.
C.N.RAMACHANDRAN NAIR
Judge
C.K.ABDUL REHIM
Judge
pms