Ballasts or boulders or chips are mineral for Sales Tax levy: Orissa HC

By Editor Goods and Services Tax Judiciary March 1, 2017

TaxGuru Citation: 2017 taxguru.in 214
Case Name: State of Orissa Vs M/s. D. K. Construction (Orissa High Court,)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Courts: All High Courts, Orissa High Court

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Ballasts or boulders or chips being mineral as per Entry 117 of the taxable list are exigible to tax at the rate of 4% of taxable list. Moreover, the appeal has been purportedly filed before the Tribunal with proper perspective and there is no defect in raising any such plea before it. It has already been observed that rightly the Tribunal has excluded the loading charges from the computation of the sales tax in STREV No.101 of 2011. Thus, the findings of the Tribunal in all the second appeals are correct and legal and we confirm the said orders of the Tribunal.

Full Text of the High Court Judgment is as follows :-

Dr. D.P.Choudhury, J. Challenge has been made in all these revisions to the order of the Orissa Sales Tax Tribunal (hereinafter called “the Tribunal”) for reversing the concurrent order passed by the First Appellate Authority and the Assessing Officer under the provision of Section 12(4) of the Orissa Sales Tax Act, 1947 (hereinafter called “the Act”) read with Orissa Sales Tax Rules, 1947 (hereafter called “the Rules”). Since common question of law arose in all these revisions, they are being disposed of by this common judgment.

FACTS

2. The factual matrix leading to filing of STREV No.101 of 2011 is that the opposite party is the assessee and it has entered into an agreement with the South Eastern Railway for supply of machine crushed track ballast for laying the same on both the sides of railway track in different locations as per the tender call notice. The tender schedule specifies loading of ballast into any type of railway wagon/hopper with contractor’s own arrangements including all lead lift crossing of railway line as per the direction of the Engineer-in-charge of the work.

3. During the assessment year 2001-2002, the Assessing Officer demanded under Section 12(4) of the Act for Rs.36,15,448/- on 31.3.2003. The Assessing Officer has treated the entire receipt by the opposite party to be sale of chattel qua chattel and made the same exigible to tax at the rate of 12% of the taxable list. Challenging the assessment order, the opposite party preferred First Appeal before the concerned Assistant Commissioner of Sales Tax on the ground that the supply of machine crushed track ballast would come within the fold of works contract and accordingly claimed 85% deduction towards labour and service charges and the rest was claimed to be taxed at the rate of 8% as tax under works contract. The First Appellate Authority disposed of the First Appeal keeping in view the order of this Court passed in P.K.Satapathy –V- State of Orissa, reported in (1999) 116 STC 494 (Ori) with the observation that the scope of contract, being supply of machine crushed ballasts, would be liable to be exigible to tax at the rate of 12%. So, the First Appellate Authority confirmed the order of the Assessing Officer.

4. Against the order passed by the First Appellate Authority, the opposite party carried Second Appeal before the Tribunal in the year 2005-2006. The State did not file any cross-objection before the Tribunal as the order of the Assessing Officer has been confirmed by the First Appellate Authority. The Tribunal, after hearing both the parties, allowed the Second Appeal preferred by the opposite party by holding that supply of ballast to the Railway in question is sale falling within the scope of Section 2(g) of the Act and “ballast” supplied to the Railway falls within the ambit of “mineral” for which it is exigible to tax at the rate of 4% as per Entry 117 of the taxable list by not agreeing to make same exigible at the rate of 12% under Entry 189 of the taxable list. Challenging such order of the Tribunal, the State-petitioner has preferred revisions on various grounds.

5. Likewise in STREV Nos.41, 98, 131 and 132 of 2011 and STREV Nos.49 and 50 of 2013, opposite parties-assessees in different years of assessment have supplied ballasts and delivered ballasts to E.Railway and accordingly, the Assessing Authority and First Appellate Authority made the sale of those materials of these assessees exigible to tax at the rate of 12% whereas the Tribunal decided the same exigible to at the rate of 4% of taxable list.

6. Similarly, in STREV No.458 of 2008, STREV Nos.37, 38, 41, 42, 43 and 44 of 2010, STREV Nos.42, 80, 83, 84 and 95 of 2011 and STREV No.47 of 2013, the opposite parties-assessees have purchased the ballast and after crushing the same, made boulders and chips and accordingly they are engaged in selling those products to different But the Assessing Authority demanded sales tax by taking such materials exigible to tax at the rate of 12% of taxable list and the First Appellate Authority also confirmed such order of the Assessing Authority. Again on the intervention in the Second Appeals, the Tribunal decided said material as “minor mineral”, being exigible to tax at the rate of 4% in the taxable list.

7. SUBMISSIONS

Mr.R.P.Kar, learned Standing Counsel for the Revenue in all the revisions submitted that the Tribunal has committed gross irregularity by reversing the concurrent finding and conclusion arrived at by both First Appellate Authority as well as the Assessing Authority by erroneously deciding the question of law as borne out from the facts available on record. The Tribunal committed allowing deduction of amount received by the opposite parties in respect of loading of the supplied ballasts from the gross receipts because without analyzing the convenants of contracts, the Tribunal jumped to the conclusion on the basis of schedule of rates and fact that the loading charges of supplied ballasts into Railway wagons would be deducted from assessment under the Act as the same is purely labour work. The Tribunal ought to have considered all clauses of the contract. The Tribunal, being the final fact finding authority, should have taken into consideration the relevant statutory provisions along with the convenants of the contract in order to independently arrive at the conclusion whether the loading charges would form part of the consideration so that the sales tax could be levied on taxable turnover.

8. Kar, learned Standing Counsel for the Revenue further submitted that the Tribunal erred by considering the claim of the opposite parties that the ballast supplied by it to the Railway is “mineral” which is exigible to tax at the rate of 4% as per Entry 117 of the taxable list because the Tribunal has transgressed its jurisdiction and authority by deciding the facts which has never before any of the authorities below raised. The Tribunal should not have considered such plea of the opposite parties as the Department was not given any chance to lead evidence in the forums. Thus, the Tribunal has violated the principles of natural justice by deciding such issue. According to him, when the intention of both the parties was to treat the goods in question as “ballast” qua “ballast” which being separate, distinctly identifiable commodity having marketability and not as “minerals”, the opposite parties-assessees cannot claim the same to be falling within the scope of Entry 117 of the taxable list, but it being not in any other list, could have been chargeable to tax at the rate of 12% of the taxable list as there was no contract between the parties to buy and sell the goods as minerals, but “ballast” simpliciter. The Tribunal has traversed its jurisdiction by holding that ballasts are minerals. He further submitted that the Tribunal went wrong to conclude that ballast obtained from spalls would be minerals inasmuch as the basis of such conclusion being the definitions contained in the Mines and Minerals (Regulation and Development) Act, 1957 (hereinafter called as “the Act, 1957”) and the Orissa Minor Mineral Concession Rules, 2004 (in short “the Rules, 2004”). The Tribunal erred in law by taking the aid of definition contained in another statute which has no nexus with the Act.

9. Mr.Kar, learned Standing Counsel for the Revenue submitted that since the ballast in no way is connected with the minerals but it is a specific material in the process as known to the commercial world, the same has been wrongly interpreted by the Tribunal being exigible to tax at the rate of 4% of the taxable list. Further, the Tribunal has erred in law by admitting the Second Appeal which has been filed beyond the period of limitation contemplated under Section 23 of the Act. The Tribunal has also acted with material irregularity by coming to the wrong conclusion without proper independent application of mind for which the same should be quashed and the order passed by the First Appellate Authority and Assessing Officer should be restored.

10. Per contra, Mr.Damodar Pati, learned counsel for the opposite party submitted that the order of the Tribunal is legal and correct because the agreement between the parties is to supply and delivery in stacks of machine crushed track ballast and laying the same into both sides of track in different locations and the opposite party has received the gross bill, which has been treated as contract for sale as against works contract as per agreement for which the works contract tax has been deducted at source by the Railways. He further contended that the “ballast” being the material and the same having been deduced from the quarry which is made out of minerals, the ballast qua ballast is a mineral, the same has been specifically exigible under the Entry 117 of taxable list. As the ballast is deducible like boulder and other material from the quarry by using the dynamite and specifically processed through machine or by manual work, the same is rightly observed by the Tribunal to be classified as minerals being exigible to tax at the rate of 4% of taxable list.

11. Mr. Pati, learned counsel for the opposite parties submitted that the Tribunal, in its Full Bench, has considered that the opposite parties have supplied ballast made out of spall to the Railways and the ballast being the material used as to the bed of a road or a Railways with specific size, the same cannot be a stone as pointed out by the State. The Tribunal, after analyzing in detail under the Act, 1957, has rightly held that the ballast or boulder or chips are minerals and the Tribunal has also considered the dictionary meaning of such mineral which is a solid homogenous crystalline chemicals element or compound that results from inorganic process of nature and it has a characterstic crystal structure, chemicals composition and rational or composition.

12. Mr. Pati, learned counsel for the opposite party further contended that since ballasts or boulder or chips are prepared from quarry and ballasts being crushed to prepare size ballast and then supplies to Railways, the same being “minor mineral” as defined in Section 2(jj) of the Mines Act, 1952 read with Section 3(a) of the Act, 1957, the Tribunal justified in charging the ballast or boulder or chips exigible to tax at the rate of 4% of the taxable list. He further submitted that the Tribunal, being the second appellate authority, has got powers to decide the facts and law for which there is no bar for the Department to adduce evidence when plea of the opposite party was raised before it that the material, i.e, ballast or boulder or chips is exigible to tax at the rate of 4% of the taxable list but not at the rate of 12% of tax list. According to him, the plea of the State that the arguments advanced by the opposite party for the first time as to the plea that the ballast as mineral is a misnomer and there is no bar for the State to produce evidence contrary to the plea taken by the opposite parties. On the other hand, whether ballast or its different size is exigible to 12% tax or 4% being a question of law can be raised at any stage before any forum. Be that as it may, according to the learned counsel for the opposite parties that the contention of the learned counsel for the petitioner would not stand in the eye of law on this score. He further submitted that the appeal has been admitted by the Tribunal being filed within time and contention of learned Standing Counsel for the Revenue is untenable. So, he supported the impugned judgment of the Tribunal and prayed for a direction to implement the judgment by the State.

13. POINTS FOR DETERMINATION

After going through the contentions of both the parties, it appears that the question of law has not been formulated but the same is being formulated now for discussion as the revisions can be allowed on the question of law raised. So, in these revisions, the questions of law are formulated as under:

“(1) Whether the ballast or boulder or chips is exigible to tax at the rate of 4% or 12% of the taxable list?

(2) Whether such fresh plea can be raised in the second appeal without the same being raised in the forums below.”

14. DISCUSSIONS
Point No.(1)

It is not in dispute that the opposite party in STREV No.101 of 2011 is an assessee having undertaken the work of supplying, delivering, stacking and loading of one lakh Cum of machine crushed track ballast to Railways. It is also not in dispute that there was an agreement between the opposite parties and the S.E.Railways for supply and delivery in stacks of machine crushed track ballast and laying the same into both side of track in different locations at Balangir Depot including all costs of materials, loading, unloading, handling, transportation including crossing of Railway lines, if required and royalty, octroi, sales taxes, cess charges and any taxes imposed by the Central/State Government and local bodies on one lakh Cum of loading of ballast supplied into any type of Railway wagons/hoppers with contractor’s own loading arrangements including all lead lift cross of Railway lines. Similarly, it is not in dispute that the opposite party in other revisions have been dealing with ballast or boulder of chips by selling the same to Railway and other private parties.

15. On going through the assessment order, it appears that the Assessing Authority has gone through the deed of agreement executed between the parties and come to a conclusion that the payment received by the dealer is inclusive of charges like cost of materials, loading, unloading, handling, transportation charges, royalty, octroi, sale taxes, cess charges and any other taxes to be imposed by different authorities from time to time and the dealer has not been given any charge/responsibility of spreading machine-crushed track ballast in any place under the S.E.Railway. Accordingly, the Assessing Officer held that the delivery of ballast is purely a sale and not a works contract as pleaded by the petitioner. The Assessing Officer has also found that there was no evidence adduced by the opposite parties to show that there was a express stipulation between the parties that freight and other charges were to be borne by the purchaser and since the opposite party has got received the gross payment which is inclusive of all cost of materials, loading, unloading and transporting including crossing of Railway line, he considered the same amount to be entire sale which is liable to be taxed at the rate of 12% of the taxable list. In other revision cases, the Assessing Authority has taken the rates by assessing of boulder, chips and ballasts and made them exigible to tax at the rate of 12% of the taxable list.

16. The First Appellate Authority in STREV No.101/2011, after hearing both parties, came to the conclusion that the contract between the parties should be interpreted whether it is a sale of good or for work or labour basically. According to him, to constitute sale, there must be an agreement express or implied relating to sale of goods and completion of the agreement by passing of title in the very goods contracted to be sold. He has referred to the tender schedule, which is reproduced as under:

“SOUTH EASTERN RAILWAY

TENDER SCHEDULE

SCHEDULE OF RATES AND QUANTITIES

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(East No.(1)33/SBP/97), (2) 34/SBP/97 (3) 35/SBP/96 (4) 34/SBP/96 (5)