State Of Jharkhand vs M/S Tata Steel Ltd.
2022 Latest Caselaw 3936 Jhar

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          IN THE HIGH COURT OF JHARKHAND AT RANCHI
                              W.P. (T) No. 753 OF 2011
                                     .......

State of Jharkhand, through the Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur, P.O. & P.S. Jamshedpur, District-Jamshedpur. ....... Petitioner Versus M/s Tata Steel Ltd., Jamshedpur ....... Respondent .......

          CORAM : Hon'ble Mr. Justice Aparesh Kumar Singh
                         Hon'ble Mr. Justice Deepak Roshan
          For the Petitioner :       Shri Sachin Kumar, AAG-II
          For the Respondent :       Mr. SumeetGadodia, Adocate,
                                     Mrs. Akansha Mittal, Advocate,
                              .......

18/26.09.2022: 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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.

(Aparesh Kumar Singh, J.)

(Deepak Roshan, J.)

Amardeep/AFR