P.K.LOHRA, J. - (1.) Petitioners have preferred this writ petition challenging the impugned judgment and order dated 24th of September 1998 passed by the Rajasthan Taxation Tribunal, Bench at Jodhpur (for short, 'the Tribunal'). The learned Tribunal, after examining the matter in its entirety, has found that there was no transfer of property in the goods from respondent-assessee to M/s. Larsen and Toubro (for short, 'L and T'), the contractor, and it had not received valuable consideration so as to constitute a sale. With this categorical finding, the learned Tribunal while allowing the petition of the respondent-assessee has quashed the notice dated 24th of May 1990 and subsequent notices and proceedings under Section 12 of the Rajasthan Sales Tax Act, 1954.
(2.) The facts, necessary and germane to the matter, are that at the threshold the second respondent issued an order dated 18th January 1984 in the name of L and T, which was in substance an agreement between both the parties as it was signed by the Managing Director of second respondent and by the authorised representative of L and T. In terms of the agreement, the second respondent has placed an order of drawing/specifications for supply of certain machineries and the said agreement was inclusive of certain headings like price, scope of supply, delivery, and terms of payment, performance guarantee and giving formal agreement. The order/agreement dated 18th of January 1984 was followed by yet another agreement dated 21st of June 1987 between both the parties. The agreement dated 21st of June 1987 envisaged a specific condition with emphasis about supply of machineries by the second respondent to L and T, which according to petitioner revenue was transaction of sale by the second respondent and purchase by L and T from second respondent. For substantiating the assertion that the transaction as such amounts to sale, debit advice of different dates and denominations, four in number, were relied upon by the petitioners. Highlighting the recitals contained in the debit advices, the petitioners have pleaded in the writ petition that it contains valuation of the supplied machineries by the second respondent to L and T indicating that the aforesaid supplies were for valuation and consideration to bring it within the ambit of sale by second respondent to L and T. While admitting the fact that the earlier assessment was made for the Assessment Year 1985-86, without construing this sort of arrangement as a sale, it is submitted by the petitioner revenue that this vital fact escaped the attention of the Assessing Authority at the time of making regular assessment which has resulted in not taxing the said sales under the provisions of the Rajasthan Sales Tax Act. Subsequent to that, the Commercial Taxes Department made inspection of the premises of second respondent on 21st of May 1990 and during inspection it was revealed that it is involved in tax evasion and has managed to conceal sale transactions by resorting to methodology of debit vouchers/advices. As per the petitioners, during inspection, some discrepancies were also noticed in the dealings of second respondent and the said L and T and as a consequence thereof a detailed report on 21st of May 1990 was prepared. Taking note of the report and on noticing illegality by the Assessee and its attempt to evade tax, the second petitioner issued a show cause notice dated 24th of May 1990 for reopening assessment of the said Assessment Year 1985-86 under Section 12 of the Rajasthan Sales Tax Act. In the show cause notice, the alleged amount which escaped from imposition of tax was also incorporated. Pursuant to the show cause notice, reply was submitted by the second respondent but the same was not found to be satisfactory. In this view of the matter, a final show cause notice was issued on 3rd of April 1991 for imposition of tax for aforesaid transactions but even in adherence of the second show cause notice the assesses has not made sincere endeavour to satisfy the Assessing Authority about the alleged dubious transactions of sale. Being aggrieved from the second show cause notice dated 3rd of April 1991, a writ petition was preferred by the Assessee before this Court which was registered as S.B. Civil Writ Petition No. 2023 of 1991 and subsequently the same was transferred to the Tribunal on enactment of Rajasthan Taxation Tribunal Act 1995 (since repealed). The learned Tribunal, after completion of the pleadings of rival parties, allowed the petition by impugned judgment and order.
(3.) The writ petition is contested by the respondent-assessee and a reply to the same was submitted. At the outset, in the return a preliminary objection was raised about delay and laches by making averment that the petition has been filed against the impugned judgment and order after a lapse of three years. Joining the issue with the petitioners, the second respondent has emphatically denied that it has agreed under agreement or it placed any order for supply of "B" category items to L and T as asserted by the petitioners. To substantiate this positive assertion, agreement/order dated 21st of June 1987 was also placed on record. The second respondent, while placing reliance on the materials available on record, has submitted that the company was granted additional licence for setting up of a new cement plant at Chittorgarh and accordingly the new unit, namely Chittorgarh Cement Works was set up. To implement the project, the company placed order to L and T on 18.01.1984, which was accepted and in furtherance and continuance of the said order an agreement was entered into between both the companies on 21st of June 1987. Referring to the terms of the contract, it was averred in the reply that for setting up of a new cement plant the assesses company has agreed to buy machinery and equipments and the L and T agreed to sale and supply of the machinery and equipments. In terms of the agreement, machines and equipments were to be procured and supplied by L and T to the assessee company by import, or by indigenous procurement. In the agreement, this part of the contract has been referred as "L and T supply" with its total value as 710.14 lacs. As per reply, apart from L and T supply, the contract also envisage procurement, erection and installation of machinery etc and equipment indigenously by Chittor Cement Works referred to in contract as "Chittor Cements Scope of Supply" in terms of specifications, drawings and supervision provided under the contract of L and T to the assessee-company as a sub-contractor of L and T. On the part of the contract, the L and T were entitled to be paid by Chittor Cement Works service charges at the rate of 20% of the invoice value raised by the L and T of the items within "Chittor Cement Scope of supply, providing drawings and designs and towards supervision charges" and those items were mentioned as "B" category items listed in Annexure "C" to the contract. It is further stated in the reply that delivery of such "B" category items which were to be procured, erected, fabricated and installed by the Chittor Cement Works were purchased by the respondent-assessee on payment of CST under the Central Sales Tax Act against the declaration in Form "C" during the course of inter-State trade or locally after paying RST under the Rajasthan Sales Tax Act. Likewise, excise duty in relation thereto wherever applicable was also to be borne by the company. Thus, according to the respondent-assessee, these items purchased by the petitioner company were tax paid. Emphasising the role of L and T in relation to this part of the contract, it was submitted in the reply that it was only confined to furnishing of designs, drawings and conducting inspection/supervision with respect to aforesaid "B" category items and for that L and T was paid service charges @ 20% of the invoice value raised by L and T. Referring to the debit advices, the assessee-company has submitted that the same were issued on the basis of the value of items, wherein it was specifically made clear that the items have been directly arranged by the company in terms of contract and these debit advices were issued on the basis of invoices issued by L and T which only required payment @20% of the invoice value. Asserting the precise object of debit advices, it was averred in the reply that value of items shown therein was only for accounting purposes. Further elaborating in the reply, the respondent-assessee has submitted that entire cost of purchase of material including sales tax etc. as well as the cost of fabrication, erection, installation etc. were incurred by the assessee-company and further service charges were also paid to L and T by the assessee-company on the basis of invoices. By tendering all these explanations, the respondent-assessee has asserted that there was no question of sale of these items by the assessee-company to L and T and its repurchase by the company from L and T. Asserting with full emphasis that there was no transfer of property in these items from assessee-company to L and T at any point of time and these items continued to remain vested in the company at all the times is sufficient to repudiate the transaction of sale. Adverting to the fact that neither any consideration was paid by L and T, nor it is received by the assessee-company for the said items, it is stated that the said transaction cannot be construed as sale for all purposes. According to the assessee, they were direct tax paid purchases by the assessee-company, and in terms of the contract service charges in relation to drawing, designs and supervision of these items were also paid to L and T by the company. In the return, the respondent-assessee has submitted that regular assessment for the year 1985-86 was completed on 09.01.1989 after due application of mind, examination of the books of account and record, and as such there is no question of any escapement and/or evasion of tax. Refuting the allegation that the assessee-company has made an attempt to conceal these transactions, the assessee has also submitted that even the purported inspection report dated 21st of May 1990 also nowhere states that any concealment of transaction or evasion of tax was by the respondent-assessee. Joining the issue with the petitioners, the respondent-assessee has submitted that initiation of re-assessment proceedings was absolutely void, illegal and without jurisdiction. The assessee has once again reiterated with full emphasis that there was no question of any sale much less sale amounting to Rs. 1,73,06,010 which escaped assessment. With all these submissions, the respondents have stoutly defended the impugned judgment and order passed by the learned Tribunal, and submitted that no interference with the impugned judgment and order is warranted.;