JUDGMENT [ENTITY], J.
1. As common issue is involved in all these matters, they were heard and disposed of by this common judgment for the sake of convenience.
2. The tax revision cases are filed for the assessment years 1989-90 to 1991-92 and the writ petitions are filed for the assessment years 1993-94 and 1994-95. In the T.R.C.s the petitioner/dealer is seeking the relief of exclusion of a part of the turnover relating to charges incurred towards the seigniorage, metal breaking, loading and unloading and transport of metal used for the laying of the road, while in the writ petitions the petitioner/dealer is seeking to quash the assessment orders in respect of the disputed turnover relating to the abovementioned items.
3. The brief facts of the case are as under :
The petitioner-contractor is a registered dealer on the file of the Commercial Tax Officer, Khairatabad Circle, Hyderabad. During the relevant years in question the petitioner had executed certain works under agreements entered with the R & B Department of the State Government. Hence, it could be ascertained from the material on record, though the copy of the agreement is not filed, the petitioner was under an obligation to extract boulders at the specified quarries by the contractor and convert the boulders into the required sizes of the metal for the purpose of laying the road. The same has to be loaded at the place of conversion of the boulders into metal and has to be transported and unloaded at the place of laying the road. In respect of the boulders extracted by the petitioner/dealer on the specified quarries, the petitioner was liable to pay seigniorage fee and the same was deducted out of the amounts payable to the petitioner. For the assessment years in question, the assessee filed returns excluding the above extent from the total turnover. Though for the first three assessment years 1989-90 to 1991-92, the Commercial Tax Officer framed the assessments accepting the claim, subsequently those assessments were revised by the Deputy Commissioner and the turnover relating to the above amounts were brought to tax. In so far as the later two assessment years are concerned, the assessments were framed including the amounts relating to the above items as part of the turnover of the petitioner/dealer and subjected to tax. The assessee carried the matter in appeal before the Sales Tax Appellate Tribunal for the first three assessment years unsuccessfully and hence the present revisions.
In so far as the other two years are concerned, as the Tribunal has also taken a decision in respect of the same issue, straightaway writ petitions were filed praying for quashing of the assessments relating to the inclusion of the turnover relating to the above disputed items.
4. The learned counsel for the petitioner contended that the Roads and Buildings Department has identified certain quarries wherefrom metal is to be obtained for the use in the road laying work entrusted to the petitioner during the relevant assessment years. The amount of seigniorage fee payable by the petitioner was already collected by the department by deducting from the running bills submitted by the petitioner. The metal that was extracted was used for laying the road for the R&B Department. The ownership in the goods continued to be with the R&B Department and the petitioner was never become the owner of the metal obtained from the quarries and therefore there was no transfer of property involved in the activity. The above items of expenditure cannot be included in the turnover and subjected to tax. The learned counsel also contended that the seigniorage fee paid by the petitioner cannot be considered as a sale price as there was no sale involved when the petitioner was permitted to extract the boulders, which was ultimately meant for utilisation in the laying of the road for the same department.
The learned counsel strongly relied upon a larger Bench decision of the apex Court in the case of [PRECEDENT]. Relying upon the above decision, it is contended that though the apex Court on an earlier occasion in the case of [PRECEDENT], held that a lease in favour of the respondent-paper mill would amounts to a sale, the larger Bench of the apex Court held that the decision rendered in the case of Orient Paper Mills Ltd. , per incurium. Therefore, in the light of the decision of the later larger Bench, even assuming that there was a lease under which the petitioner was permitted to extract the boulders for which seigniorage fee was collected, the same does not amount to sale and the department continued to be its owner and there was no property in goods passed on to the petitioner/contractor. Hence, there is no sale while executing the works contract by the contractor. The learned counsel also contended that though in a later decision the apex Court, in the case of [PRECEDENT] held that the royalty paid by the contractor to Forest Department of Government for boulders, earth, etc., used in works contract is part of the contractual transfer price, still in view of the larger Bench decision of the apex Court, which is binding on this Court, this Court has to follow the ratio laid down by the larger Bench of the apex Court and if so the contention of the petitioner is liable to be accepted. The learned counsel also contended that in the case of [PRECEDENT] this Court the considered similar leases for obtaining timber from the forest and held that there is no sale under the lease agreements. Therefore, it is contended that as there was no sale of the metal effected in favour of the petitioner/contractor, there is no transfer of property in goods and consequently the turnover relating to the same could not be subjected to tax, as it would be taxable only when there is a transfer of property in the goods.
5. The learned Government Pleader, on the other hand, supported the orders of the Sales Tax Appellate Tribunal stating that the Tribunal has rightly rejected the contention of the petitioner/dealer. It is stated that the petitioner in accordance with the terms of the contract has to extract the boulders from the identified quarries and convert the boulders into the metal of required sizes. The same has to be transported to the place of work and has to be used for laying the road. The extraction of the boulders, conversion of the same into required sizes of the metal and the transportation of the same is part of the terms of the contract and it is part of the work to be executed by the contractor and the contract is not mere laying the road alone. Obtaining of the metal in the above form is part of the terms of the contract ; the expenditure incurred for obtaining such metal would go into as part of the turnover of the work and would be subjected to tax, as there was a transfer of property in goods at the time of incorporation of the metal into the work. The learned counsel contended that the judgments relied upon by the learned counsel for the petitioner are not at all relevant for the purpose of deciding the issue in question. The learned counsel contended that the moment the petitioner is permitted to extract the boulders on payment of seigniorage fee, the petitioner would become the owner of the same. As required under the terms of the contract, he has to convert the boulders into the metal of required sizes and has to be used for completing the laying of the road. Though the petitioner is not free from using the metal that was extracted from the identified mines as his own, still in a limited sense the petitioner is the owner of the metal and its ownership passes on while incorporating the same into the works contract. Therefore, it is contented that there is no merit in the petitioner's contention for exclusion of the disputed turnover from liability to tax under the provisions of the [ACT].
6. From the above rival contentions, the dispute that arises for consideration is "whether the expenditures incurred towards the metal breaking charges, loading and unloading and transport charges are not to be included as part of the turnover under the provisions of the [ACT]".
7. The simple contention of the petitioner is that as the contractee-supplier continues to be the owner of the metal, the turnover relating to the above items could not be included as part of the turnover liable to tax. Strong reliance was placed on the decision of the larger Bench of the apex Court in the case of [PRECEDENT]. In the case of [PRECEDENT], the apex Court held that royalty was a feudalistic euphemism for the price of the timber that was extracted in terms of the lease granted by the State of Madhya Pradesh in favour of the Orient Paper Mills Ltd. The said decision was held per incurium in the later decision of the apex Court in the case of [PRECEDENT]. The apex Court in that case was dealing with the two appeals filed by the State of Orissa. The Government of Orissa issued two notifications under the provisions of the [ACT] and made bamboos agreed to be severed and standing trees agreed to be severed are liable to tax on the turnover of purchase with effect from June 1, 1977. As many as 209 writ petitions are filed under [SECTION] of the [ACT] before the Orissa High Court challenging the validity of the above notifications. The High Court allowed the writ petitions and quashed the impugned provisions. Hence the appeals before the apex Court. The apex Court, though allowed the appeals upholding the constitutional validity of the above two notifications, but, however, held that the impugned provisions cannot have any application to the cases of the respondents therein, as there was no transfer of property in goods under the agreement of leases. Relying upon the said judgment, the learned counsel for the petitioner in the present case contended that as there was no transfer of property in goods, as the title continued to be with the department, the disputed turnover is not liable to tax. But the apex Court, subsequently, in the case of [PRECEDENT], considered almost identical issue as on hand before this Court. There also the petitioners were contractors. As per the terms royalty was paid by the contractors to the Forest Department of the Government for boulders, earth, etc., used in works contract and this was held as part of the contractual transfer price. Before the apex Court specific contention was raised in the following terms :
"The second contention put forward by the learned counsel was that the value of the stores and materials supplied by the contractee to the contractor for the specific purpose of use in the execution of works contract should not be included in the 'contractual transfer price' under [SECTION] as according to the learned counsel in such supplies there is no transfer of property and the property always remains with the contractee, The third submission advanced by the learned counsel for the appellants was that the royalty paid by the contractors in the execution of works contract while procuring boulders, earth, etc., should not be included in the 'contractual transfer price'."
These two contentions were answered by the apex Court as under :
"So far as the second contention urged on behalf of the learned counsel for the appellant is concerned, the Tribunal on facts has found the contractor has to pay the price of the goods supplied by the contractee by way of adjustment. This Court in ([PRECEDENT]) has observed as follows :
' Ordinarily unless there is a contract to the contrary in the case of a works contract the property in the goods used in the construction of a building passes to the owner of the land on which the building is constructed, when the goods or materials used are incorporated in the building. The contractor becomes liable to pay the sales tax ordinarily when the goods or materials are so used in the construction of the building and it is not necessary to wait till the final bill is prepared for the entire work.' It is, therefore, clear that goods used in the execution of the works contract stand transferred from the contractor to the contractee at the time the goods are incorporated in the construction. It is also brought to our notice by the learned counsel for the respondents that the principle laid down by this Court in [PRECEDENT], squarely applies to the second point raised herein. While considering a similar issue, namely, whether there was sale of goods in view of the contract between the parties whereunder the custody and control of the goods remained with the P.W.D. and goods were only used in the construction under the contract, this Court held that '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 P.W.D. By appropriation and by the agreement, there was a sale as envisaged in terms of Clause (10) set out hereinbefore. Therefore, in our opinion there was a sale which was liable to tax ' So far as the third question of payment of royalty is concerned, we do not think there is any substance in that argument. As rightly pointed out by the learned counsel for the respondents that in view of the decision of this Court in Orient Paper Mills , the payment of royalty amounts to payment of price for the goods obtained from the Government departments and used in the works contract".
8. However, the learned counsel for the petitioner contended that the third contention was answered by the apex Court in the above decision by relying upon an earlier decision of the same court in the case of [PRECEDENT], which was held per incurium by a subsequent larger Bench. No doubt it is a fact that a larger Bench of the apex Court in the case of [PRECEDENT] it was held that the decision of the court in Orient Paper Mills Ltd. is per incuriam. De hors the above legal position, it is not in dispute that though the petitioner paid the seigniorage fee for extraction of the boulders at that point of time there may not be a sale, but after extraction of the boulders, the boulders have become the property of the petitioner, unlike in the case of the Titaghur Paper Mills Co, Ltd, , where lot of other restrictions were there before appropriation of the extracted timber for the forest area leased out in favour of the company. Apart from that the boulders were converted into the required sizes of the metal, the metal was transported and utilised by the petitioner-contractor for laying the road, the 'seigniorage paid and the cost of expenditure incurred by the petitioner towards conversion of the boulders into metals, loading, unloading, transportation, etc., would be the cost of the metal to the petitioner/contractor which was used in execution of the works contract, i.e. laying of the road. While completing the execution of the works contract, the property in the goods has transferred from the contractor to the contractee at the time the goods are incorporated in the laying of the road. Therefore, there is a clear transfer of property in goods while completing the works contract from the contractor to the contractee and the same would result in sale or deemed sale of goods, liable to tax, Similar issue was also considered by the apex Court in the case of [PRECEDENT], and it was held "that even in a single and indivisible works contract there is a deemed sale of the goods, which are involved in the execution of a works contract. Such a deemed sale has all the incidents of a sale of goods involved in the execution of a works contract where the contract is divisible into one for sale of goods and the other for supply of labour and services." In the instant case there are no separate contracts for the sale of the goods and for execution of the work. Still as held by the apex Court, a deemed sale is involved and therefore, the petitioner/contractor is liable to tax in respect of the above disputed turnover, which forms part of the cost of the goods to the petitioner.
Under the above circumstances, we do not find any merit in the contention of the petitioner that there is no sale or deemed sale in respect of the metal used in laying the road on the premise that the contractee continues to be the owner. To illustrate otherwise also, in this type of works contract, the Government departments used to supply steel, cement, etc., even in respect of those items supplied, the ownership continued to be with the contractee, but still when those items are utilised by the contractor while execution of the works contract, they were treated as sales and the value of the above items are deducted from the bills. Even under such circumstances also it was held that the contractor is liable to tax, as there was a deemed sale while executing the works contract.
9. Under the above circumstances, we do not find any merit in the contention of the petitioner. Accordingly, the tax revision cases as well as the writ petitions are dismissed, but under the circumstances there is no order as to costs.