J.P.Bansal, Judicial Member -
(1.) ALL these five applications which have been filed under Section 8(1) of the Rajasthan Taxation Tribunal Act, 1995 arise on facts and in the circumstances to be mentioned in the paragraphs that follow. Since they involve the consideration of common questions of fact and law they are being disposed of by a common judgment.
(2.) FOR the sake of convenience we put on record the facts of the Application No. 250 of 1997 for our examination and consideration. The applicant -company which is engaged in the execution of civil construction works including laying of pipelines for water supply schemes entered into a contract with the State of Rajasthan through its Chief Engineer, Public Health Engineering Department (PHED), Ajmer Region, Ajmer, for providing and laying of pipes complete with suitable jointing materials, specials, valves and construction of valve chamber, anchor blocks table crossing including testing and commissioning of pipelines, etc., in respect of Ajmer, Kishangarh, Beawar Water Supply Reorganisation Scheme from Bisalpur Dam pursuant to a notice inviting tenders dated September 8, 1997. The applicant -company submitted its tender which was accepted. It was chosen as the contractor to execute the foregoing works. The work orders which were issued on August 23, 1988 and My 10, 1989 culminated into agreements between the applicant -company and the PHED on January 11, 1989 and July 23, 1989. As per the terms of agreements the requisite pipes were to be manufactured, supplied, laid and jointed by the applicant -company. It was to establish a factory near the working site for the manufacture of pipes and the specials. Trench excavation was also to be done by the applicant -company. Submission of completion drawings was also the work which was entrusted to be done by the applicant -company. The entire scheme was to be commissioned and successfully operated for a period of at least 30 days at designed flow and pressure. It was a turnkey project. The quotation given by the applicant -company was inclusive of all taxes, levies and octroi, etc. It was also provided that statutory variations in taxes and duties shall be allowed as per the actual payment. As per the terms of the agreement the PHED was to deduct 2 per cent of the amount of the running bills for sales tax purposes. This deduction of 2 per cent towards sales tax was in line with the Notification No. G.S.R. 12 dated May 28, 1987. This 2 per cent was relatable to entire turnover of the works contract. As regards the nature of contract it was an indivisible works contract for supply of material, work and labour. During the year 1989 -90 corresponding to the period from April 1, 1989 to March 31, 1990 a sum of Rs. 4,03,43,028 inclusive of a sum of Rs. 11,75,043 on account of tax was received by the applicant -company from the PHED on account of the running bills. The applicant -company during this relevant assessment year received a sum of Rs. 3,91,68,085 from PHED as part payment for composite works contract undertaken by it. In spite of all this the non -applicant No. 4, Commercial Taxes Officer, Special Circle, Ajmer (assessing authority) on May 6, 1996 framed the assessment order whereby it levied sales tax at the rate of 12 per cent amounting to Rs. 42,32,921 on a sum of Rs. 3,52,74,345 treating it to be the amount towards sale of pipes, which amount was arrived at after deducting a sum of Rs. 38,93,740 towards labour charges from the foregoing sum of Rs. 3,91,68,085 received by the applicant -company on account of the running bills during the year. Penalty under Section 7AA of the Rajasthan Sales Tax Act, 1954 (for short, "the Act") was levied. Interest under Section 11B of the Act was also levied. Thus a demand notice dated May 6, 1996 for a sum of Rs, 87,63,561 was issued against the applicant -company. This assessment order dated May 6, 1996 was challenged by the applicant -company before the non -applicant No. 3, Deputy Commissioner (Appeals), Ajmer, who on May 24, 1997 dismissed it and set his seal of approval on the assessment order dated May 6, 1996. The supply of pipes was treated as sale of pipes by the assessing authority as also the first appellate authority and sales tax was levied besides penalty and interest thereon as mentioned above. It has been averred that the contract was an indivisible one. There was no sale of pipes and since it was an indivisible contract no sales tax could be levied on the total amount of works contract. This view has been taken by the Orissa High Court as also by the apex Court in similar matters. It was prayed that the impugned order dated May 24, 1997 be quashed. It may be declared that the agreements dated August 23, 1988 and July 10, 1989 are indivisible works contracts. The applicant -company is not liable to pay sales tax over and above 2 per cent which has already been deducted by PHED at source from the running bills.
In the counter filed on behalf of the non -applicants Nos. 1 to 4 the factual position with regard to the issuance of notice inviting tenders and work orders, execution of agreements, framing of the assessment order and the passing of the appellate order has been admitted. It is alleged that a works contract cannot be treated to be an indivisible contract after coming into the force of the Constitution (Forty -sixth) Amendment Act, 1982 (Amendment Act). A works contract is to be treated as a divisible one consisting of two parts - -one for the supply of material and the other for the supply of labour and services. The first part of the works contract is to be treated as a contract for sale. The assessment order as also the first appellate order are just and proper. The applicant -company is liable to pay sales tax on the price of the pipes supplied by it to PHED in the course of execution of the works contract.
(3.) THE non -applicant No. 5 (PHED) has also put in a separate reply wherein it has virtually adopted the case as put forth by the non -applicants Nos. 1 to 4 in their counter. There is nothing which deserves any special mention.;