vil Appeals Nos
1671 87 of 1987
From the Judgment and order dated 2241987 of the Customs Excise and Gold Control Appellate Tribunal New Delhi in Appeal No 1546 1547 etc
in Order No 267 to 283 of 1987 B I MK Banerjee Solicitor General RP Srivastava and P Parmeswarn for the Appellants
Soli J Sorabji KK Patel Rajiv Dutta and RS Sodhi for the Respondents 
The Judgment of the Court was delivered by SABYASACHI MUKHARJI J
These are appeals from the decision of the Customs Excise  Gold Control Appellate Tribunal New Delhi hereinafter referred to as CEGAT  under Section 35Lb of the Central Excises  Salt Act 1944 hereinafter called the Act 
The respondent Calcutta Steel Industries filed revised classification lists wherein they had classified all rectangular products of thickness below 30 mm manufactured by them as bars covered by Tariff item 26AAia of the Central Excise Tariff
The Assistant Collector Central Excise was of the tentative view that rectangular products of thickness less than 30 mm and of width less than 75 mm conform to the definition of Hoops and merit classification under item ii of Tariff Item 26AA attracting effective rate of duty of Rs450 per MT less the PG NO 597 reduction provided for under Notification No 5580 dated 13th May 1980
The respondents were therefore called upon to show cause as to why the classification list should not be amended and duty charged accordingly
The respondents submitted their written statement and requested for a personal hearing
The matter came up for adjudication before the Assistant Collector Central Excise
He held inter alia that the type of Mills used for the manufacture was irrelevant
He relied on the definition of Hoops evolved in consultation with the Ministry of Steel and the Indian Standard Institution
The revised definition was as follows The finished product generally of cross section with edges of controlled contour and of thickness 30 mm and over width 400 mm and below and supplied in straight lenths
The product shall have rolled edges only square or slightly rounded
This group also includes flat bars with bulb that has swelling on one or two phases of the same edge under width of less than 400 mm
The Assistant Collector Central Excise on the basis of certain discussion in his order was of the view that rectangular products of thickness less than 30 mm and of width less than 75 mm were hoops and were correctly classified under sub item ii of Tariff item 26AA of the Central Excise Tariff and accordingly exigible to the appropriate duty
The revised classification list was accordingly modified and approved
The respondents preferred appeals to the Collector of Central Excise Appeals
The Collector considered the Indian Standard 1956 62 2nd reprint May 1975 which defined Hoops as follows 554 HOOP bailing hoop iron a Hot Rolled Flat Product rolled in rectangular section of thickness less than 30 mm and width less than 750 mm He held that according to the specifications the product in question sequarely fell within the above definition particularly when the description of the Tariff Items covered Hoops all sorts
The Appellate Collector also considered the definition of Hoop and Strips in the Brussels Tariff Nomenclature which described these as follows Hoop and Strip heading No 73
12 rolled products with sheared or unsheared edges of rectangular section of a thickness set exceeding 6 milli PG NO 598 metres of width not exceeding 500 millimetres and of such dimension that the thickness does not exceed one tenth of the width in straight strips coils or flattened coils He accordingly held that this definition showed that the edges of the product in question might be sheared or unsheared and the products might be in straight lengths or in coils
He also held that the nature or type of mill cannot by itself be the determining factor of the issue in dispute which has to be determined taking into account all relevant considerations viz the phraseology and the scope of the Tariff Entry the trade practice terminology well recognised standard national and international technical literature
In the result the Appellate Collector of Central Excise inter alia for the reasons stated above found no reason to interfere with the order of the Assistant Collector Central Excise which was accordingly upheld
The respondents preferred appeals to the Tribunal
The Tribunal allowed the appeals and held that the flat product of thickness less than 30 mm and a width of less than 75 mm is classifiable as bars as claimed by the respondents herein and not as hoops as held by the Assistant Collector Central Excise and upheld by the Appellate Collector of Central Excise
in allowing the appeals the Tribunal referred to US Steel Publications The shaping and treating of steel wherein it is stated as follows goods have been rolled in a bar mill and have not been subjected to the process mentioned by the book for producing hoops and that they were not meant for bailing or packaging which a hoop is meant for   The Tribunal in its order discussed various aspects of the matter
The Tribunal noted that the Collector had stated and what are the different categories
In US Steel Publication The Making Shaping and Treating of Steels edited by Herald E Mc
Gannon 9th Edition whom the Tribunal has described as an authority on the Steel and we presume he is there are some observations at page 808 under the heading Narrow Flat rolled products which are relevant
ThereHoops have been described as follows Hoop There are four general classification of this type of products 1
Tight cooperage hoop for barrels to hold liquid
PG NO 599 2
Slack barrell hoop for barrels to hold dry products
Tobacco barrel hogshead hoop and 4
Special hoop for special packages
 It has further to be noted that hoop is made either by slitting coiled strip rolled in multiple width into narrow coiled strip of the desired width or from narrow coiled strip with a not rolled or mill edge and the type and width of hoop being produced influences the choice of the method used
It further appears that the method of the products in question is not one of the methods listed in this authoritative work for hoops
The so called hoops were not produced by slitting coiled strip nor rolled from narrow coiled strip with hot rolled or mill edge
The article as has been noted says that hoop is produced as  curled hoop  or a straight length 
Curled hoop is made by a pinchroll and curved guide shoe arrangement that permits the hoop to take a circular form
A straight length hoop is produced merely by removing the curved guide shoe
The Tribunal was conscious that the goods in question were neither curled hoops nor straight length
In those circumstances it was necessary to understand clearly that the straight length used in this book is not the straight length understood by the department which seems to think that any short straight length is the straight length signified by the term for these products
It is nothing of the kind as can be seen from the above passage quoted from the authority
Straight length is not a short length it is long
The means of producing the goods is completely different from what is generally written
The Tribunal was justified in holding that it is not possible to agree with the department that the manner of production of the goods can be taken into account
It has also to be borne in mind that the very nature of the mill was a criteria to decide the nature of the product manufactured
Further however taking into account the nature and type of the mill cannot itself be the determining factor in the issue in dispute
The Tribunal also took into account that these are produced in a mill which cannot produce hoops or strips
The Tribunal found the fact that they were produced in a mill that could produce hoops and strips
Their lengths are not such as to place them in the same class as hoops
Having therefore regard to this and the relevant tariff item the Tribunal came to the conclusion that it will be more appropriate to assess them PG NO 600 under item 26AAia than under Item 26AAii
The Tribunal has considered all the relevant facts
There was no misdirection on the facts
All proper and relevant materials relevant for the determination of the question before the Tribunal have been applied to
Reliance was placed on certain observations of this Court in South Bihar Sugar Mills Ltd vs Union of India  Ors  There this Court was dealing with Item 14A and the appellants  manufacturing mixture of gases containing carbon dioxide by burning lime stone with coke in using only the carbon dioxide from the mixture for refining sugarcane juice and for producing soda ash by solvay ammonia soda process Whether the mixture of gases was kiln gas or compressed carbon dioxide covered by Item 14 H in Schedule I to the Act
It was held by this Court that the gas generated by the appellant companies was kiln gas and not carbon as known to the trade ie to those who deal in it or who use it
The kiln gas in question therefore is neither carbon dioxide nor compressed carbon dioxide known as such to the commercial community and therefore cannot attract Item 14 H in the First Schedule
It was held that it was incorrect to say that because the sugar manufacturer wants carbon dioxide for carbonisation purposes and sets up a kiln for it that he produces carbon dioxide and not kiln gas
In fact what he produces is a mixture known both to trade and science as kiln gas one of the constituents of which is no doubt carbon dioxide
The kiln gas which is generated in these cases is admittedly never liquified nor solidified and is therefore neither liquified nor solidified carbon dioxide assuming that it can be termed carbon dioxide
It cannot be called compressed carbon dioxide as understood in the market among those who deal in compressed carbon dioxide
If the Revenue wants to tax a particular goods known as such then the onus is on the Revenue
That they have failed
The Tribunal has analysed all the aspects
In appeal we have to see the propriety and the correctness of adjudication
Having examined the aspects from all angles we find that there was no misdirection in law nor any non consideration of facts
There is no exclusion from consideration of legitimate and proper materials
In the premises we have also examined the ultimate conclusion of the Tribunal
That conclusion appeals to us
It follows irresistibly from the other premises as indicated hereinbefore
In the premises the appeals fail and are accordingly dismissed
SKA Appeals dismissed


Summary:
Section 3 of MP Sthaniya Kshetra Me Mal Ke Prevesh Par Kar Adhiniyam 1976 provides for levy of entry tax on the entry of goods specified in Schedule Il for consumption use and sale therein and on entry of goods specified in Schedule III for consumption or in the execution of work contracts but not for sale
Section 6c 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 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 MP General Sales Tax Act apply mutatis mutandis to a dealer in respect of entry tax payable under the Adhiniyam
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 PWD for construction of foodgrains godown 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 PWD 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 the PWD undertook to PG NO 657 PG NO 658 supply such materials 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 sum due or to become due thereafter to the contractor
It also provided that all materials supplied to the contractor remained the 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 inspection by the Engineer in charge
Any such materials remaining unused and in perfectly good condition at the time of completion or determination of the contract were to be returned to the Engineer in charge
Iron steel and cement were supplied by the PWD an unregistered dealer to the appellant for the construction of work
The Taxing authority assessed the appellant to purchase tax under section 71 of the Madhya Pradesh General Sales 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 because it had ultimately used the materials for the construction work
The aforesaid assessment orders were affirmed by the Deputy Commissioner 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 materials so supplied by the PWD 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 prices of which had been deducted from its final bill the entry of material could be presumed to have been made at the instance of the appellant who had ultimately used the materials for the construction work and since these materials were purchased from the unregistered dealer ie the PWD the appellant was liable for payment of purchase tax and entry tax
The Full Bench of the High Court which disposed of the writ petition found that there was sale  and that the tax was leviable
In the appeal by special leave by the assessee to this Court on the question whether there was sale and whether the property in the goods had passed to the appellant or continued to remain with the PWD although the PWD had in the final bill debited the prices of the goods so supplied to the appellant under clause 10 of the contract PG NO 659 Dismissing the appeal this Court HELD 11
Whether a contract for service or for execution of work involved a taxable sale of goods must be decided on the facts and circumstances of each case
The burden in such a case lay upon the taxing authorities to show that there was a taxable sale and that burden was not discharged by merely showing that property in the goods which belonged to the party performing service or executing the contract stood transferred to the other party
664G H 12 Even in a contract purely of work or service it is possible that articles may have to be used by the person executing the work and property in such articles or materials may pass to the other party
That would not necessarily convert the contract into one of sale of those materials
In every case the court has to find out the primary object of the transaction and the intention of the parties while entering into it
667F G 13 In order to be sale taxable to duty  not only the property in the goods should pass from the contractor to the Government or the appellant in the instant case but there should be an independent contract separate and distinct apart from mere passing of the property where a party purchases or procures goods from the Government
Mere passing of property from the contractor to the Government would not suffice
There must be sale of goods
The primary object of the Bargain judged in its entirety must be viewed
668B C 14 In the instant case by use or consumption of materials in the work of construction there was passing of the property in the goods to the Assessee from the PWD
By appropriation and by the agreement there was a sale as envisaged in terms of clause l0 of the contract and consequently such sale was liable to tax
669A B The Government of Andhra Pradesh vs Guntur Tobaccos Ltd 16 STC 240 Hindustan Steel Ltd vs The State of Orissa 25 STC 211 The State of Himachal Pradesh  Ors
vs Associated Hotels of India Ltd 29 STC 474 relied on
Brij Bhushan Lal Parduman Kumar etc
vs Commissioner of Income Tax Haryana Himachal Pradesh and New Delhi III  referred to
PG NO 660 Construction Company Changanacherry  Anr
vs State of Kerala 36 STC 320 Cementation Patel Durgapur vs Commissioner of Commercial Taxes West Bengal Calcutta 47 STC 385 distinguished