Home › GST Law › N.M. Goel & Co v. Sales Tax Officer, Rajnandgoan (1989) 1 SCC 335/AIR 1989 SC 285/1988 (38) ELT 733 (SC)/(1989) 72 STC 368 (SC)

N.M. Goel & Co v. Sales Tax Officer, Rajnandgoan (1989) 1 SCC 335/AIR 1989 SC 285/1988 (38) ELT 733 (SC)/(1989) 72 STC 368 (SC)

Madya Pradesh General Sales tax Act , 1939
S.2(n): Works Contract – Material supplied by the employer – price of the material so supplied and consumed by the contactor deducted from the prices of the material in the final bill of the contractor – Entry Tax payable on the entry of goods into the local area for sale, consumption or use – Supplies are “sales” within the meaning of the MP Gen. Sales Tax Act – Contractor liable to pay entry tax [7(1), M. P. Sthaniya Kshetra Me Mal Ke Pravesh Per Kar Adhiniyam,1976, S. 3(1) , 6(c)]

Facts

PWD had invited tenders for the construction of godown. Contractor/appellant was to procure the material and use the same in the construction. However, as     per clause (10) of the contract, certain materials of special description were to be supplied by PWD (the employer). The prices of such materials were specified in  the tender and were to be deducted from the final bill of the contractor. The PWD was not registered dealer, however the appellant/contractor was the registered dealer.

 

Issue

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.

 

View

The Supreme Court was of the view 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 the impugned case, but there should be an independent contract – separate and distinct – apart from mere passing of the property where     a party purchases or procurers goods from the government. Mere passing of property from the contractor to government would not suffice. There must be  sale of goods. The primary object of the bargain, judged in its entirety, must be viewed. For the purpose of performance of the contract, the contractor was bound  to procure materials. In order to ensure that quality materials are procured, the PWD undertook to supply such materials and stores as from time to time required   by the contractor to be used for the purpose of performing the contract only. The value of such quantity of materials and stores so supplied was specified at a rate and got set off or deducted from any sum due or to become due thereafter to the

 

 

contractor. The Court was of the view that there was no inherent sale, however a sale inhered from the transaction.

 

Held

By use or consumption of materials in the work of construction,  there  was passing of the property in the goods to the contractor from the PWD. By appropriation     and by the agreement, there was a sale as envisaged in terms of Clause (10) of the contract. Therefore, there was a sale which was liable to tax. The ratio Decidendi: “For purpose of sales tax there must be a contract for transfer of title to goods but also sale of goods which parties intend to sell for a money consideration”. (CA    No. 340 of 1998 dt. 28-10-1988)

Editorial: This decision furnishes some first principles for application to new GST regime, though this must be done cautiously since the statutory framework  has now changed. For a valid levy there have to be a supplier and a recipient which have been specifically defined under the GST Law under Sec 2(105) & (93) respectively.

“Lawyers will, as a  rule,  advance  quarrels instead of repressing them. Moreover, men take  up that profession, not in order to help others    out of their miseries, but to enrich themselves. It  is one of the avenues of becoming wealthy and their interest exists in multiplying disputes. It is within my knowledge that they are glad when   men have disputes.”

– Mahatma Gandhi