LexM/S. INDIAN HUME PIPE CO. LTD. versus STATE OF RAJASTHAN & ORS.
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[2017] 7 S.C.R. 565 MIS. INDIAN HUME PIPE CO. LTD. v. STATE OF RAJASTHAN & ORS. (Civil Appeal No. 9879of2017) AUGUST28,2017 (A. K. SIKRI AND ASHOK BHUSHAN, JJ.( Rajasthan Sales Tax Act, 1954 - s. 7AA - Imposition of tax A B · and penalty under - Works contract in favour of assessee for pro- viding and laying pipes for water supply scheme - Excisability to C sales tax - Assessee seeking exemption ji·om tax - Rejection of, by the Assessing officer holding that the pipes manufactured and sup- plied by it fell within the definition of sale of goods and the con- tract was divisible in nature - Said order upheld by the appellate authority, Single Judge as well as Division Bench of the High Court - On appeal, held: Transfer of moveable property in a works con- D tract is deemed to be sale - Authorities below as also High Court rightly held that the agreement was clearly in two parts-sale and supply of pipes, jointing material specials, valves, anchor blocks, etc. and the remaining part being supply of labour and services - Approach of the High Court is accepted that when it is found on E facts that the works contract executed by assessee is a divisible contract, the submission of the assessee that it is to be treated as one single and composite contract is rejected - Further, assessee . admitted that it has no grievance against the finding that supply of pipes was sale of pipes involved in the execution of the· contracts, thus, was excisable to sales tax - Thus, judgment of the High Court F is upheld. Dismissing the appeals, the Court HELD: 1.1 The High Court concluded that as per the terms and conditions thereof, substantial part of the value of the contract pertained to the cost of PSC pipes, joining material specials, G valves, etc. which were manufactured by the assessee in its factory and were not supplied to the State Government. The High Court, thus, affirmed the findings of the authorities below on this aspect and concluded that the findings with regard to sale of pipes H 565 566 SUPREME COURT REPORTS [2017] 7 S.C.R. A involved in the works contract are findings of facts which did not require any interference. The said approach of the High Court that when it is found on facts that the works contract executed by. the assessee is a divisible contract, the submission of the assessee that it is to be treated as one single and composite B contract needs to be rejected, is concurred with. [Paras 15, 16) [571-D-F[ 1.2 By virtue of the Forty Sixth Amendment to the Constitution, a single and indivisible contract is now brought on par with a contract containing two separate agreements. The State Governments have power to levy sales tax on value of material C in execution of the works contract. This position is brought about by creating friction whereby the transfer of moveable property in D a works contract is deemed to be sale, even though it may not be···· well within the meaning of Sale of Goods Act. [Para 20) [576-D- EJ 1.3 In the instant case, the assessing authority, after scrutinising the agreem.ent in question between the assessee and the State Government, returned a finding of fact that manufacture and supply of PSC pipes, jointing material specials, valves, anchor blocks, etc. do not fall within the scopes of buildings, bridges, E dams, roads and canals. It was also held that the agreement was clearly in two parts, namely, sale and supply of PSC pipes, jointing material specials, valves, anchor blocks, etc. and the remaining part being supply of labour and services. These findings are upheld not only_ by the appellate authority but also by the Single Judge as well as the Division Bench of the High Court. The F assessee has, in fact, admitted that it had no grievance against the finding that supply of pipes was nothing but the sale of pipes involved in the execution of the contracts and, therefore, It was excisable to sales tax. Thus, there is no fault with the impugned judgment of the High Court. [Para 21[ [576-D-H; 577-A-CJ G State of Karnataka and Others v. Pro Lab and Others (2015) 8 SCC 557: [2015) l SCR 808; Larsen and Toubro Limited and Another v. State of Karna/aka and Another (2014) I SCC 708 - referred to. H Kone Elevator India Private Limited v. State of Tamil · .Nadu (2014) 7 SCC l - held inapplicable. MIS. INDIAN HUME PIPE CO. LTD. v. STATE OF 567 RAJASTHAN & ORS. Case Law Reference A c2014) 1 sec 1 [2015) 1 SCR 808
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