PETITIONER: MOHD. ZAHOOR Vs. RESPONDENT: C.S.T. DATE OF JUDGMENT17/02/1993 BENCH: KULDIP SINGH (J) BENCH: KULDIP SINGH (J) KASLIWAL, N.M. (J) CITATION: 1994 SCC Supl. (2) 99 ACT: HEADNOTE: JUDGMENT:
ORDER
1. The following question was referred for the considerationof
the High Court under Section 44 of the Madhya Pradesh
General Sales Tax Act, 1958 (‘the Act’):
“Whether 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.
3. 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
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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 Section 6.”
4. Clause 11 of the conditions of the contract
entered into between the parties is reproduced
hereunder :
“11. 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.”
5.A bare reading of the above-quoted
clause brings out the following binding
features of the contract :
(i) 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.
(ii)The 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.
(iii)The 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.
(iv)The 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.
6.It 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
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iron and cement supplied by the Government and used by the
contractor were an outright purchase.
7. The High Court based its conclusions on the following
reasoning:
“Thus, 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.
by using the same in the building works.
Under these circumstances, the view of the
assessing authority that the dealer was liable
to purchase tax appears to be correct.”
8. We 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 accordingly dismissed.
No costs.
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