M.C.Desai, C.J. - (1.) The Judge (Revisions), Sales Tax, U. P., has, at the instance of an assessee, referred to this Court this statement of the case inviting its opinion on the following questions: Whether on the admitted facts of this case, the Kanpur Development Board can be said to be a 'dealer' within the meaning of Section 2(c) of the U. P. Sales Tax Act, and whether it can be assessed to payment of sales tax on the value of the materials supplied by it to its contractors ?
(2.) The assessee, the Kanpur Development Board, was constituted for certain specific purposes such as provision of water supply and public drains, development and maintenance of streets, regulation of traffic, town planning, organization of transport, river trading, adequate housing, location of markets and provisions of sites for hawkers and pedlers. It had to make constructions to carry out these objects and it entrusted the work to contractors. In order to avoid delay and also to secure the use of satisfactory materials in all constructions it arranged to supply the contractors with certain materials required by them in the constructions from its own stores on certain prices. The terms of the contracts with the contractors included the following :( 1) The contractor shall be supplied with such material and stores as are required from time to time to be used by him for the purpose of contract only. (2) The value of the full quantity of the materials and stores so supplied at the rates specified in the said schedule of the memorandum may be set-off or deducted from any sums due or thereafter to become due to the contractor under the contract or otherwise. (3) All materials supplied to the contractor are the property of the contractor but shall not on any account be removed from the site of the work except with the permission of the Assistant City Engineer or under the orders of the Assistant Engineer and shall at all times be open to inspection by the Engineer in charge. (4) Any materials unused and in perfectly good condition at the time of the completion or determination of the contract may by special arrangement be taken over by the Kanpur Development Board at the prevailing market rates if required for use for other works in progress provided that the price allowed shall not exceed the amount charged to the contractor.
(3.) In accordance with these terms the Board supplied materials from its stores to the contractors and realized their price from them. It has been assessed to sales tax by the Sales Tax Officer on the ground that it is a dealer within the meaning of the Sales Tax Act and is liable to be assessed on the turnover of the sales made to the contractors. The Judge (Appeals), Sales Tax, set aside the assessment order, he being of the view that the Board did not carry on any business by selling materials to the contractors and was, therefore, not a dealer. The Judge (Revisions) noted the facts that all materials supplied to the contractors became their property, that the contractors had to pay their price through adjustment of their claims under the contracts and that the Board had a right to repurchase unused materials at the prevailing market price and held that the transaction amounted to sale. Then he noted the fact that the prices of the materials were worked out from the cost price including insurance, freight, cartage, octroi, sales tax, producers' tax, etc. and an allowance for normal price fluctuations and the fact that materials could be repurchased by the Board at the prevailing market prices provided that they were lower than the prices at which they were sold and concluded that this meant nothing but profit from the sales. In the result he held that the Board was a dealer and restored the assessment order of the Sales Tax Officer.;