- 1 - IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR. ::: O R D E R 1.S.B. CIVIL REVISION PETITION NO.105/2007 -HINDUSTAN ZINC LTD VS. COMMERCIAL TAXES OFFICER, SPECIAL CIRCLE, UDAIPUR AGAINST THE JUDGMENT AND ORDER DATED 6.3.2007 , PASSED BY THE RAJASTHAN TAX BOARD, AJMER IN APPEAL NO.114/2005. 2.S.B. CIVIL REVISION PETITION NO.104/2007 -HINDUSTAN ZINC LTD VS. COMMERCIAL TAXES OFFICER, SPECIAL CIRCLE, UDAIPUR AGAINST THE JUDGMENT AND ORDER DATED 6.3.2007 , PASSED BY THE RAJASTHAN TAX BOARD, AJMER IN APPEAL NO.115/2005 3.S.B. CIVIL REVISION PETITION NO.117/2007 -HINDUSTAN ZINC LTD VS. COMMERCIAL TAXES OFFICER, SPECIAL CIRCLE, UDAIPUR AGAINST THE JUDGMENT AND ORDER DATED 6.3.2007 , PASSED BY THE RAJASTHAN TAX BOARD, AJMER IN APPEAL NO.59/2007 REPORTABLE 4.S.B. CIVIL REVISION PETITION NO.118/2007 -HINDUSTAN ZINC LTD VS. COMMERCIAL TAXES OFFICER, SPECIAL CIRCLE, UDAIPUR AGAINST THE JUDGMENT AND ORDER DATED 6.3.2007 , PASSED BY THE RAJASTHAN TAX BOARD, AJMER IN APPEAL NO.1932/2006 5.S.B. CIVIL REVISION PETITION NO.119/2007 -HINDUSTAN ZINC LTD VS. COMMERCIAL TAXES OFFICER, SPECIAL CIRCLE, UDAIPUR AGAINST THE JUDGMENT AND ORDER DATED 6.3.2007 , PASSED BY THE RAJASTHAN TAX BOARD, AJMER IN APPEAL NO.1933/2006 DATE OF ORDER : 29th Feb., 2008 - 2 - PRESENT HON'BLE MR. JUSTICE PRAKASH TATIA Mr. Dinesh Mheta, for the petitioner. Mr VK Mathur ] Mr. Rishabh Sancheti ], for the respondent. <><><> BY THE COURT: The petitioner has raised questions of law in these revision petitions that (i) whether in the facts and circumstances of the case supply of explosives by the petitioner to his contractor for using the same by the contractor in petitioner's mining operation in mining area of the petitioner can be treated to be a sale within the meaning of Rajasthan Sales Tax Act, 1994 (hereinafter referred to as the Act of 1994) and (ii) if answer to question no.(i) referred above is affirmative and it is held that aforesaid supply of explosives is a sale whether such sale is not taxable being subsequent sale within the State of the goods on which tax on first point has already paid and (iii) whether in the facts and circumstances of the case, the explosives for the purpose of blasting in the petitioner's mine could not have been purchased at concessional rates against declaration form ST17. - 3 - The petitioner is a company duly registered under the provisions of the Rajasthan Sales Tax Act, 1994, Rajasthan VAT Act, 2003, Central Sales Tax Act, 1956 and the Rules framed thereunder. The company engaged in manufacture of lead, zine and allied metals and it has is own mines. In the regular course of business, the petitioner company awarded various mining contracts to the contractors wherein cement and steel are required to be used. The petitioner company is required to use explosives for winning minerals from its mines. This operation includes explosions and is got done on job work basis in the field of the petitioner under strict control and supervision of explosive experts. For use of explosives,the petitioner company is required to obtain licence from the competent authority under the Explosive Act, 1884 and as per the statutory condition of licence, the petitioner cannot re-sale the explosives purchased for its own use. The petitioner has placed on record the copy of the explosive licence. The petitioner company purchased the explosives against declaration form ST17 on payment of concessional rate of tax - 4 - as stipulated under Section 10(1) and 10(3) of the Act of 1994. According to the petitioner explosives have been mentioned in the certificate of registration of the petitioner company as raw-material and, therefore, the petitioner is authorized to purchase the same at concessional rate of 4% against declaration form ST17. The petitioner's company's regular assessment for the tax under the provisions of the Act of 1994 for the assessment yearS 1999- 2000, 2000-2001, 2001-2002, 2002-2003 AND 2003- 2004 were framed by the assessing authority, but notices were issued for re-opening of assessments under Section 30 of the Act of 1994 to the petitioner on the ground that supply of material such as cement, iron, steel and explosives to various contractors firms is sale within the meaning of Section 2(38) of the Act of 1994. The petitioner submitted reply and took the plea that the goods have not been used for the purpose other than for which they have been procured and there is no misuse of declaration form. The petitioner submitted that ownership of - 5 - the goods had never been transferred to the contractor and the contractor had returned the remaining goods as such and no property stands transferred to the contractor from the petitioner, therefore, the transaction cannot amount to sale of the goods liable for tax under the provisions of the Act of 1994. The assessing authority rejected the petitioner's contention and passed assessment orders for various years. Copies of the assessment orders passed for various years have been placed on record on these revision petitions, which are dated 7.8.2003, 27.9.2005 and 15.2.2006 in total for five years. Aggrieved against the above assessment orders passed by the assessing authority, the petitioner company preferred separate appeals before the Dy. Commissioner (Appeals) Commercial Taxes, Udaipur, which were dismissed by Dy. Commissioner (Appeals) by order dated 6.1.2005 (two appeals), dated 21.6.2005 (two appeals) and dated 5.10.2006 (one appeal). The petitioner preferred further appeals before the Rajasthan Tax Board, Ajmer, which too were dismissed by the Rajasthan Tax Board, Ajmer vide order dated - 6 - 6.3.2007, hence, these revision petitions raising common questions of law referred above. According to learned counsel for the petitioner the petitioner has its own mining area. In the mining operation certain goods including explosives are required for which the petitioner company obtained licence from the competent authority under the relevant provisions of law which is apparent from the copy of the licence placed on record by the petitioner. The petitioner company cannot sale the explosives and has not sold it out to anybody. The petitioner company gave these explosives to its contractor only for using the explosives in petitioner's own mining operation. The explosives exhausts in the mining operation and after its use nothing remained in the hands of the contractor. As per the contract between the petitioner and its contractor, the contractor could have used the explosives within the mining field of the petitioner and that too, under the strict control and supervision of the explosives experts. Therefore, no legal title of the goods had passed on to the contractor. The petitioner company could have - 7 - used its explosives through its own labour for its own consumption and as per sub-section (3) of Section 10, the petitioner was entitled to purchase the goods for its mining operation on payment of lower rate of tax i.e., @ 4% on furnishing a declaration duly filled under form ST14. The petitioner consumed the explosives in its mining operation is not in dispute, therefore, the petitioner fulfilled all the conditions of sub-section (3) of Section 10 of the Act of 1994 and has not violated the conditions as provided by sub-section (3) of Section 10 of the Act of 1994 after purchase of the goods i.e., explosives. In view of the above fact, the first contention of the petitioner is that the explosives in the hands of contractor is not the goods sold to the contractor and secondly, even if it amount to sale then as per sub-section (3) of Section 10 of the Act of 1994, the sale is not prohibited to a person who uses the said sold goods only for the purpose and use of the seller. Learned counsel for the petitioner tried to distinguish allege sale of explosives by the petitioner company to its contractor for - 8 - carrying out work of petitioner with the sale of goods to other person who may not use the goods for carrying out the manufacture in process or mining operation of the seller and submitted that in former cases there cannot be violation of sub-section (3) of Section 10 of the Act of 1994 because of the reason that the petitioner company is required to satisfy that the goods purchased by the petitioner company by submitting a declaration under form ST17 were required by it and has been used for its mining operation. Sub-section (3) of Section 10 of the Act of 1994 nowhere provides that in case the goods are required by the assessee and has been used for the assessee's own work but through third party then the assessee is not entiled to get benefit of payment of tax at lower rate as provided under sub-section (3) of Section 10 of the Act of 1994. Learned counsel for the petitioner further submitted that the petitioner purchased the goods i.e., explosives after payment of tax under sub-section (3) of Section 10 of the Act of 1994 though on payment of lower rate of tax under sub-section (3) of Section 10 by - 9 - furnishing declaration form ST 17, therefore, the explosives in the hands of the petitioner is tax paid goods, therefore, even if it is held that handing over of the explosives to the contractor of the petitioner company for the purpose of mining operation within the mining area of the petitioner amounts to sale then that sale is sale of tax paid goods and the tax can be levied within the State only ones and not on subsequent sales. Learned counsel for the petitioner relied upon the judgment of this court delivered in Shekhawat Explosives Vs. State of Rajasthan & Ors reported in 2003(5) Tax Update 155. Facts of which case was slight different but learned counsel for the petitioner relied upon this judgment in support of his argument that since the explosives exhausts in the mining operation therefore, cannot be transferred to the petitioner company by the contractor, therefore,the goods in the hands of the contractor is not a commodity acquired by sale. Learned counsel for the petitioner also relied upon the judgment of this Court delivered in the case of Bharat Sanchar Nigam & Anr. vs. - 10 - Union of India & Ors reported in 2006(14) Tax Update 185. Learned counsel for the revenue submitted that in the present case the petitioner not only delivered the explosives to its contractor but also recovered the cost of the explosives from the contractor and this fact is not in dispute. Therefore, the transaction of sale stands completed by delivery of goods to the contractor engaged by the petitioner for execution of their works contract and receipt of the sale consideration by the seller -petitioner company. Sale is not determined from the fact that how the purchaser (contractor) has used or consumed the goods or where the purchaser (contractor) has used the goods. The completed sale transaction is not affected because of total exhausts of the sold goods after reaching it in the hands of purchaser, therefore, where and how the purchaser; the contractor of the petitioner company, has used the explosives is absolutely irrelevant and transaction stands concluded before goods used by the contractor. Learned counsel for the revenue as well as learned counsel for the petitioner both tried to - 11 - interpret sub-section (2) of Section 38 of the Act of 1994 which defines “sale” to their favour. Petitioner's counsel submitted that the petitioner could not have transferred the property and was not competent to pass over the “title in goods” to the contractor by virtue of statutory bar against sale of explosives, therefore, handing over of the explosives to the contractor without passing on title vesting in the purchaser, cannot amount to sale whereas learned counsel for the revenue submitted that this issue specifically was under consideration before the Hon'ble Apex Court in the case of Karya Palak Enigneer, CPWD, Bikaner Vs. Rajasthan Taxation Board, Ajmer & Ors reported in (2004) 7 SCC 195 and the Hon'ble Apex Court in a case where there was no transfer of title of property in the contractor and there was a contract that the goods shall remain on the work site of the assessee and the contractor shall not remove the said material from the work site and shall be opened for inspection of the assessee and where the contractor was bound to return the unused materials to the principal even then Hon'ble Apex Court held that by the - 12 - use or consumption of the materials in the construction work, property thereof, held, passed to the contractors and consideration therefor passed to CPWD by way of adjustment in the bills and said transaction was held amounting to sale within the meaning of Section 2(38) of the Rajasthan Sales Tax Act, 1994 and it has been held that sales tax could be levied on the said transaction. I have considered the rival submissions of learned counsel for both the parties and perused the facts of the case as well as impugned orders. Substantially the facts are not in dispute and which may be recapitulated here again, that the petitioner-Company in its regular course of business, awarded mining works contract to the contractors and supplied various goods to the contractors and we are concerned with the supply of explosives to the contractors by the petitioner-Company in these matters. The revenue treated the supply of those explosives to the contractors by the petitioner as transaction of sale, as defined under sub-clause (ii) of sub- section (38) of Section 2 of the Rajasthan Sales - 13 - Tax Act, 1994. The contention of the petitioner is that the said transaction is not sale for the reasons mentioned above. Sub-clause (ii) of sub-section (38) of Section 2 of the Act of 1994 is as under:- “ (38) “Sale” with all its grammatical variations and cognate expressions means every transfer of property in goods by one person to another for cash, deferred payment or other valuable consideration and includes- (i) ..... ..... ..... (ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (iii) ..... ..... ...... (iv) ..... .... ...... (v) ..... ..... ...... (vi) ..... .... ......” When the word is defined in the Act itself then there is no need to take help of definition given in any other Act nor dictionary meaning is needed to see the meaning of the word. When any transaction is specifically included in any definition in the Act that transaction is required to be given its effect. Section 38(ii) unambiguously provides that (i) any transfer of - 14 - property in goods by one person to another person (ii) for cash, deferred payment or for valueble consideration is sale and (iii) includes a transfer of property in goods in whatever form involved in the execution of works contract. In case in hand, the property was delivered to the contractor. The property was for use in the works contract only. The cost of explosive was separately charged from the contractor by deducting the value of the explosive from bills of contractor. Therefore, all the ingredients of sale as required by the sub-clause (ii) of sub-section 38 of Section 2 of the Act of 1994 are present in the transaction. Hence, the transaction in this case is sale of goods by petitioner to the contractor in view of unambiguous and clear definition of sale given in Section 2 (38)(ii) of the Act of 1994. A similar question as above, arose before Hon'ble the Supreme Court in the case of Karya Palak Engineer, CPWD, Bikaner v. Rajasthan Taxation Board, Ajmer and others ( (2004) 7 SCC 195), as is raised in these revision petitions. It was contended in above case that under the - 15 - terms and conditions of the contract, the material supplied to the contractors remained the absolute property of the Union and the same could not be removed from the site of the work and were at all times open to inspection by the authorities as per the terms and conditions of the contract, if there remains surplus material, then those materials were required to be returned by the contractors. Therefore, the title in the property never transferred to the contractors, and the contractors remained only custodian of such material. It was also contended that no specific consideration was paid for the supply of the goods, therefore, the supply of materials to the contractors did not amount to sale and could not be subjected to sales tax. Hon'ble the Supreme Court, after considering the above pleas, rejected all the contentions following the earlier decision of the Hon'ble Supreme Court delivered in the cases of N.M Goel & Co. v. STO ((1989) 1 SCC 335) and Cooch Behar Contractors' Association v. State of W.B. ( (1996) 10 SCC 380). In N.M.Goel's case (supra), Hon'ble the Supreme Court held that “by use or consumption of material in the work of - 16 - construction, there was passing of property in the goods to the assessee from PWD. By appropriation and by the agreement, there was a sale as envisaged in terms of clause of the contract.” Here in present cases also, it is not in dispute that the explosives were handed over physically to the contractors and the petitioner-Company received the cost of explosives from the contractor by deducting the cost of explosives from bills of contractor, therefore, with the passing of the goods in the hands of the contractors from the petitioner for consideration, the transaction of sale stands concluded. Transaction is not dependent upon the ultimate use of the goods, transferred to the contractors, as the goods which may have been sold to the contractors for valuable consideration, may be returned to the Principal, if remained unused and the goods in different form may be returned to the Principal and the goods may be consumed or exhausted in the works contract. The transaction of sale completes with the passing of the goods for consideration in the hands of the contractors. Hon'ble the Supreme Court even in a case rejected the - 17 - contention of the assessee that title in the property never got transferred to the contractor and the contractor remained only a custodian of such materials and held that the transaction is sale. In view of the above, so far as the first contention of the learned counsel for the petitioner is concerned, it has no force and in view of the above referred judgments of the Hon'ble Supreme Court, the petitioner cannot get any help from the Division Bench judgment delivered in the case of Shekhawat Explosives v. State of Rajasthan & anr. (RLW 2003(1) Raj. 648). Next question yet remained to be answered is, whether it is necessary that above transaction of sale can be recognized as sale only if sale is legal? The above was the question directly answered in the case of Commonwealth Vs. Miller, 118 Pa.Super. 58, 180 A. 144 wherein the issue involved was a tax on stored spiritous and vinous liquors and the tax was sought to be imposed upon illegally manufactured whiskey. In the said case, it has been held “[i] it would - 18 - seem unreasonable to assume, without a clear expression of such intension, that the Legislature intended that a tax should be imposed on those who complied with the mandate of the law but those who flagrantly flaunted the law should not be required to pay such a tax.” In the case of Hiram K. Undercofler, Commissioner Vs. Veterans of Foreign Wars Post 4625 139 South Eastern Reporter, 2nd Series 776 Ga. it has been held that “We find nothing in the Act which indicates any intention on the part of the legislature to differentiate between legal and illegal sales, and the general language of the Act should not be limited to legal sales only merely because the Act does not specifically tax illegal sales by referring to them as such.” In the Hiram K. Undercofler case (supra) even a issue was raised to tax the illegal sale is equivalent to licensing an illegal activity and that the court should not so construe the Act as to give such an intent to the legislature in the absence of clear express words to the contrary. Same can be argument here also in view of the fact that the explosives, which were - 19 - involved in the works contract were not salable commodity in open market and, therefore, the petitioner could not have sold it to anybody including to its own contractor. We may recapitulate here, if the sale is illegal, it may not pas on title to the vendee- the purchaser and the purchaser may not get full benefit of that purchased property and that is subject matter relating to the title to the property and consequential rights of the purchaser, which is governed by general law governing the subject of sale of property. As stated above, the sale is defined in the Rajasthan Sales Tax Act, 1994. Tax Act is for specific purpose and and do not depend upon other law for the purpose of levy of tax or for finding out the nature of transaction, if the taxing law itself has defined the transaction and included the transaction in any of the category of transaction for the purpose of levy of tax. The taxing law may not be a substantive law determining the property rights of the parties involved in the transaction and, therefore, the separate definition of sale has been given in the Act of 1994. Certain - 20 - transactions, which may fall short of sale in general law have been included in the transaction of sale statutorily in the Act of 1994 and that is why the transaction in question is deemed sale and may not be actual sale so as to pass on title in property to the vendee-the purchaser. The illegal transaction of sale may not pass on title of property to the vendee but still it is sale for the purpose of Act of 1994. An illegal sale may have penal consequence or other liability of vendee and or vendor and that may be statutory, but cannot convert the illegal transaction into legal transaction if law does not permit. In taxing statute, the statutes are required to be constructed strictly and at the same time, when language of the Act is clear and unambiguous then there is no reason to presume that the statutory provisions of law creating liability has been enacted to licensing the illegal activity (in this case sale of explosives) to make the illegal transaction legal. Therefore, the fact whether the petitioner could have sold the explosives to the contractor in view of the restrictions under the Explosives Act is totally irrelevant and - 21 - immaterial. Same view was taken in the case of Y. Laxman v. Commercial Tax Officer, 1st Circle, Udipi and Anr. ( (1975) 35 STC 393(Kar.), the Karnataka High Court held that “ the expression “buying, selling, supplying or distributing goods” used in section 2(1)(k) of the Act does not exclude buying, selling, supplying or distributing goods in an illegal way. The liability to pay sales tax does not depend upon whether the business carried on by the dealer is lawful or not. Even when buying, selling, supplying or distributing goods is not authorised by law, a person who carries on those activities would be liable to pay sales tax under the Act.” In view of the above, it is held that even if transfer of property in goods was not permitted by statutory provision; i.e., the explosive Act even then it was a taxable transaction under the Act of 1994. Another contention of the learned counsel for the petitioner is that since the explosives were consumable commodity in the hands of the petitioner and the said explosives have been - 22 - consumed in the works contract, therefore, the transaction cannot be a sale. The learned