K. Venkataswami, C.J.
1. On an earlier occasion when this matter was heard by a Division Bench of this Court the learned Judges were of the view that the issue raised in this matter requires a decision by a larger Bench and on that view of the matter they passed an order of reference on 25.8.1987
2. The order of reference can be usefully set out as it contains the relevant facts in a nut-shell as well as the reason for referring the matter to a larger Bench. The order of reference reads as follows.
8. 25.8.1987 The petitioner is a Public Limited Company. It has entered into a Works agreement with Tata Iron and Steel Company Limited, Jamshedpur for execution of certain works. The nature of the work is putting up structural constructions. In the course of execution of the Works Contract, the petitioner had to use cranes, tippers and trucks. The petitioner had been granted a certificate in terms of Section 13(1)(b)(ii) of the Bihar Finance Act, 1981. Subsequently, it filed a petition for amendment of the said certificate by adding cranes, tippers and trucks in the Certificate. The Sales Tax authorities refused the prayer for inclusion of those items in the certificate. It was refused on the footing that these items were not 'directly' for mo in the execution of the works agreement, hence die present application before us under Articles 226 and 227 of the Constitution of India.
One of She decisions relied upon by file petitioner in support of its case is Tata Iron and Steel Co. Limited v. The State of Bihar and Ors. 26, S.T.C. 30). That case related to insertion of certain items in the registration certificate, The items were Lamps, Spare parts of plant and machinery, Spare parts for Eimco Loader, spare parts for Commute Engines, Spare parts for crane, Spare parts for chipping hammers, screen vibrating and wire screen cloth, oil seal, wagon components and packing cotton yarn and flax. The prayer for insertion of these items in the registration certificate had been rejected by the sales tax authorities in that case. A Bench. of this Court relying upon a decision of the Supreme Court in the case of J.K. Cotton Spinning and Weaving Mills Co. Ltd v. The Sales Tax Officer, Kanpur and Anr. 16 STC 563 held that in order to fall within the expression 'electrical equipment' it was not necessary in terms of Rule 13 that those items must be m ingredient of the finished goods to be prepared, or that it must be a commodity which-is used in the creation of goods.' On that basis their Lordships rejected the stand of the then learned Standing Counsel No.1, who had submitted that the word 'directly' must be given its full connotation and it was not redundant. Following the Supreme Court decision, their Lordships held screen vibrating and wire screen cloth, Seal Oil, Wagon components and packing cotton yarn and flax as items used in the manufacture of goods. Their Lordships, therefore, directed inclusion of those items in the registration' certificate.
In the instant case, we are concerned with the execution of works contract. At the time, the' case of Tata Iron and Steel Company Limited (Supra) was decided, the Sales Tax law did not contemplate imposition of sales tax on execution of works contract. Section 13 of the Bihar Finance Act, 1981 (Bihar Act 5 of 1981) provides that notwithstanding any thing contained in Part I, but subject to such conditions and restrictions as may be prescribed, sales to or purchases by registered dealer of goods required by him 'directly' for use in the manufacturing or processing of goods for sale shall not be subject to tax.' Patna case referred to earlier did not deal with execution of works contract.
In this connection we are faced with a decision of the Orissa High Court in Kalinga Construction Co. Limited v. Collector of Sales Tax, Orissa, Cuttack(13 S.T.C., 225), where their Lordships held as follows :-
For the purpose of his business a contractor may have to maintain a number of trucks or machineries which he may have to utilise in a number of works at different places. These trucks or machineries last for a number of years and may be used for any number of separate works even in different States in India.
and further
To my mind, the expression 'for use in the execution of the contract' clearly imports an idea of the user of such materials which bodily go into the contract work itself. In other words, the very materials should form part of the work itself, and shall pass as the property of the party who gave the contract work.
We would have preferred the decision of our own High Court, but then we are faced with another decision of the Supreme Court in Indra Singh and Sons (P) Ltd. v. Sales Tax Officer, Raigarh Circle, Raigarh and Ors. 17 S.T.C. 510. This decision is not in relation to a works contract, but the ratio of this case seems to cast cloud upon the decision of this Court in the case of Tata Iron and Steel Company Limited (Supra).
In our view, therefore, the matters need to be settled firmly by a larger Bench.
Let this matter be placed before Hon'ble the Chief Justice for constituting a larger Bench for considering the correctness of the decision of this Court in Tata Iron and Steel Company Limited (Supra). Let the office prepare three copies of brief, in case the Hon'ble the Chief Justice considers it appropriate to send the case to a larger Bench, for use of the three Hon'ble/Judges.
Sd/- Uday Sinha
I agree to the reference aforesaid. In my opinion the substance of the: question is; whether the use of mechanised labour for execution of works contract is entitled to the benefit of Section 13(1)(b)(ii).
Sd/- S.B. Sanyal.
9. 28.8.1987 One week's time is allowed to file complete third copy of brief for the use of third Hon'ble Judge failing which the Writ application shall stand rejected without further reference to Bench.
3. Before actually answering the issue raised before us it is necessary to set out in brief the reasons which weighed with the revenue officials for rejecting (he request of the petitioner for inclusion of cranes, tippers and trucks in the registration certificate issued to them under the Bihar Finance Act, 1981. The first authority, namely, the Deputy Commissioner of Commercial Taxes after getting a report from Assistant Commissioner of Commercial Taxes of Jamshedpur, Urban Circle, rejected the request of the petitioner for amendment of the registration certificate by including the items mentioned above in the certificate by observing as follows :
The purpose of Government in giving rebate to the assessee' under Section-13(1)(b) is that the tax payable under Bihar Finance Act would increase due to use and utilization of the articles purchased at concessional rate. Under the Bihar Finance Act it is also provided that the tax is payable only on such work contract in which contractor uses own goods. The cost of the assessees contract is in crores but the tax payable by him is negligible due to labour work. Secondly the existence of the assessee at Jamshedpur is not permanent and the assessee, from time to time gets work of so many places and the assessee completes the work by moving place to place in all over the country. The goods which has been urged for being purchased at concessional rate is of durable nature and the life of the same is very long. Therefore the utilization of the said goods in the State of Bihar will be made by the assessee to what extent is doubtful. As such there is a full probability that the assessee can use the said goods on other places also after completing the work in the State. Therefore in the aforesaid facts and circumstances in my view, since the said goods is not directly concerned with the said works contract, on which tax is payable under the Bihar Financial Act, the aforesaid goods would be used in such work in which the assessee's labour work is directly concerned with the works contract.'
(english translation of Hindi version as supplied by counsel for petitioner)
We are hasten to add that while rejecting the request of the petitioner, the Deputy Commissioner of Commercial taxes did not doubt the requirement of those goods by the petitioner for their use in the execution of works contract.
4. Aggrieved by the order of the Deputy Commissioner of Commercial Taxes dated 17.10.1985 the petitioner preferred a revision to die Commissioner of Commercial Taxes under Section 46 of the Bihar Finance Act. The Commissioner obtained a report from Joint Commissioner (Law) and directed the petitioner to file their written submissions which the petitioner did.
5. The Commissioner by the order impugned in this Writ petition dated 10.11.1986 held as follows:
In the instant case merely, the use of the expression directly for use in the execution of works contract could not entitle a dealer to concessional rate on purchase of goods which are not for sale in the course of execution of a works contract, as has been intended by die legislature, but which are Actually required for carrying on the business of works contract expediently and profitably.
In view of the discussions made in the preceding paragraphs I find that though the grounds on which the D.C.C.I. Jamshedpur Urban Circle, has rejected the application of the petitioner for a certificate Under Section 13(1)(b)(ii) for purchase of cranes, tippers and trucks may appear to be disputable but in intent the order is in accordance with the law and hence requires no interference.
In this petition the orders of the Deputy Commissioner, Commercial Taxes confirmed by the order of the Commissioner, Commercial Taxes had been challenged by the petitioner. Learned senior counsel appearing for the petitioner submitted that while the respondents have admitted the fact iliac the goods namely, cranes, tippers and (trucks are required by the petitioner for carrying on the business of work contract expediently and profitably erred in rejecting the application for inclusion of those items in the certificate already granted to enable the petitioner for payment of concessional rate of tax on the purchase of those goods. According to the learned Counsel the' authorities below have misunderstood the ratio laid down by a Division Bench of this Court while interpreting Section 1 3(1)(b)(i) of the Act. Likewise the authorities have not correctly understood the judgment of the Supreme Court placed before them. In this connection learned senior counsel placed reliance on : AIR1965SC891 . He has also placed reliance on the judgment of this Court in 26 S.T.C. 30. Apart from the above point incident the learned senior counsel also mentioned that in the event of this Court agreeing with his contention them the registration certificate mast be amended is prayed for from the date of its application and for that contention he placed reliance upon a Division Bench judgment of Madhya Pradesh High Court reported in 23 S.T.C. 308.
6. Learned Advocate General contending contra submitted that Section 13(1)(b)(ii) of the Act must be construed strictly and only those goods which are required by a dealer not only directly for use in the execution of works contract but must also be exclusively used for execution of that works contract will be entitled for concessional rate of tax. Therefore, according to the learned Advocate General the goods in question, namely, Cranes, Trippers and Trucks admittedly are not to be used exclusively for the works contract in question but also to be used for any other works contract in any other part of the country and so those goods can not be brought within the purview of Section 13(1)(b)(ii) of the Act. In support of this contention be placed reliance on a decision of Orissa High Court in the case of Kalinga Construction Co. Ltd. v. Collector of Sales Tax, Orissa, Cuttack (1962) 13 S.T.C, 225. He also submitted that in die event of this Court agreeing with the contention of the learned Counsel for the petitioner, the benefit of entry in the registration certificate can not be from the date of application for such entry but only from the date of the judgment. We may point out here that on the factual aspect that the goods in question are required by the petitioner for carrying on the business of works contract expediently is not denied by the learned Advocate General.
7. Learned Advocate General also pointed out that expect 1970) 26 S.T.C., 30. (Tata Iron and Steel Co. Limited v. The State of Bihar and Ors. ) a Division Bench Judgment of this Court, other cases cited by the learned Counsel appearing for the petitioner relate to interpretation of Section 8(3) of the Central Sales Tax Act and the rules framed thereunder wherein the word 'directly' does not find place. In other words the word 'directly' introduced in Section 13(1)(b)(ii) of the Act must be given due importance in interpreting the scope of that Section. According to him if due importance is given to the word 'directly' occurring in Section 13(1)(b)(ii) of the Act, then the orders of the Deputy Commissioner and the Commissioner of Saks Tax do not cal for any interference by this Court.
8. We have considered the rival submissions. Before appreciating the contentions advanced at the Bar, it is necessary to set out the relevant portion of Section 13(1) of the Bihar Finance Act, 1981, which reads as follows :
13. Special rate of tax on certain sales or purchases.
(1) Notwithstanding anything contained in this part but subject to such conditions and restrictions as may be prescribed.
(a) * * * * *
(b)(i) sales to or purchases by a registered dealer of goods required by him directly for use in the manufacture or processing of any goods for sale;
(ii) sales to or purchases by a registered dealer of goods required by him directly for use in the execution of works contract;
(c) * * * * *
(d) * * * * *
and in respect of which the purchaser has been granted a certificate by the prescribed authority in the prescribed manner and for the prescribed period shall, unless the goods are taxable at a lower rate under Section 12 be subject to Sub-section (2), leviable to tax at such rate or rates as may be notified by the State Government in this behalf not exceeding 4 per centum:
Provided that the State Government may, from time to time by notification in official Gazette, excluded any goods or class or description of goods from the operation of this Section.
9. Prior to Bihar Finance Act, 1981, there was no corresponding provision to Sub-clause (ii) of Section 13(1)(b) of this Act. Section 6-A (b) of the Bihar Sales Tax Act, 1959, as amended by Bihar Act 20 of 1962, corresponds to the present Section 13(1)(b)(i)
10. A question arose in the case reported in 26 S.T.C. 30 (Supra) whether spare pares for Eimco Loader spare parts for Commine Engines, spare parts for crane, spare parts for chipping hammers, Screen vibrating and wire screen cloth, oil seal, wagon components and packing cotton yarn and flax could be included in the certificate of registration of the assessee for the purpose of special concessional rate of sales tax as provided under Section 6-A (b) of the Bihar Sales Tax Act, 1959. In that case the assessee company was carrying on business of manufacturing and processing iron and steel and their by-products for sale. The learned Judges after taking into consideration the principle laid down by the Supreme Court in 16 S.T.C. 259 (Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes Bihar and Ors. ) as also in 16 S.T.C. 563 (J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. The Sales Tax Officer, Kanpur and Anr.) held as follows:
Keeping in view the wide interpretation given by the Supreme Court in the two cases referred to above, of the expression 'goods intended for use in the manufacture and processing of goods for sale' in the Central Act, I am of the opinion that Items No. 7, 8, 9 and 10 ought to have been also included in the certificate of registration under Section 6A of the Act.
11. We have noticed earlier that in the orders of reference, the learned Judges have mentioned that they could have accepted the view taken by the Division Bench of this Court in 26 S.T.C, 30; but, for the fact that there is a judgment of the Supreme Court reported in 17 S.T.C, 510 (Indra Singh and Sons (P) Ltd v. Sales Tax Officer, Raigarh Circle, Raigarh and Ors.) which, according to them, 'cast cloud' upon the decision of this Court they referred the. matter to larger Bench.
12. Let us now find out whether there is anything in 17 S.T.C., 510 (Supra) which cast any cloud upon the ratio laid down in 26 S.T.C., 30. In 17 S.T.C., 510, their Lordships of the Supreme Court while considering Rule 13 of the Central Sales Tax (Registration and Turnover) Rules, 1957 has considered the question whether spare parts of motor vehicle including tubes and tubes sanitary fitting and motor trucks could be included in the certificate of registration in terms of Rule 13 of the Central Sales Tax Rules, 1957. Their Lordships while applying the ratio laid down in 16 S.T.C., 259 on facts held as follows:
The learned Counsel for the appellant relying on the above observations contends that the appellant here was also carrying on the business of manufacturing coke and selling it, and he says that for that reason the appellant required motor trucks and spare parts for motor vehicles, including tyres and tubes, for transporting coal to the factory for manufacturing coke. But on looking through the record, we find that this is the first time that this point is being made in the course of these proceedings. In the application for registration before the Sales Tax Officer no mention is made that the appellant is carrying on the business of manufacturing of coke. In its application under Article 226 in the opening para it only mentions that it is carrying on the business of mining coal and trading in coal and coke, as the owner of the mines. The learned Counsel has not been able to point out any documentary evidence to show that the appellant was actually manufacturing coke, and, therefore, we cannot allow him to raise this new point at this stage.
In the alternative, the learned Counsel for the appellant contends that the appellant requires these motor trucks for transporting coal to the railway siding at the nearest railway station. He says that the appellant has to deliver coal F.O.R. railway siding, and in order to fulfil its commitments it must transport coal to the railway siding. He says that one cannot carry on the activity of mining without sending coal to the railway station for being loaded on the trains. He urges that we should regard the railway siding as similar to a warehouse or place of storage. We are unable to accept the submissions of the learned Counsel. We cannot read the expression 'in mining' in Rule 13 of the Central Rules to mean in the business of mining. The goods must be intended for use only in the actual activity of mining which would include raising the coal and storing it in a heaps or in warehouses. But in our opinion the expression can not be extended to include delivering the coal to a siding at the railway station. Therefore, the High Court was right in holding that these two items, namely, spare parts of motor vehicle including tyres and tubes, and motor trucks can not be included in the registration certificate of the appellant.
As far as furniture and sanitary fittings are concerned, these are covered by the ration of the decision of this Court in the Indian Copper Corporation case (16 S.T.C. 259). In dealing with stationery, Shah, J., observed that' stationery also is not intended for use in the manufacture or processing of goods for sale or for mining operations. Use of stationery undoubtedly, facilitates the carrying on of a business of manufacturing goods or of processing goods or even mining operation but the expression 'intended to be used' can not be equated with 'likely to facilitate' the conduct of the business of manufacturing or of processing goods or of. mining.' These observations apply to the items 'furniture' and 'sanitary fittings'. These two items are likely to facilitate the business of mining but it can not be said that they are intended to be used in mining.
From the above extracted portion, we are of the view that there is nothing which would go against the ruling of this Court in 26 S.T.C., 30. We have seen on facts in this case that the goods in question, namely, Cranes, Trippers and Trucks are required by the petitioner for their business of works contract expediently. The report submitted by the Assistant Commissioner at the instance of the Deputy Commissioner as also the Joint Commissioner (Law) at the instance of the Commissioner, Commercial Taxes, also got to show that factually they do not dispute that the goods in question are directly used by the petitioner in the execution of works contract in question. The findings of the authorities were also lo that effect. Nonetheless the request for inclusion of those goods in the registration certificate was rejected on the footing that there is probability of the petitioner's using the said goods for other works contract in other parts of the State and, therefore, it can not be said that those goods are directly concerned with the works contract in question. We do not think that we can sustain this view nor the argument of the learned Advocate General that the goods for the purpose of getting entry in the registration certificate must be exclusively used for the works contract in question.
13. No doubt me two decisions of the Supreme Court on which reliance was placed by the learned Counsel for the petitioner relate to interpretation of Section 8(3) of the Central Sales Tax Act and the rules framed thereunder, However, the ratio laid down in those two cases have been rightly applied by the Division Bench of this Court in 26 S.T.C., 30. In 1962 S.C., 1310 (M/s J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. The Sales Tax Officer, Kanpur arid another), their Lordships of the Supreme Court while explaining the scope of Rule 13 framed under Section 8(3)(b) of the Central Sales Tax Act, held as follows : '
In our judgment if a process or activity is so integrally related to the ultimate manufacture of goods so that without that process or activity manufacture may, even if theoretically possible, be commercially inexpedient goods intended for use in the process or activity as specified in Rule 13 will qualify for special treatment. This is not to say that every category of goods 'in connection with' manufacture of, or 'in relation to' manufacture, or which facilitates the conduct of the business of manufacture will be included within Rule 13. Attention in this connection may be invited to a judgment of this Court in which it was held that vehicles used by a company (which mined ore and turned out copper in carrying on activities as a miner and as manufacturer) fell within Rule 13, even if the vehicles were used merely for removing ore from the mines to the factory, and finished goods from the factory to the place of storage. Spare parts and accesseries required for the effective operation of those vehicles were also held to fall within Rule 13. (See Indian Copper Corporation Ltd. v. Commr. of Commercial Taxes, Bihar, C.A. No. 1021 of 1963, dated 19-10-1964 reported in : AIR1965SC891 .
Applying the above ratio to the facts of this case, it can be seen that for the execution of the works contract, the goods in question are commercially expedient and cannot be avoided, having regard lo the magnitude of the works undertaken by the petitioner.
14. In Para 20 of the Writ petition, the petitioner has stated as follows :
That your petitioner further states and submits that 'Cranes' are required by the petitioner for lifting the heavy iron structures and machines which are necessary for the execution of the works contract and without the help of which the contract cannot be executed. The trippers are required for carrying the goods from one place to another and without the help of which the contract can not be executed. The trucks are required by the petitioner for carrying the goods and structure from one place to another and are directly required for the execution of works contract.
15. In the Counter-affidavit no serious denial has been made to the above assertions of the petitioner. In Para 7 of the counter-affidavit it is stated by the respondents as follows :
That with respect to the statement made in Paragraphs No. 20 and 21 of the Writ petition it is stated that for execution of the works materials supplied to the petitioner free of cost for which the petitioner makes only labour charges. He does not manufacture such structure out of his own materials and as such the works contract claimed by the petitioner is out of the purview of Section 13(1)(b) of the Bihar Finance Act.
16. The insertion of the word 'directly' in Section 13(1)(b)(ii) of the Act is not of much significance. What the legislature intended, by the use of the expression 'directly' is to emphasise the fact that the use of the goods in question is a must for the execution of works contract. In other words it meant that the works contract cannot be executed without the use of the goods in question. '
17. We hold that similar was the legislative intent in Section 8(3) of the Central Sales Tax Act. We further hold that the word 'directly' in Section 13(1)(b)(ii) of the Act has been used ex-abundanti cautela (by way of abundant caution) in order 'to counter any attempted evasion of the legislative intention' as has been expressed/by Fransic Bennion in his famous treatise on Statutory Interpretation (2nd Edition, Butterworths) at Page 718. While dealing with such provision the learned author has observed that such provisions are 'apparently unnecessary' and are included 'ex-abundanti cautela' and are 'to be treated accordingly'.
18. We are in respectful agreement with the aforesaid principle of construction and hold that the insertion of word 'directly' is of no major significance and has been used to quieten doubts if any.
19. In the light of the facts discussed as above any applying the ratio laid down by the Supreme Court followed by this Court in 26 S.T.C., 30, we are of the view that the petitioner is entitled to the reliefs in question i.e. for inclusion of these items in the certificate of registration and the rejection of the same is not sustainable in law.
20. The other question that remains for our consideration is whether the entry should be from the date of application or from this date. In this connection the judgment of the Madhya Pradesh High Court reported in 23 S.T.C., 308 (Orient Paper Mills Ltd. v. Commissioner of Sales Tax, Madhya Pradesh, Indore and Anr.) can be usefully cited. The learned Judges have held as follows:
As regards the date of effectiveness of an amendment in the registration Certificate, the Central Sales Tax Act, 1956, or the Central Sales Tax (Registration and Turnover) Rules, 1957, does not contain any provision indicating the date from which any amendment in the certificate would be effective. The amendment can be effective either from the date on which it is made or from the date on which the purchasing dealer applies for amendment of the registration certificate. It would, however, be equitable and reasonable to hold that where the purchasing dealer applies for amendment of a registration certificate, its is the date on which he makes the application for amendment that should be taken as the date of effectiveness of the amendment if it is allowed.
21. In the case at hand also there is nothing to suggest that there is nothing to suggest that there is any statutory provision indicating the date from which the entry in the certificate should come into effect. Therefore, we direct that the entry in the registration certificate will be effective from the date of the application. It may also be mentioned that Section 13(1)(b)(ii) of the Act has since been omitted as per Act 2 of 1990. This is only by way of information.
22. For all these reasons, we hold that the Division Bench judgment of this Court in 26 S.T.C., 30 does not call for any reconsideration and the petitioner is entitled to succeed in the writ petition. Accordingly, the writ petition is allowed and the goods in question will be entered in the registration certificate from the date of application by the petitioner, namely, 14-10-1985. There will be no order as to costs.
B.N. Agrawal, J.
23. I agree.