JUBILEE ENGINEERING CO LTD Vs. SALES TAX OFFICER
HIGH COURT OF ANDHRA PRADESH
JUBILEE ENGINEERING CO LTD
SALES TAX OFFICER
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(1.)THIS is a petition for a writ of mandamus or any other appropriate writ under Article 226 of the Constitution for restraining respondents 1 and 3, the Sales Tax Officer and Commissioner of Sales Tax, from demanding sales tax and prohibiting them from collection on the turnover of works contract undertaken by the petitioner in completing maternity hospital at Mahboobabad and for the repair of a large tank at Rudrur.
(2.)THE petitioner is registered as a dealer under the Hyderabad General Sales Tax Act, 1950 (hereinafter called "the Act") and is a limited company incorporated under the Indian Companies Act. It carries on business as building and construction contractors and has been recognised as such by the Public Works Department of the Government of Hyderabad. During the year 1951-52 this company had obtained from the P. W. D. two contracts, one for building the maternity hospital at Mahboobabad for Rs. 52,290 and the other for repairing a large tank at Rudrur for Rs. 1,11,660. It is alleged that the petitioner received a sum of Rs. 52,290 at various intervals between 2nd November, 1950, and 7th May, 1951. In so far as repairs to Rudrur tank is concerned, the petitioner received on 26th September, 1952, an amount of Rs. 74,691 after deduction of 71/2 per cent. With respect to these two contracts the petitioner was assessed for the year 1951-52 on a taxable turnover of Rs. 1,14,709-0-0 which consisted of Rs. 78,163-3-3 towards the repairs of the large tank and Rs. 36,603-6-4 with respect to building of the maternity hospital at after deducting 30 per cent. of the contract amounts under Rule 5 (3) of the Sales Tax Rules on account of expenses of labour incurred in the execution of work. The petitioner alleges that the Sales Tax Officer had taken the entire amount tendered for the repairs of the Rudrur tank into account while the Executive Engineer's certificate shows that the work done was only for Rs. 81,303 less the further security deposit. The petitioner having been aggrieved by this order of the Sales Tax Officer filed a revision before the Sales Tax Commissioner challenging the validity of the Sales Tax Officer's order to tax the turnover of works contract and also contended before him that the definition of dealer does not include a P. W. D. contractor, that it has paid sales tax while buying the material and it cannot therefore be subjected to tax under proviso (2) of Sub-section (1) of Section 5 of the Act and that tax should be levied only to the extent of costs of the material but not on the contract amount. The Commissioner rejected the revision on all the grounds urged before him and consequently this writ petition has been filed.
(3.)THE two contracts which the assessee had executed have not been produced, but samples of the usual contracts for buildings and repairs and the schedule of rates which are attached to such contracts on tenders being accepted have been filed by the learned Advocate-General at the request of the assessee. From the contract for buildings it will be seen that it includes all labour, material, scaffolding, centering moulds, tools and every other thing necessary for carrying on and completing the works in conformity with the plans and specifications attached to it with such additional drawings, descriptions and instructions as from time to time be furnished while the work is in progress. The materials have to be the best and the Government reserved to itself the right to reject any of it, if it is defective and has even got the liberty to supply both the material and labour if the work is unsatisfactorily done. The risk of damage etc. is upon the contractor who under the agreement undertakes to statisfactorily execute and complete the work in strict accordance with plans, estimates and specifications and is subject to a penalty if he delays the completion of the work. The contractor is further prohibited from letting out the work on sub-contracts unless permitted in writing by the Engineer in charge. The sample agreement further deals with various matters which are not relevant for our purpose except clause 47 which is us under : 47. The Department is not responsible for the supply of any material except cement and steel for which permits will be arranged on receipt of requisition from the party.
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