State Of Jharkhand vs M/s Tata Steel Ltd

The instant writ petition has been preferred by the petitioner-State of Jharkhand challenging part of the order dated 06.12.2008 passed in Revision Petition bearing JR 266 of 2001 by Commercial Taxes Tribunal, Jharkhand, Ranchi, to the extent Tribunal has set aside additional levy of tax on supply of cement to the contractor by the Assessee.

The dispute in the instant writ petition pertains to the period 1989-90, wherein, under the provisions of Section 17(2)(b) of the Bihar Finance Act, 1981, regular assessment order dated 17.03.1993 was passed by the Assessing Authority in respect of the Assessee-Tata Steel Ltd. The Assessee during the relevant period, purchased cement after paying tax and supplied it to its contractor to execute works on its behalf worth Rs. 1,03,62,379/- and, at the time of assessment, the Assessee claimed that since the tax on purchase of cement has already been paid at the first point and supply of cement was made to the contractor for use in the work of Assessee itself, therefore, no tax could have been levied on supply of cement by it to its contractor. However, the Assessing Officer rejected the claim of the Assessee on the ground that although cement was purchased by the Assessee after paying tax, at the time of supply of cement to the contractor, the Assessee deducted from the bills of the contractor the price of cement and, thus, said transaction amounted to second sale leviable to tax under the Bihar Finance Act, 1981. Accordingly, on supply of cement of Rs. 1,03,62,379/-, tax @ 11% amounting to Rs. 11,39,861.69 was levied in the Assessment Order dated 17.03.1993 (Annexure-1).

The Assessee being aggrieved by the said levy of tax, preferred statutory Appeal before the Joint Commissioner of Commercial Taxes (Appeal), Jamshedpur Division, Jamshedpur which was registered as Appeal Case No. JUSTA 35/1993-94. However, learned Appellate Authority, vide order dated 10.01.1995 (Annexure-2), was pleased to reject the Appeal of the Assessee by declaring therein that since the company deducted the price of cement from the bills of the contractor and, as such, ownership of the property in cement stood transferred to the contractor from the Assessee and rightly the said transaction has been treated as ‘sale’ by the Assessing Officer.

Being aggrieved by the said order, the Assessee preferred Revision application before the Commercial Taxes Tribunal, Jharkhand, which was registered as Revision Case No. JR 266 of 2001. Said revision application was allowed vide order dated 16.12.2008 (Annexure-3) and it was held that additional levy of tax on supply of cement to the contractor is illegal and cannot be sustained in the eye of law. Taking exception to the said finding of Commercial Taxes Tribunal, the present writ application has been filed by State of Jharkhand.

Mr. Sachin Kumar, AAG-II, appearing for the State of Jharkhand, has vehemently assailed the portion of the Judgment of the Tribunal and has contended, inter alia, that supply of cement by the Assessee-Tata Steel Ltd. to its contractor for carrying out its own work would be deemed to be a sale, as, Tata Steel Ltd. has, admittedly, deducted the value of cement from the contractor’s bill. By placing reliance upon the decisions of the Hon’ble Apex Court in the case of M/s. N.M. Goel and Co. Vs. Sales Tax Officer, Rajnandgao & Anr., reported in (1989) SCC 335, and Rashtriya Ispat Nigam Ltd. Vs. State of Andhra Pradesh, reported in (1998) 8 SCC 439, it has been contended that aforesaid issue is no longer res integra and once the Assessee has recovered the amount towards supply of cement from the bills of the contractor, the same was leviable to tax at the hands of the Assessee being second sale at the point of time.

However, Mr. Sachin Kumar fairly submitted that ‘cement’ in terms of the provisions of Section 11 of the Bihar Finance Act, 1981 read with Notification No. Bikrikar/San/1026/77-14537 dated 26th December, 1977 was leviable to tax only on first point of sale and it was admitted that there is no dispute that tax has already been paid by the Assessee on the first point of sale of cement. However, it was contended that in terms of the Notification dated 26th December, 1977, even if goods were leviable to tax only at the first point of sale, then also, at the stage of second sale of such goods, the selling dealer was required to produce before the Assessing Officer purchase orders, bills and true declaration in writing in Form IX-C as envisaged under the Bihar Sales Tax Rules to demonstrate that tax on such sale was already paid at the first point of sale. It was contended that although there is no dispute that tax has already been paid on the first point of sale of cement, but still it was obligatory on the part of the Assessee to produce statutory Form IX-C at the stage of subsequent sale of cement by it to its contractor, and, since the said Form has not been produced, tax has been rightly levied by the Assessing Officer, which was not appreciated by Commercial Taxes Tribunal.

Per contra, Mr. Sumeet Gadodia, Advocate assisted by Mrs. Akansha Mittal, Advocate, appearing for the Assessee supported the Judgment of the Tribunal and contended that additional levy of tax on supply of cement by Tata Steel Ltd. to its contractor is illegal and cannot be sustained. It has been contended that there is no dispute that cement was levied to tax at the first point of sale and, admittedly, tax has been levied and collected by the State of Jharkhand from Tata Steel Ltd. on sale of cement at the first point.

However, on the proposition of law raised by the State of Jharkhand that there would be second sale when goods are supplied by Tata Steel Ltd. to its contractor and the value of the goods is deducted from the bills of the contractor, learned counsel submits that there is no dispute on the aforesaid proposition of law that even if the goods are supplied to the contractor for executing the work of the Assessee, the same would amount to second sale if the value of the goods is deducted from the bills of the contractor. However, it was submitted that despite the fact that there would be, under law, two sales, but since cement is leviable to tax only on first point of sale and has already suffered the incidence of tax, even if there is second sale, no tax can be levied upon the Assessee.

While referring to Para-9 of the order of the Tribunal, it has been submitted that learned counsel appearing for the State before the Tribunal conceded that sales tax for cement is charged at the first point of sale. Attention of this court was invited to the pleadings made in the writ application to contend, inter alia, that Petitioner has not disputed in the writ petition that sale of cement was leviable to tax at first point of sale and tax was already paid on the first point of sale. It has been submitted that the question of law raised in the writ petition is merely academic, as even if it is presumed that supply of goods to the contractor and recovery of the amount from its bills would amount to second sale in the eye of law, then also, no tax can be levied, as cement was chargeable to first point of sale and tax was levied upon it.

It has been further submitted that production of statutory Form IX-C at the subsequent stage of sale is merely directory in nature and not mandatory especially when cement is leviable to tax on first point of sale, and, there is no dispute that it has suffered the incidence of tax. Reliance was placed by Respondent on the following decisions:-

(i) State of Tamil Nadu v. Raman & Co., reported in (1994) 93 STC 185 (SC), Para-verbatim/

(ii) Food Corporation of India v. Commissioner of Commercial Taxes, reported in (1993) SCC Online Pat. 322 -- Para 13, 14.

(iii) State of Madras v. Raman & Co., reported in (1974)33 STC 1(Mad), Para 2-4.

(iv) Govindan & Co. v. State of Tamil Nadu, reported in (1975) 35 STC 50 (Mad) – Para-3.

Having heard learned counsels for the parties and after perusing the materials on record; it is an admitted fact that Tata Steel Ltd. purchased cement after paying tax, which was leviable at first point of tax and supplied the same to its contractor for executing works in its behalf and has, admittedly, deducted the amount towards supply of cement from the bills of the Contractor. Thus, in view of the ratio of the Judgments laid down by the Hon’ble Apex Court in the cases of M/s. N.M. Goel and Co. Vs. Sales Tax Officer, Rajnandgao & Anr. (supra), and Rashtriya Ispat Nigam Ltd. Vs. State of Andhra Pradesh (supra), there is no dispute on the proposition that transaction of supply of cement by the Assessee to its contractor and recovery of the amount from bills of the contractor would amount to second sale of cement by the Assessee to its contractor. In fact, Respondent-Tata Steel Ltd. has not joined issues on said proposition of law and has accepted said proposition of law.

However, the thrust of arguments of Respondent is that even if supply of cement is treated to be second sale by Tata Steel Ltd. to its contractor, the same was not leviable to tax as, in terms of Section 11 of the Bihar Finance Act, 1981 read with Notification dated 26th December, 1977, as tax on cement was leviable only on the first point of sale.

We have carefully perused the pleadings made in the writ petition as well as the statement of the Revenue counsel recorded at Para-9 of the Judgment of the Tribunal. In the entire writ application, no dispute is raised that cement is leviable at first point of sale and tax has already been paid on such cement. It is during the course of arguments alone it was contended by the Petitioner-State of Jharkhand that there were certain procedural requirement, like, submission of statutory Form IX-C by the Assessee at the time of executing second sale to claim that second sale is not chargeable to tax.

We have examined the provisions of Section 11 of the Bihar Finance Act, 1981 and the relevant Notification dated 26th December, 1977. Section 11 of the Bihar Finance Act, 1981 enables the State Government to prescribe point or points in the series of sales at which the sales tax shall be levied. Admittedly, in exercise of the said power, sales tax was levied on cement only on the first point of sale, and, any subsequent sale of cement was not leviable to tax. Hon’ble Patna High Court, in its decision rendered in the case of ‘Food Corporation of India v. The Commissioner of Commercial Taxes, Bihar, Patna’, reported in (1999) 116 STC 173, has already held that production of Form IX-C is merely directory in nature.

That apart, from the pleadings of the writ application, it is nowhere in dispute that tax was not levied at the time of initial purchase of cement by Tata Steel Limited. Even during the proceedings before the Tribunal, said fact was duly admitted. Thus, merely because Tata Steel Ltd. did not furnish statutory Form-IXC at the time of supply of cement to its contractor, would not warrant levy of tax again on cement which has already been subjected to tax on first point of sale.

In view of cumulative facts mentioned hereinabove, we declare that although transaction of supply of cement by Assesse-Tata Steel Ltd. to its contractor and recovering the amount from bills of the contractor would amount to second sale of cement, the same would still not be subjected to levy of tax on the second sale, as, admittedly, cement was levied to tax only at the first point of sale and, admittedly, tax on such cement has duly been discharged by the assesse-Tata Steel Ltd.. Accordingly, we find no merit in the writ application and the same is dismissed. However, in the facts and circumstances of the case, there would be no order as to cost.