M/S. Steel Authority Of India Ltd vs Sales Tax Officer
2023 Latest Caselaw 2152 Ori

    IN THE HIGH COURT OF ORISSA AT CUTTACK

                TREV Nos. 1, 2, 3, 4 and 5 of 2001



TREV No.1 of 2001
M/s. Steel Authority of India Ltd.      ....            Petitioner
                             -versus-
Sales Tax Officer, Rourkela-I Circle ....         Opposite Parties
and Others

TREV No.2 of 2001
M/s. Steel Authority of India Ltd.      ....            Petitioner
                             -versus-
Sales Tax Officer, Rourkela-I Circle ....         Opposite Parties
and Others

TREV No.3 of 2001
M/s. Steel Authority of India Ltd.      ....            Petitioner
                             -versus-
Sales Tax Officer, Rourkela-I Circle ....         Opposite Parties
and Others

TREV No.4 of 2001
M/s. Steel Authority of India Ltd.      ....            Petitioner
                             -versus-
Sales Tax Officer, Rourkela-I Circle ....         Opposite Parties
and Others
                          AND
TREV No.5 of 2001
M/s. Steel Authority of India Ltd.      ....            Petitioner
                             -versus-
Sales Tax Officer, Rourkela-I Circle ....         Opposite Parties
and Others


TREV Nos.1,2, 3, 4 and 5 of 2001
                                                      Page 1 of 12
 Advocates, appeared in these cases:
For Petitioner(s)          :            Mr. Chandra Madhab Singh
                                                       Advocate

For Opposite Parties       :                      Mr. Sunil Mishra
                                       Additional Standing Counsel

CORAM:
THE CHIEF JUSTICE
JUSTICE M.S. RAMAN
                               JUDGMENT

15.03.2023 Dr. S. Muralidhar, CJ.

1. These five tax revision petitions by the Steel Authority of India Ltd. (SAIL) arise from a common order dated 28th August, 2000 passed by the Orissa Sales Tax Tribunal, Cuttack Bench, Cuttack (Tribunal) in Second Appeal Nos.1143 to 1147 of 1999-2000 filed by SAIL.

2. The earlier order dated 13th February, 2019 of this Court dismissing these revisions petitions by answering the questions framed in favour of the Department and against SAIL was set aside by the Supreme Court of India by judgment dated 14th February, 2022 in Civil Appeal Nos.1324-1328 of 2022. The present tax revision petitions were restored to the file of this Court for a fresh decision in respect of questions 'b, d and e' which read as under:

"(b) Whether the learned Tribunal is justified in not deleting the Tax free and First Point Tax Paid goods turnover from the taxable turnover and as such the order is illegal and arbitrary?

TREV Nos.1,2, 3, 4 and 5 of 2001

(d) Whether the learned Tribunal is justified in holding that the receipts of hire charges recovered from contractors by appellant falls within ambit of deemed sales as contemplated u/s 2(g)(iv) of the Orissa Sales Tax Act?

(e) Whether the receipt of hire charges of machineries from inter-department of the assessee for account purpose is sale to self as contemplated u/s 2(g) (iv) of the Orissa Sales Tax Act?

3. This Court has heard the submissions of Mr. Chandra Madhab Singh, learned counsel appearing for SAIL and Mr. Sunil Mishra, learned Additional Standing Counsel for the Opposite Parties- Department.

4. SAIL is a public sector Government of India undertaking having one of its steel and fertilizer plants located at Rourkela in the State of Odisha. It is a registered dealer both under the Orissa Sales Tax Act, 1947 (OST Act) and the Central Sales Tax Act, 1956 (CST Act).

5. As regards question 'b', the relevant facts are that the sales effected by SAIL in its canteen in the aforementioned plant during the Assessment Years (AYs) in question i.e. 1991-92 to 1995-96 was not included in its gross turnover. The contention of SAIL was that the canteens were maintained under the provisions of the Factories Act, 1948; that canteen sales were treated as 'service rendered' by SAIL to its employees and that the canteen was being run on a purely no-profit basis with the supplies subsidised by

TREV Nos.1,2, 3, 4 and 5 of 2001

SAIL. Accordingly, SAIL contended that the canteen sales did not constitute its business and were, therefore, not amenable to sales tax under the OST Act.

6. The Assessing Officer (AO) i.e. the Sales Tax Officer (STO), Rourkela I Circle, Udit Nagar noted in the assessment order for 1991-92 that in the absence of detailed accounts, the total sales in the canteen had to be taxed on an estimate on the basis of total purchase turnover. Of the total purchases, 20% was allowed towards subsidy. Of the balance amount, the total sale was apportioned as 70% towards food and 30% towards sale of tea, coffee and snacks etc. Similar orders were passed in relation to the other AYs.

7. The 1st Appellate Authority i.e. the Assistant Commissioner of Commercial Taxes (ACCT), Sundargarh Range at Rourkela, dismissed SAIL's appeals by the order dated 31st July, 1999. Specific to the issue of canteen sales, it was held that in view of the decision of this Court in SAIL v. Sales Tax Officer (1988) 70 STC 2 canteen sales are to be included as part of the GTO. In the absence of the details of the transactions, the findings of the STO were upheld.

8. In dismissing the further appeals of SAIL, the Tribunal in the impugned order noted the contention of learned counsel for the SAIL that the canteen also serves 'tax free items like bread, cigarettes and first point tax paid items like biscuits, soft drinks etc.

TREV Nos.1,2, 3, 4 and 5 of 2001

and that no reduction had been allowed from the total turnover towards turnover of tax-free sales and exempted sales'. The Tribunal noted that as per Sl. No.20 of the list of taxable goods, cooked food and other food articles and beverages sold along with food in hotel and restaurants and meeting halls shall be taxed @ 4%. The Tribunal also noted that no reasoning had been given by the STO in estimating that 70% of the canteen sales shall be taxed @ 4% and the balance 30% @ 12%. The Tribunal observed "no materials have also been brought to record evidencing that the canteen run by the appellant-company has supplied any meals or food articles, beverages etc. outside the canteen by way of parcel sale. In that view of the matter, we hold that the entire turnover of canteen sales should be subjected to tax @ 4% only. We are, however, not inclined to accept the contention of the learned Advocate for the appellant that the forums below have gone arbitrary in not allowing any deduction towards sale of tax free or other exempted goods in as much as, we find, the appellant has failed to produce detailed accounts in respect of its canteen sales except a statement showing total purchase and sales at this forum".

9. Mr. Chandra Madhab Singh, learned counsel for SAIL, contended that canteen sales also comprised sale of tax-free goods like bread, cigarette etc. as well as first point tax paid goods like soft drinks, biscuits, matches etc. He contended that since in any event, in respect of certain other questions, the assessment for all the five years have been set aside for a fresh consideration by the AO, this issue also could be sent back to the AO for a fresh

TREV Nos.1,2, 3, 4 and 5 of 2001

decision. On the other hand, it was contended by Mr. Sunil Mishra on behalf of the Department, that this issue was not raised before the Tribunal but raised before this Court for the first time.

10. As far as the above contention is concerned, the Court is unable to agree with it since it is plain from a perusal of not only the orders of the AO and the ACCT but also of the Tribunal that the issue was raised by SAIL and discussed by the Tribunal. As noted hereinbefore the Tribunal has, while rejecting the plea of sale, held that the entire sales in the canteen should be taxed @ 4% without accounting for sale of tax free goods and first point tax paid goods. The ground on which SAIL's plea was rejected was that adequate materials had not been placed before the AO to enable him to come to a conclusion as to what extent the sales in the canteen included sales of tax-free goods and first point tax paid goods.

11. Having carefully considered the above pleas, the Court is of the view that if indeed SAIL was unable to produce materials to show to what extent the canteen sales included sale of tax-free goods and first point tax paid goods, remanding the matter to the AO will be a futile exercise. In the absence of SAIL producing records relevant to the issue, even in this Court, the estimation that 70% of the sales was of cooked food items and 30% of tea, coffee and snacks etc. cannot be said to be arbitrary. Consequently, in this aspect the Court is not inclined to accept the plea of SAIL and remand the matter to the AO. In other words, the question 'b' as framed is

TREV Nos.1,2, 3, 4 and 5 of 2001

answered in the affirmative i.e. in favour of the Department and against the Assessee.

12. Questions 'd' and 'e' are taken together for the sake of convenience. The relevant facts are the Department found that SAIL had supplied machinery to different contractors engaged in the modernization programme of a plant against which it collected hire charges. However, this amount had not been incorporated in the gross turnover. The contention of SAIL was that the contractors used the machinery inside the premises for plant work only. They were not permitted to carry the machinery outside the plant and could not use it in any work other than the work entrusted at the plant. Therefore, the hire charges could not be considered as price for transfer of the right to use the machinery within the meaning of Section 2(g)(iv) of the OST Act. A similar contention was advanced to resist the Department's case that hire charges collected from other departments for use of machinery by them should also be included in the gross taxable turnover.

13. The STO has relied on the decision of this Court in Krishna Chandra Behera v. State of Odisha (1991) 83 STC 325 and held that it was a case of transfer of ownership of machinery for an agreed period to the contractors for recovery of hire charges. When the matter travelled to the ACCT, reliance was placed on the decision of the Bombay High Court in 20th Century Finance Corporation v. State of Maharashtra [1989] 75 STC 217 apart

TREV Nos.1,2, 3, 4 and 5 of 2001

from the decision of this Court in Krishna Chandra Behera (supra) to uphold the view of the STO.

14. Before the Tribunal, it was sought to be explained by SAIL that no transfer of right to use took place when the contractors or other departments were permitted to use the machinery belonging to it. The precise transaction was explained as under:

"Machineries are to be indented through a certificate of requirement from the concerned Engineer and on such certificate the concerned Department engaged its own operator to run the machine. Cost of operation for each machine is fixed earlier on hourly basis. Even when one Department of the appellant uses the machines of other Department, the use Department is charged for such use on shift or hourly basis. We plead that the ownership and control over the machinery during the period of use by the hirer remained always with the appellant and, therefore, the receipts by the appellant never come within the ambit of deemed sale as envisaged U/s. 2(g)(iv) of the OST Act."

15. Before the Tribunal reliance was placed by SAIL on the decisions in Rashtriya Ispat Nigam Ltd. v. CTO 1990 (77) STC 182; Tripura Bus Syndicate v. State of Tripura (1997) 105 STC 409 and Kandoi Transport v. Sales Tax Officer (1992) 43 STC

167.

16. The Tribunal observed in the impugned order that to understand the entire gamut of transactions, it was necessary for the Tribunal to examine the agreement between SAIL and the contractor "but

TREV Nos.1,2, 3, 4 and 5 of 2001

instead of furnishing the agreement, a copy of what is said to be relevant portion Mukand Contractor No.104.I in the form of excerpt was furnished before us from which it is difficult to deduce a firm conclusion. Assuming what is stated before us is correct, the machineries remain in possession with the hirer/lesser for purpose of executing specified work and for this the appellant realises consideration. This consideration cannot escape taxation under the OST Act."

17. After discussing the case laws cited by the parties, the Tribunal observed as under:

"In absence of the detailed terms and conditions of the contract before us relating to hiring out of the machineries and with the limited materials before us, we proceed to decide the matter keeping in view the various cases we have referred to earlier supra. In the case, we observe that the machineries have been delivered to the contractors with operators though which hardly matters in view of the decision of our own Hon'ble High Court in the case of K.C. Behera (83 STC 325), for use by the contractors on definite consideration and the contractors have been legally possessed of the such machineries and made entitled to the right to enjoy the goods with control and, therefore, since the substance of right is the enjoyment of goods, transfer has materialized upon delivery of the goods and, therefore, we are of the view that the receipts of hire charges by the appellant fails within the ambit of deemed sales as contemplated U/s.2(g)(iv) of the OST Act. We therefore do not see any cogent reason to interfere with the findings of the lower forum."

TREV Nos.1,2, 3, 4 and 5 of 2001

18. Before this Court it was contended by Mr. Chandra Madhab Singh, learned counsel for SAIL, that the effective control of machinery remained with SAIL and that the contractors were permitted to use the machinery inside SAIL's plant and for only SAIL's work. Therefore, it cannot be said that the hire charges received amounted to sales. It was not the price for transfer of the right to use the machinery.

19. On the other hand, Mr. Mishra, learned Additional Standing Counsel for the Department, submitted that the complete contract was never furnished before the statutory authorities even though it was in possession of SAIL and, therefore, the conclusion reached by the STO, the ACCT and the Tribunal ought not to be interfered with by this Court.

20. The Court finds that in the memorandum of the present revision petition it has been pleaded by SAIL as under:

"That the petitioner did produce the full contract though it filed the relevant extract only and the petitioner is ready and willing to produce the original contract at the time of hearing and as such the order is vitiated by imposing tax on this count."

21. Whether in fact the Tribunal asked SAIL to produce the full contract is not clear from the impugned order of the Tribunal. On its part, with SAIL having offered to produce the entire contract, the Tribunal could have asked SAIL to produce it before deciding the issue.

TREV Nos.1,2, 3, 4 and 5 of 2001

22. If the contract in question does bear out the contention of SAIL that the contractor could use the machinery only inside the plant premises; only for the work of SAIL and was not permitted to take the machinery outside the plant for any other work and further that SAIL retained control of machinery then the case would be different from the one in Krishna Chandra Behera (supra) which has been relied upon by the STO and the ACCT to negative the contention of SAIL. In such event the fact situation would be very similar to the one in Rashtriya Ispat Nigam (supra), Tripura Bus Syndicate (supra) and Kandoi Transport (supra).

23. With SAIL offering to produce the entire contract and the matter any way being remanded to the AO as regards the other questions, the Court considers it appropriate to refer questions 'd' and 'e' also to the AO for being considering afresh by examining the complete text to the contract to be produced by SAIL as undertaken by it.

24. In that view of the matter, while not answering questions 'd' and 'e' conclusively, the Court while setting aside the orders of the AO, the ACCT and the Tribunal on issues 'd' and 'e' and remands them to the AO for a fresh determination.

25. The matters will now be listed before the State Tax Officer, Rourkela on 1st May, 2023 on which date the authorized representative (AR) of SAIL will appear along with a downloaded

TREV Nos.1,2, 3, 4 and 5 of 2001

copy of this order. The AR of SAIL will produce the complete text of contract entered into with the contractors in question to whom the machinery was given on hire. It will also produce any relevant additional documents relevant to issue 'e'. The AO will examine the contract and documents and decide both the issues afresh. The AO will be uninfluenced by the earlier decisions of the predecessor, the ACCT as well as the Tribunal and decide both the issues afresh in accordance with law within a period of three months thereafter.

26. The tax revision petitions are disposed of in the above terms. No order as to costs.

(S. Muralidhar) Chief Justice

(M.S. Raman) Judge S.K. Jena/Secy.

TREV Nos.1,2, 3, 4 and 5 of 2001