Commercial Taxes Officer versus Hindustan Zinc

-1


IN THE HIGH COURT OF JUDICATURE FOR
RAJASTHAN AT JODHPUR.


:::


O R D E R


1.S.B.
CIVIL REVISION PETITION
NO.105/2007 -HINDUSTAN ZINC LTD VS.
COMMERCIAL TAXES OFFICER, SPECIAL
CIRCLE, UDAIPUR AGAINST THE JUDGMENT
AND ORDER DATED 6.3.2007 , PASSED BY
THE RAJASTHAN TAX BOARD, AJMER IN
APPEAL NO.114/2005.
2.S.B.
CIVIL REVISION PETITION
NO.104/2007 -HINDUSTAN ZINC LTD VS.
COMMERCIAL TAXES OFFICER, SPECIAL
CIRCLE, UDAIPUR AGAINST THE JUDGMENT
AND ORDER DATED 6.3.2007 , PASSED BY
THE RAJASTHAN TAX BOARD, AJMER IN
APPEAL NO.115/2005
3.S.B.
CIVIL REVISION PETITION
NO.117/2007 -HINDUSTAN ZINC LTD VS.
COMMERCIAL TAXES OFFICER, SPECIAL
CIRCLE, UDAIPUR AGAINST THE JUDGMENT
AND ORDER DATED 6.3.2007 , PASSED BY
THE RAJASTHAN TAX BOARD, AJMER IN
APPEAL NO.59/2007
REPORTABLE


4.S.B.
CIVIL REVISION PETITION
NO.118/2007 -HINDUSTAN ZINC LTD VS.
COMMERCIAL TAXES OFFICER, SPECIAL
CIRCLE, UDAIPUR AGAINST THE JUDGMENT
AND ORDER DATED 6.3.2007 , PASSED BY
THE RAJASTHAN TAX BOARD, AJMER IN
APPEAL NO.1932/2006
5.S.B.
CIVIL REVISION PETITION
NO.119/2007 -HINDUSTAN ZINC LTD VS.
COMMERCIAL TAXES OFFICER, SPECIAL
CIRCLE, UDAIPUR AGAINST THE JUDGMENT
AND ORDER DATED 6.3.2007 , PASSED BY
THE RAJASTHAN TAX BOARD, AJMER IN
APPEAL NO.1933/2006
DATE OF ORDER :
29th Feb., 2008



-2


PRESENT
HON'BLE MR. JUSTICE PRAKASH TATIA


Mr. Dinesh Mheta, for the petitioner.
Mr VK Mathur ]
Mr. Rishabh Sancheti ], for the respondent.


<><><>
BY THE COURT:
The petitioner has raised questions of law
in these revision petitions that (i) whether in
the facts and circumstances of the case supply
of explosives by the petitioner to his
contractor for using the same by the contractor
in petitioner's mining operation in mining area
of the petitioner can be treated to be a sale
within the meaning of Rajasthan Sales Tax Act,


1994 (hereinafter referred to as the Act of
1994) and (ii) if answer to question no.(i)
referred above is affirmative and it is held

that aforesaid supply of explosives is a sale
whether such sale is not taxable being
subsequent sale within the State of the goods on
which tax on first point has already paid and


(iii) whether in the facts and circumstances of
the case, the explosives for the purpose of
blasting in the petitioner's mine could not have
been purchased at concessional rates against
declaration form ST17.

-3The
petitioner is a company duly registered
under the provisions of the Rajasthan Sales Tax
Act, 1994, Rajasthan VAT Act, 2003, Central
Sales Tax Act, 1956 and the Rules framed
thereunder. The company engaged in manufacture
of lead, zine and allied metals and it has is
own mines. In the regular course of business,
the petitioner company awarded various mining
contracts to the contractors wherein cement and
steel are required to be used. The petitioner
company is required to use explosives for
winning minerals from its mines. This operation
includes explosions and is got done on job work
basis in the field of the petitioner under
strict control and supervision of explosive
experts. For use of explosives,the petitioner
company is required to obtain licence from the
competent authority under the Explosive Act,
1884 and as per the statutory condition of
licence, the petitioner cannot re-sale the
explosives purchased for its own use. The
petitioner has placed on record the copy of the
explosive licence. The petitioner company
purchased the explosives against declaration
form ST17 on payment of concessional rate of tax



-4


as stipulated under Section 10(1) and 10(3) of
the Act of 1994. According to the petitioner


explosives have been mentioned in the
certificate of registration of the petitioner
company as raw-material and, therefore, the

petitioner is authorized to purchase the same at
concessional rate of 4% against declaration form
ST17.


The petitioner's company's regular
assessment for the tax under the provisions of
the Act of 1994 for the assessment yearS 19992000,
2000-2001, 2001-2002, 2002-2003 AND 20032004
were framed by the assessing authority, but
notices were issued for re-opening of
assessments under Section 30 of the Act of 1994
to the petitioner on the ground that supply of
material such as cement, iron, steel and
explosives to various contractors firms is sale
within the meaning of Section 2(38) of the Act
of 1994. The petitioner submitted reply and
took the plea that the goods have not been used
for the purpose other than for which they have
been procured and there is no misuse of
declaration form.


The petitioner submitted that ownership of



-5


the goods had never been transferred to the
contractor and the contractor had returned the
remaining goods as such and no property stands
transferred to the contractor from the
petitioner, therefore, the transaction cannot
amount to sale of the goods liable for tax under
the provisions of the Act of 1994. The assessing
authority rejected the petitioner's contention
and passed assessment orders for various years.
Copies of the assessment orders passed for
various years have been placed on record on
these revision petitions, which are dated
7.8.2003, 27.9.2005 and 15.2.2006 in total for
five years.


Aggrieved against the above assessment
orders passed by the assessing authority, the
petitioner company preferred separate appeals
before the Dy. Commissioner (Appeals) Commercial
Taxes, Udaipur, which were dismissed by Dy.
Commissioner (Appeals) by order dated 6.1.2005
(two appeals), dated 21.6.2005 (two appeals) and
dated 5.10.2006 (one appeal). The petitioner
preferred further appeals before the Rajasthan
Tax Board, Ajmer, which too were dismissed by
the Rajasthan Tax Board, Ajmer vide order dated



-6


6.3.2007, hence, these revision petitions
raising common questions of law referred above.


According to learned counsel for the
petitioner the petitioner has its own mining
area. In the mining operation certain goods
including explosives are required for which the


petitioner company obtained licence from the
competent authority under the relevant
provisions of law which is apparent from the

copy of the licence placed on record by the
petitioner. The petitioner company cannot sale
the explosives and has not sold it out to
anybody. The petitioner company gave these
explosives to its contractor only for using the
explosives in petitioner's own mining operation.
The explosives exhausts in the mining operation
and after its use nothing remained in the hands
of the contractor. As per the contract between
the petitioner and its contractor, the
contractor could have used the explosives within
the mining field of the petitioner and that
too, under the strict control and supervision of
the explosives experts. Therefore, no legal
title of the goods had passed on to the
contractor. The petitioner company could have



-7


used its explosives through its own labour for
its own consumption and as per sub-section (3)
of Section 10, the petitioner was entitled to
purchase the goods for its mining operation on
payment of lower rate of tax i.e., @ 4% on
furnishing a declaration duly filled under form
ST14. The petitioner consumed the explosives in
its mining operation is not in dispute,
therefore, the petitioner fulfilled all the
conditions of sub-section (3) of Section 10 of
the Act of 1994 and has not violated the
conditions as provided by sub-section (3) of
Section 10 of the Act of 1994 after purchase of
the goods i.e., explosives. In view of the
above fact, the first contention of the
petitioner is that the explosives in the hands
of contractor is not the goods sold to the
contractor and secondly, even if it amount to
sale then as per sub-section (3) of Section 10
of the Act of 1994, the sale is not prohibited
to a person who uses the said sold goods only
for the purpose and use of the seller. Learned


counsel for the petitioner tried to
distinguish allege sale of explosives by the
petitioner company to its contractor for


-8


carrying out work of petitioner with the sale of
goods to other person who may not use the goods
for carrying out the manufacture in process or
mining operation of the seller and submitted
that in former cases there cannot be violation
of sub-section (3) of Section 10 of the Act of
1994 because of the reason that the petitioner
company is required to satisfy that the goods
purchased by the petitioner company by
submitting a declaration under form ST17 were
required by it and has been used for its mining
operation. Sub-section (3) of Section 10 of the
Act of 1994 nowhere provides that in case the
goods are required by the assessee and has been
used for the assessee's own work but through
third party then the assessee is not entiled to
get benefit of payment of tax at lower rate as
provided under sub-section (3) of Section 10 of
the Act of 1994.


Learned counsel for the petitioner further
submitted that the petitioner purchased the
goods i.e., explosives after payment of tax
under sub-section (3) of Section 10 of the Act
of 1994 though on payment of lower rate of tax
under sub-section (3) of Section 10 by



-9


furnishing declaration form ST 17, therefore,
the explosives in the hands of the petitioner is
tax paid goods, therefore, even if it is held
that handing over of the explosives to the
contractor of the petitioner company for the
purpose of mining operation within the mining
area of the petitioner amounts to sale then that
sale is sale of tax paid goods and the tax can
be levied within the State only ones and not on
subsequent sales. Learned counsel for the
petitioner relied upon the judgment of this
court delivered in Shekhawat Explosives Vs.
State of Rajasthan & Ors reported in 2003(5) Tax
Update 155. Facts of which case was slight
different but learned counsel for the petitioner
relied upon this judgment in support of his
argument that since the explosives exhausts in
the mining operation therefore, cannot be
transferred to the petitioner company by the
contractor, therefore,the goods in the hands of
the contractor is not a commodity acquired by
sale.


Learned counsel for the petitioner also
relied upon the judgment of this Court delivered
in the case of Bharat Sanchar Nigam & Anr. vs.



-10


Union of India & Ors reported in 2006(14) Tax
Update 185.


Learned counsel for the revenue submitted
that in the present case the petitioner not only
delivered the explosives to its contractor but
also recovered the cost of the explosives from
the contractor and this fact is not in dispute.
Therefore, the transaction of sale stands
completed by delivery of goods to the contractor
engaged by the petitioner for execution of their
works contract and receipt of the sale
consideration by the seller -petitioner company.
Sale is not determined from the fact that how
the purchaser (contractor) has used or consumed
the goods or where the purchaser (contractor)
has used the goods. The completed sale
transaction is not affected because of total
exhausts of the sold goods after reaching it in
the hands of purchaser, therefore, where and how
the purchaser; the contractor of the petitioner
company, has used the explosives is absolutely
irrelevant and transaction stands concluded
before goods used by the contractor.


Learned counsel for the revenue as well as
learned counsel for the petitioner both tried to



-11


interpret sub-section (2) of Section 38 of the
Act of 1994 which defines “sale” to their
favour. Petitioner's counsel submitted that the
petitioner could not have transferred the
property and was not competent to pass over the
“title in goods” to the contractor by virtue of
statutory bar against sale of explosives,
therefore, handing over of the explosives to the
contractor without passing on title vesting in
the purchaser, cannot amount to sale whereas
learned counsel for the revenue submitted that
this issue specifically was under consideration
before the Hon'ble Apex Court in the case of
Karya Palak Enigneer, CPWD, Bikaner Vs.
Rajasthan Taxation Board, Ajmer & Ors reported
in (2004) 7 SCC 195 and the Hon'ble Apex Court
in a case where there was no transfer of title
of property in the contractor and there was a
contract that the goods shall remain on the
work site of the assessee and the contractor
shall not remove the said material from the work
site and shall be opened for inspection of the
assessee and where the contractor was bound to
return the unused materials to the principal
even then Hon'ble Apex Court held that by the



-12


use or consumption of the materials in the
construction work, property thereof, held,
passed to the contractors and consideration
therefor passed to CPWD by way of adjustment in
the bills and said transaction was held
amounting to sale within the meaning of Section
2(38) of the Rajasthan Sales Tax Act, 1994 and
it has been held that sales tax could be levied
on the said transaction.


I have considered the rival submissions of
learned counsel for both the parties and perused
the facts of the case as well as impugned
orders.


Substantially the facts are not in dispute
and which may be recapitulated here again, that
the petitioner-Company in its regular course of
business, awarded mining works contract to the
contractors and supplied various goods to the
contractors and we are concerned with the supply
of explosives to the contractors by the
petitioner-Company in these matters. The revenue
treated the supply of those explosives to the
contractors by the petitioner as transaction of
sale, as defined under sub-clause (ii) of subsection
(38) of Section 2 of the Rajasthan Sales



-13


Tax Act, 1994. The contention of the petitioner
is that the said transaction is not sale for the
reasons mentioned above.


Sub-clause (ii) of sub-section (38) of
Section 2 of the Act of 1994 is as under:“
(38) “Sale” with all its grammatical
variations and cognate expressions means
every transfer of property in goods by one
person to another for cash, deferred
payment or other valuable consideration and


includes(
i) ..... ..... .....
(ii) a transfer of property in goods
(whether as goods or in some other form)
involved in the execution of a works
contract;
(iii) ..... ..... ......
(iv) ..... .... ......
(v) ..... ..... ......
(vi) ..... .... ......”

When the word is defined in the Act itself
then there is no need to take help of definition
given in any other Act nor dictionary meaning is
needed to see the meaning of the word. When any
transaction is specifically included in any
definition in the Act that transaction is
required to be given its effect. Section 38(ii)
unambiguously provides that (i) any transfer of



-14


property in goods by one person to another
person (ii) for cash, deferred payment or for
valueble consideration is sale and (iii)
includes a transfer of property in goods in
whatever form involved in the execution of works
contract.


In case in hand, the property was delivered
to the contractor. The property was for use in
the works contract only. The cost of explosive
was separately charged from the contractor by
deducting the value of the explosive from bills
of contractor. Therefore, all the ingredients
of sale as required by the sub-clause (ii) of
sub-section 38 of Section 2 of the Act of 1994
are present in the transaction. Hence, the
transaction in this case is sale of goods by
petitioner to the contractor in view of
unambiguous and clear definition of sale given
in Section 2 (38)(ii) of the Act of 1994.


A similar question as above, arose before
Hon'ble the Supreme Court in the case of Karya
Palak Engineer, CPWD, Bikaner v. Rajasthan
Taxation Board, Ajmer and others ( (2004) 7 SCC
195), as is raised in these revision petitions.
It was contended in above case that under the



-15


terms and conditions of the contract, the
material supplied to the contractors remained
the absolute property of the Union and the same
could not be removed from the site of the work
and were at all times open to inspection by the
authorities as per the terms and conditions of
the contract, if there remains surplus material,
then those materials were required to be
returned by the contractors. Therefore, the
title in the property never transferred to the
contractors, and the contractors remained only
custodian of such material. It was also
contended that no specific consideration was
paid for the supply of the goods, therefore, the
supply of materials to the contractors did not
amount to sale and could not be subjected to


sales tax. Hon'ble the Supreme Court, after
considering the above pleas, rejected all the
contentions following the earlier decision of

the Hon'ble Supreme Court delivered in the cases
of N.M Goel & Co. v. STO ((1989) 1 SCC 335) and
Cooch Behar Contractors' Association v. State of


W.B. ( (1996) 10 SCC 380). In N.M.Goel's case
(supra), Hon'ble the Supreme Court held that “by
use or consumption of material in the work of

-16


construction, there was passing of property in
the goods to the assessee from PWD. By
appropriation and by the agreement, there was a
sale as envisaged in terms of clause of the
contract.” Here in present cases also, it is
not in dispute that the explosives were handed
over physically to the contractors and the
petitioner-Company received the cost of
explosives from the contractor by deducting the
cost of explosives from bills of contractor,
therefore, with the passing of the goods in the
hands of the contractors from the petitioner for
consideration, the transaction of sale stands
concluded. Transaction is not dependent upon the
ultimate use of the goods, transferred to the
contractors, as the goods which may have been
sold to the contractors for valuable
consideration, may be returned to the Principal,
if remained unused and the goods in different
form may be returned to the Principal and the
goods may be consumed or exhausted in the works
contract. The transaction of sale completes with
the passing of the goods for consideration in
the hands of the contractors. Hon'ble the
Supreme Court even in a case rejected the



-17


contention of the assessee that title in the
property never got transferred to the contractor
and the contractor remained only a custodian of
such materials and held that the transaction is
sale.


In view of the above, so far as the first
contention of the learned counsel for the
petitioner is concerned, it has no force and in
view of the above referred judgments of the
Hon'ble Supreme Court, the petitioner cannot get
any help from the Division Bench judgment
delivered in the case of Shekhawat Explosives v.
State of Rajasthan & anr. (RLW 2003(1) Raj.
648).


Next question yet remained to be answered
is, whether it is necessary that above
transaction of sale can be recognized as sale
only if sale is legal?


The above was the question directly
answered in the case of Commonwealth Vs. Miller,
118 Pa.Super. 58, 180 A. 144 wherein the issue
involved was a tax on stored spiritous and
vinous liquors and the tax was sought to be
imposed upon illegally manufactured whiskey. In
the said case, it has been held “[i] it would



-18


seem unreasonable to assume, without a clear
expression of such intension, that the
Legislature intended that a tax should be
imposed on those who complied with the mandate
of the law but those who flagrantly flaunted the
law should not be required to pay such a tax.”


In the case of Hiram K. Undercofler,
Commissioner Vs. Veterans of Foreign Wars Post
4625 139 South Eastern Reporter, 2nd Series 776
Ga. it has been held that “We find nothing in
the Act which indicates any intention on the
part of the legislature to differentiate between
legal and illegal sales, and the general
language of the Act should not be limited to
legal sales only merely because the Act does not
specifically tax illegal sales by referring to
them as such.”


In the Hiram K. Undercofler case (supra)
even a issue was raised to tax the illegal sale
is equivalent to licensing an illegal activity
and that the court should not so construe the
Act as to give such an intent to the legislature
in the absence of clear express words to the
contrary. Same can be argument here also in view
of the fact that the explosives, which were



-19


involved in the works contract were not salable
commodity in open market and, therefore, the
petitioner could not have sold it to anybody
including to its own contractor. We may
recapitulate here, if the sale is illegal, it
may not pas on title to the vendee-the
purchaser and the purchaser may not get full
benefit of that purchased property and that is


subject matter relating to the title to the
property and consequential rights of the
purchaser, which is governed by general law
governing the subject of sale of property. As
stated above, the sale is defined in the

Rajasthan Sales Tax Act, 1994. Tax Act is for
specific purpose and and do not depend upon
other law for the purpose of levy of tax or for
finding out the nature of transaction, if the
taxing law itself has defined the transaction
and included the transaction in any of the
category of transaction for the purpose of levy
of tax. The taxing law may not be a substantive
law determining the property rights of the
parties involved in the transaction and,
therefore, the separate definition of sale has
been given in the Act of 1994. Certain



-20


transactions, which may fall short of sale in
general law have been included in the
transaction of sale statutorily in the Act of
1994 and that is why the transaction in question
is deemed sale and may not be actual sale so as
to pass on title in property to the vendee-the
purchaser. The illegal transaction of sale may
not pass on title of property to the vendee but
still it is sale for the purpose of Act of 1994.
An illegal sale may have penal consequence or
other liability of vendee and or vendor and that
may be statutory, but cannot convert the illegal
transaction into legal transaction if law does
not permit. In taxing statute, the statutes are
required to be constructed strictly and at the
same time, when language of the Act is clear and
unambiguous then there is no reason to presume
that the statutory provisions of law creating
liability has been enacted to licensing the
illegal activity (in this case sale of
explosives) to make the illegal transaction
legal. Therefore, the fact whether the
petitioner could have sold the explosives to the
contractor in view of the restrictions under the
Explosives Act is totally irrelevant and



-21


immaterial.


Same view was taken in the case of Y.


1st


Laxman v. Commercial Tax Officer, Circle,
Udipi and Anr. ( (1975) 35 STC 393(Kar.), the
Karnataka High Court held that “ the expression
“buying, selling, supplying or distributing
goods” used in section 2(1)(k) of the Act does
not exclude buying, selling, supplying or
distributing goods in an illegal way. The
liability to pay sales tax does not depend upon
whether the business carried on by the dealer is
lawful or not. Even when buying, selling,
supplying or distributing goods is not
authorised by law, a person who carries on those
activities would be liable to pay sales tax
under the Act.”


In view of the above, it is held that even
if transfer of property in goods was not


permitted by statutory provision; i.e., the
explosive Act even then it was a taxable
transaction under the Act of 1994.

Another contention of the learned counsel
for the petitioner is that since the explosives
were consumable commodity in the hands of the
petitioner and the said explosives have been



-22


consumed in the works contract, therefore, the
transaction cannot be a sale.


The learned counsel for the petitioner,
tried to draw distinction between the goods
which are transferred to contractor and which
are used or involved in execution of works
contract in two categories,one which are
returned to the Principal by the contractor
after completion of the works contract in its
original form or in its different form and
others which are consumed or exhausted in the
works contract. According to the learned counsel
for the petitioner, the goods which can be
returned to the Principal by the contractor
alone can be subjected to tax. And the goods
which are consumed and exhausted in the
execution of works contract and nothing remains
with the contractor then the transfer of those
consumable goods to the contractor, cannot be
treated to be sale even under deeming clause of
sale. The learned counsel for the petitioner for
this purpose, relied upon the judgment of the
Hon'ble Supreme Court deliverd in the case of
Gannon Dunkerley & Co. and others v. State of
Rajasthan & others (1993(88) Sales Tax Cases



-23


204).


It appears that in the case of Gannon
Dunkerley(supra), a different question also
cropped up which was with respect to the
determination of the value of the goods which
are involved in execution of the works contract.
The value of the goods involved in works
contract were of two types; one where value of
goods involved in works contract was known and
another where its actual cost is not known. In
former case there is no difficulty in levying
the tax. In later case a formula for determining
the value of goods involved in works contract
was worked out after taking into consideration
the suggestions of contractors and suggestion
came from the State that more convenient mode
for such determination is to take the value of
the works contract as a whole and deduct
therefrom the cost of labour and services
rendered by the contractor during the course of
execution of the works contract. The learned
counsel for the contractors submitted that in
that event, the cost incurred on the items
suggested by the contractors may be deducted
from the value of the entire contract in order



-24


to arrive at value of the goods involved in the
execution of the works contract. Hon'ble Supreme
Court held as under:


“The value of the goods involved
in the execution of a works contract


will, therefore, have to be determined
by taking into account the value of the
entire works contract and deducting
therefrom the charges towards labour
and services which would cover:


(a) labour charges for execution
of the works;
(b) amount paid to a subcontractor
for labour and services;
(c) charges for planning,
designing and architect's fees;
(d) charges for obtaining on hire
or otherwise machinery and tools used
for the execution of the works
contract;
(e) cost of consumables such as
water, electricity, fuel, etc., used in
the execution of the works contract the
property in which is not transferred in
the course of execution of a works
contract; and
(f) cost of establishment of the
contractor to the extent it is
relatable to supply of labour and
services;
(g) other similar expenses

-25


relatable to supply of labour and


services;
(h) profit earned by the
contractor to the extent it is
relatable to supply of labour and
services.

The amounts deductible under these
heads will have to be determined in the
light of the facts of a particular case
on the basis of the material produced
by the contractor.”.


According to the learned counsel for the
petitioner, since the explosives is a consumable
item and in fact consumed in mining operation,
therefore, as per clause (e), the entire cost of
explosives is required to be deducted from the
value of the goods involved in execution of
works contract, which in other words, mean that
no tax can be levied on the value of the
consumable item which is explosive in this case.
The argument appears to be quite attractive but
is devoid of any force because of the reason
that deduction from the value of goods involved
in the execution of a works contract can be
claimed only of “charges towards labour” and
“services” obviously provided by principle. The
explosive is not falling in either “labour



-26


charges” nor it is “service” provided to the
contractor. As per clause (e) referred above,
the consumable items are only the items used
ancillary in works contract and those can be
water, electricity and fuel etc., as these items
are not the goods transferred to the contractor
in execution of works contract and providing
above or like items, the contractor is given
some facilities by the Principal engaged in
works contract. In mining operation, the main
article with which operation can be given effect
to, is the explosive and that explosive can be
put to blast with the help of electricity, which
may be generated or obtained from different
source. The explosive is the item like cement,
iron etc,for which tax is leviable. In mining
operation, fuel is consumed to run the machinery
like in other works contract and the machineries
are run by electricity and fuel and in that
process, there may be consumption of water.
Therefore, the explosives are not those
consumable items which can be equated with the
water, electricity or fuel. When in the
definition clause or a list prescribing certain
items, is not exhaustive and uses the words



-27


“such as” and “etc.” then other items or
articles or goods which are similar to the goods


or articles, referred in the definition
depending upon the facts, can be included in
said definition.

The Hon'ble Supreme Court in the case of
Gannon Dunkerley & Co. (supra) while considering
the suggestion that the value of goods involved
in the execution of the works contract is
required to be determined by taking into account
the value of entire works contract and deducting
therefrom the charges towards labour and
services held that item referred above in
preceding para from (a) to (h) the account
value of which may be deducted from entire works
contract as charges towards labour and service
and, thereafter, clearly observed that “the
amount deductible under these heads will have to
be determined in the light of the facts of a
particular case on the basis of the material
produced by the contractor”. Here, in this
case, the specific known commodity which has
been transferred to the contractor is the
explosives. Its value is known and, therefore,
is not item transferred in the execution of



-28


work, value of which is required to be
determined by assessment only as is required to
be determined in a case where Principal or
contractor, as the case may be, does not
maintain proper accounts or accounts maintained
by him are not found worthy of credence.
Therefore, the revenue was justified in levying
the tax on the value of the goods, which deemed
to have been transferred to the contractor in
execution of the works contract.


In view of the above discussion, the answer
of question no.1 is that the transaction
referred in question no.1 is sale within the
meaning of Rajasthan Sales Tax Act, 1994 under
sub-clause (ii) of sub-section (38) of Section 2
of the Act of 1994.


Another contention of the petitioner covered
by question no.(ii) and (iii) is that the
petitioner could have purchased the goods on
payment of concessional rate of tax as the goods
were required as raw-material for mining
operation of the petitioner and the explosive
has been shown as raw-material in the
certificate of registration of the petitioner
and, thereby, the condition of sub-section (1)



-29


of Section 10 fulfilled and otherwise explosives
were used by the petitioner in the process of
mining and if it is held that petitioner not
entitled to take benefit under sub-section (1)
of Section 10 then was entitled to benefit under
sub-section (3) of Section 10 of the Act of
1994. The declaration form ST17 is a composite
declaration form covers all the transactions and
if the purchase falls in any of the category
given in the form ST17 or under Rule 23 then
consequence is only one that tax will be levied
at concessional rate of tax and in this case @
4% only. Therefore, even if the declaration
given in ST17 form may be found wrong merely on
the ground that the declaration is not falling
in particular category and it is found that it
falls in another category then that cannot be
said to be a violation of declaration and it is
a technical mistake only cannot have penal
consequence of charging full rate of tax. For
this purpose we may examine relevant provisions
of law.


Section 10 of the Act of 1994 allows sale
and purchase of certain goods on payment of
concessional rates of tax. The petitioner's



-30


contention is that he was entitled to purchase
the explosives on payment of concessional rate
of tax under Section 10 of the Act of 1994 in
view of the fact that the explosives have been
shown in the certificate of registration of the
petitioner company as raw-material and,
therefore, as per sub-section (1) of Section


(10) of the Act of 1994, the petitioner was
entitled to benefit of purchasing the explosive
on payment of concessional rate of tax and he
submitted a declaration form ST17 and paid the
tax @ 4% and, thereafter, used the above
explosives for its own purpose. In view of the
above facts, the explosives were tax paid
commodity in the hands of the petitioner.
According to learned counsel for the
petitioner under any provision of Section 10, it
has not been provided that the goods purchased
after availing the benefit of payment of
concessional rate of tax are required to be used
in any particular manner. The requirement under
sub-section (1) of Section 10 of the Act of 1994
are that dealer should be a registered dealer
under the Act of 1994, the goods must be shown
as raw-material in his certificate of



-31


registration and as per sub-section (2) of
Section 10 of the Act of 1994 goods are required
to be used by the person himself, purchasing the
goods on payment of concessional rate of tax.
And in case, after purchasing the goods on
payment of concessional rate of tax, the goods
are not utilized by him for the purpose
specified in sub-section (1) of Section 10 of
the Act of 1994 then said person is liable to
pay the difference of amount of tax, which would
be the difference between full rate and the
amount of tax paid under sub-section (1) with
interest @ 2% per month.


Even as per sub-section (3) of Section 10 of
the Act of 1994 the goods other than raw-
material if are purchased by the dealer, which
are required by him for use in the manufacturing
or processing of goods for sale or in mining or
in generation or distribution of electricity
then said dealer can purchase the goods on
payment of concessional rate of tax. In the
present case, firstly the commodity has been
shown as raw-material in the certificate of
registration of the petitioner and secondly,
even if it is treated not to be raw-material



-32


then the explosives involved in the works
contract were required by the petitioner for use
in its own mining operation and for these facts
there is no dispute then the petitioner was
entitled to take benefit of purchase the goods
on payment of concessional rate under Section 10
of the Act of 1994 and the petitioner paid the
tax @ 4%, therefore, the explosives were tax
paid commodity and even if it is held to be sale
then it is sale of tax paid goods, therefore,
the same cannot be subject to tax second time
even if it was sold to the contractor (in law)
because sale was within State and as per Section
4 tax is one time tax.


It is also submitted that the Rule 23
prescribes form ST17, which is the declaration
given before purchasing of the goods of
concessional rate by the dealer and it very
specifically provides that a purchase may be for
re-sale within the State as per sub-clause (i)
in form ST17 in consonance with the of sub-
clause (i) of sub-rule (1a) of Rule 23 of the
Rajasthan Sales Tax Rules, 1995. In this form
itself as per clause (iv) the dealer can give
declaration about the goods purchased that above



-33


goods will be used as processing articles under
sub-section (3) of Section 3 of Section 10 of
the Act of 1994 The petitioner's declaration in
form ST17 was submitted under sub-clause (iv) of
sub-rule (1a) of Rule 23 of the Rules of 1995
and it is found that it has been falling in
other clause of Rule 23 then it cannot be said
that the petitioner-dealer has violated any of
the conditions of form ST17 merely because of
describing its purchased goods in different
category which has no other consequence then the
consequence which is if the goods are purchased
in the category declared by the petitioner.


The arguments advanced by learned counsel
for the petitioner are devoid of force in view
of the fact that once it has been held that the
transfer of property to the contractor is sale
under sub-clause (ii) of sub-section (38) of
Section 2 of the Act of 1994 then that took
place before the goods could have been utilized
by the petitioner under sub-section (1) or under
sub-section (3) of Section 10 of the Act of 1994
and, therefore, it cannot be held that the goods
were used by the petitioner itself as raw-
material or has been used for petitioner's own



-34


purpose by the petitioner itself. In view of
the above, the Board of Revenue rightly held
that the event of sale took place prior to its
use in the mining operation of the petitioner
and, therefore, the petitioner is guilty of
giving wrong declaration under ST17. The
consequence of it is under sub-section (2) of
Section 10 of the Act of 1994 and petitioner has


been charged at only the difference amount of
tax and rightly held so.
The next contention of the petitioner is

that petitioner is not liable to pay interest
because of the reason that as per sub-section


(1) of Section 58 the interest can be levied for
the period starting from the day immediately
succeeding the date specified for such payment
and ending with the day on which payment is made
and according to learned counsel for the
petitioner till the revenue determined the
petitioner's liability of payment of tax by
order, he could not have paid the tax amount.
It is undisputed that it is the duty of the
dealer to pay the tax and it is not dependent
upon any order, which may be passed under the
Act of 1994. Section 58 of the Act of 1994



-35


clearly provides that in case dealer commits
default in making payment of any amount of tax


(i) leviable or (ii) payable or (iii) of any
amount of tax, fees interest or (iv) penalty
assessed or (v) determined or (vi) of any amount
or (vii) demand otherwise payable, within the
specified time under the provisions of the Act
of 1994 or rules made or notification issued
thereunder then dealer is liable to pay interest
for the period starting from the day
immediately succeeding the date specified for
such payment. Therefore, interest can be
charged on the amount when payment of tax is
required by law itself by particular time and in
that situation, the payment is not dependent
upon passing of any order by the assessing
authority. In this case, the petitioner paid the
tax @ 4% admittedly and he was not entitled to
pay the less amount of tax and, therefore, the
interest has rightly been levied against the
petitioner.
In view of the above reasons, the revision
petitions are dismissed.


(PRAKASH TATIA), J.


c.p.goyal/