N.M. GOEL & CO versus SALES TAX OFFICER, RAJNANDGAON & ANR.

Citation: [1988] SUPP. 3 S.C.R. 657 · Decided: 28-10-1988 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Dismissed

Judgment (excerpt)

N.M. GOEL & CO. 
A 
v. 
SALES TAX OFFICER, RAJNANDGAON & ANR. 
OCTOBER 28, 1988 
[SABYASACHI MUKHARJI AND K. JAGANNATHA 
B 
SHETTY, JJ.] 
M.P. Sthaniya Kshetra Me Mal Ke Prevesh Par Kar Adhiniyam 
1976/ M.P. General Sales Tax Act-Sections 3, 6/Section 7-Entry taxi 
Purchase tax-Assessment of-Works contract-Materials supplied by 
P. W.D. and used in construction of building by assessee-Prices of C 
material deducted from the final bill of contractor-Whether sale of 
maferial-Assessee-Whether liable for entry tax/purchase tax. 
Section 3 of M.P. Sthaniya Kshetra Me Mal Ke Prevesh Par Kar 
Adhioiyam 1976 provides for levy of entry tax on the entry of goods 
specified in Schedule II for consumption, use and sale therein, and on 
D 
entry of goods specified in Schedule III for consumption or in the execu-
tion of work contracts bot not for sale. Section 6(c) provides that where 
a dealer purchases goods specified in Schedule II and Schedule III in a 
local area from a person or a dealer who is not a registered dealer, it is 
presumed, unless the contrary is proved by him, that the entry of such 
goods had been effected by him into such local area before they were 
E 
purchased by such dealer. Iron and steel are listed among other goods 
in Schedule II, and cement in Schedule III. Section 13 provides that 
certain provisions of the M.P. General Sales Tax Act apply mutatis 
mutandis to a dealer in respect of entry tax payable under the -
Adhinlyam. 
~ 
F 
c"tr 
The appellant-company, a building contractor and registered as a 
dealer under the Madhya Pradesh General Sales Tax Act, entered into a 
Works Contract with the P.W.D. for construction of foodgraios 
godowo and ancillary buildings. It was on item rate basis. In the tender 
submitted by the appellant, the prices of the materials to be used for 
construction including cost of iron, steel and cement were included. The G 
P. W .D. had agreed to supply from its stores the Iron, steel and cement 
for the construction work and to deduct the prices of materials so 
supplied and consumed In the said construction work from and out of 
the final bill of the appellant. Under clause 10 of the Works Contract, 
the contractor was 'bound to procure' certain materials of special 
·description, and in order to ensure that quality materials are procured, 
H 
657 
658 
SUPREME COURT REPORTS 
[1988] Supp. 3 S.C.R. 
A 
the PWD undertook to supply such material~ and stores from time to · 
time as required by the contractor to be used for the purpose of 
performing the contract. The value of such quantity of materials and 
stores· so supplied was specified at a rate and got set-off or deducted 
from any snm doe or to become due thereafter to the contractor. It also 
provided that all_ materials supplied to the contractor, remained the 
B 
absolute property of the Government and could not be removed on any 
account from the site of the work and were at all times open to inspec-
tion by the Engineer-in-charge. Any such materials remaining unused 
and in perfectly good condition at the time of completion or determina-
tion of the contract were to be returned to the Engineer-in-charge. Iron, 
steel and cement were supplied by the P.W.D., an unregistered dealer, 
to the appellant for the construction of work. 
c 
The Taxing authority assessed the appellant to purchase tax 
under s. 7(1) of the Madhya Pradesh General Salex Tax Act and also 
held it liable for payment of entry tax for iron, steel and cement, the 
entry for the same having been effected at the instance of the appellant 
D because It had ultimately used the materials for the construction work. 
The aforesaid assessment orders were affirmed by the Deputy Commis· 
sioner of Sales Tax by dismissing the revision petitions of the appellant. 
The appellant challenged the aforesaid assessment orders In a writ 
petition before the High Court, on the ground that the entry of 
E 
materials so supplied by the P.W.D. was effected by it and not by the 
appellant and that as these materials were used for construction of the 
building, there was no sale as such and consequently no entry tax could 
be levied. On behalf of the Taxing authorities-respondent, it was 
argued that since the appellant and purchased the iron, steel and 
cement from the PWD and not from the market as per the contract the 
F 
prices of. which had been deducted from its fmal bill, the entry of 
material could be presumed to have been made at the instance of the 
appellant wh

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