Full Judgment
Syed Shah Mohammed Quadri, J.
1. These revision cases are filed by the State challenging the correctness of the common order of the Sales Tax Appellate Tribunal, Andhra Pradesh, Hyderabad, in T.A. Nos. 654, 655 and 483 of 1980 dated October 10, 1985. T.R.C. No. 104 of 1986 relates to the assessment year 1975-76, T.R.C. No. 110 of 1986 relates to the assessment year 1976-77 and T.R.C. No. 107 of 1986 relates to the assessment year 1977-78. These three revision cases arise under the Andhra Pradesh General Sales Tax Act, 1957. T.R.C. No. 108 of 1986 relates to the assessment year 1977-78 and arises under the Central Sales Tax Act, 1956. The T.R.Cs. relate to the same assessee, viz., Hindustan Cables Limited, a company wholly owned by the Government of India. The assessee is a manufacturer of cables among other goods. It supplies cables mainly to the Posts and Telegraphs Department of the Union of India. Under agreements which are contained in the correspondence between the assessee and the Posts and Telegraphs Department, the copper which is used in the manufacture of the cables, was being supplied by the Posts and Telegraphs Department to the assessee. The assessee was manufacturing the cables from out of the said copper and selling the cables to the Posts and Telegraphs Department. The assessee was also making use of the said copper supplied by the Posts and Telegraphs Department for manufacturing the cables for other customers also. In such cases, the assessee was reimbursing the cost of the copper to the Posts and Telegraphs Department. The turnover of the cables supplied by the assessee to the Posts and Telegraphs Department was assessed under the Andhra Pradesh General Sales Tax Act on the basis of the total amounts set out in the bills issued by the assessee. It appears that during the assessment year 1977-78, both under the Andhra Pradesh General Sales Tax Act as well as Central Sales Tax Act, the assessing authority noticed that in the provisional bill, the cost of the copper was included but in the final bills, the same was not included. The assessing authority issued notice under section 14(4) of the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as 'the APGST Act'), to reopen the assessment for the assessment years 1975-76 and 1976-77. The assessee filed objections on various grounds including the ground that it was barred by limitation and was merely based on change of opinion and as such, the assessment could not be reopened. Overruling the objections, the assessing authority assessed the turnover including the cost of the copper supplied by the Posts and Telegraphs Department to the assessee-company. The appellate authority confirmed the assessments. The Sales Tax Appellate Tribunal, on appeal by the assessee, held that the reopening of the assessment for the years 1975-76 and 1976-77 under section 14(4) of the APGST Act was valid. It further held that the cost of the copper could not have been included in the turnover as the assessee was not the owner of the copper. In that view of the matter, the Tribunal partly allowed the two appeals by a common order dated October 10, 1985. It is this order that gave rise to the above tax revision cases.
2. The learned Government Pleader contends that against the finding of the Tribunal that the reopening of the assessment was valid under section 14(4) of the APGST Act, no revision was filed, as the assessee was dealing with the copper supplied by the Posts and Telegraphs Department by making use of the same to manufacture cables for other customers, it was pledging the cables for raising loans and that in the provisional bills the cost of the copper supplied by the Posts and Telegraphs Department was included so the Tribunal ought to have held that the cost of the copper supplied by the said Posts and Telegraphs Department forms part of the turnover. Sri Srinivasa Reddy, the learned counsel for the assessee, on the other hand, contends that having regard to the unamended definition of the 'turnover' in section 2(s) of the APGST Act, the Tribunal was right in holding that the cost of the copper does not form part of the turnover. He further contends that the Tribunal erred in holding that the reopening of, the assessment for the years 1975-76 and 1976-77 was valid under section 14(4) of the APGST Act.
3. On the above contentions two questions arise in these revision cases :
'(1) Whether, the Appellate Tribunal is right in holding that the cost of the copper does not form part of the turnover so as to be exigible to the sales tax either under the APGST Act or under the Central Sales Tax Act (hereinafter referred to as 'the CST Act'); and
(2) Whether the reopening of the assessment for the years 1975-76 and 1976-77 was valid in law ?'
4. To consider the first question, it would be apt to remind ourselves of the definition of the expression 'turnover' in section 2(s) of the State Act which is in the following terms :
'(s) 'Turnover' means,
(i) the total amount set out in the bill of sale;
(ii) the total amount of consideration for the sale or purchase of goods as may be determined by the assessing authority, if the bill of sale does not set out correctly the amount for which the goods are sold; or
(iii) if there is no bill of sale, the total amount charged as the consideration for the sale or purchase of goods by a dealer either directly or through another, on his own account or on account of others, whether such consideration be cash, deferred payment or any other thing of value and shall include, -
(a) the cost of any goods as determined by the assessing authority,
(i) to have been used or supplied by the dealer in the course of execution of the works contract;
(ii) to have been delivered by the dealer on hire purchase or any other system of payment by instalments;
(iii) to have been supplied or distributed by a society including a co-operative society, club, firm or association to its members, where the cost of such goods is not separately shown or indicated by the dealer and where the cost of such goods is separately shown or indicated by the dealer, the cost of such goods as shown or indicated;
(b) any other sum charged by the dealer for anything done in respect of goods sold at the time of, or before, the delivery of the goods;
(c) any other sum charged by the dealer, whatever be the description, name or object thereof; and
(d) the aggregate of amounts charged under section 5-C or realisable under section 5-E :
Provided that in the case of a sale by a person whether by himself or through an agent of agricultural horticultural produce grown by himself or grown on any land in which he has an interest, whether as owner, usufructuary mortgagee, tenant or otherwise, the amount of consideration relating to such sale shall be excluded from his turnover when such produce is sold in the form in which it was produced, without being subjected to any physical, chemical or other process for being made fit for consumption save mere cleaning, grading or sorting.'
To bring the value of the copper wire supplied to the respondent-assessee under clauses (i) and (ii), it should have been included in the bill of sale. Indeed, there is no bill of sale and as such the question of including the value in the bill of sale does not arise. If there is no bill of sale, clause (iii) is attracted and it becomes necessary to determine whether any consideration was charged for the wire supplied by the Posts and Telegraphs Department under the agreement entered into between the parties. For this purpose what is relied upon is Letter No. 41-6/74-MMS, New Delhi-110 001, dated August 27, 1975. Clauses (1), (2) and (4) of the said letter on which reliance is placed by the learned counsel for the parties may be noted here :
'The following are the main points of agreement.
(1) P&T;'s recovered copper wire will be supplied on zero value basis to HCL and quantity accounting will have to be rendered in the shape of cables returned. The quantity accounting will be on the basis of the consumption norms that may be determined and agreed to in the case of cables for the production of which P&T;'s recovered copper is used.
(2) The calculation of profits on the cost of such cables may be made including the cost of copper at the P&T;'s accounting price ruling in the year.
(3) ............
(4) In the event of the P&T;'s recovered copper wire being used in the production of cables and wires supplied to departments other than the P&T;'s the value of copper thereof shall be charged at the ruling MMTC's prices and the difference in such value above the P&T; accounting price shall be returned to P&T; in cash at the end of the year with full information about the supplies made and their copper content.
(5) ............
(6) .............'
5. A perusal of the clauses extracted above shows that the 'copper wire' was supplied by the Posts and Telegraphs Department on zero value basis to the assessee and the assessee was under an obligation to convert it into cables and account for the same. The profits of the assessee are calculated in terms of clause (2) referred to above, that is, the assessee will be entitled to profit on the cost of the cables which would include the cost of copper at the Posts and Telegraphs Department's accounting price ruling in the year. These two clauses make it clear that there was no sale of copper wire in favour of the assessee, but the assessee was given profit for the work it had undertaken, namely, converting the copper wire into cables for the use of the Posts and Telegraphs Department.
6. Placing reliance on clause (4), it is contended by the learned Government Pleader that it shows that the assessee was entitled to deal with the copper wire therefore it must be assumed that the assessee became the owner of the copper wire supplied to it. We are unable to read the said clause in the way in which the learned Government Pleader wants us to read. In our view, clause (4) deals with the eventuality of the conversion of the copper wire into cables for the use of departments other than P&T.; It provides that if the Posts and Telegraphs Department's recovered copper wire is used in the production of cables which are supplied to other departments, the value of the copper wire shall he charged to the assessee at the ruling MMTC's prices. The assessee was under an obligation to return the difference between such value and the Posts and Telegraphs Department accounting price in cash at the end of the year with information about the supplies made and their copper content. In our view, this clause cannot be interpreted to mean that the assessee would become the owner of the copper wire supplied to it by the Posts and Telegraphs Department for conversion into cables and return with liability to account for any shortfall.
7. A feeble attempt is made to show that as the assessee had dealt with the cables by raising loan on it, the assessee was the owner of the cables. We had already indicated above that as the property in the copper wire of the Posts and Telegraphs Department did not pass of to the assessee, the position of the assessee was that of a bailee and if it has raised any loan on that stock of cables that would not make the assessee the owner of the cables.
8. In Hyderabad Chemicals and Fertilizers Ltd. v. Deputy Commissioner, Commercial Taxes [1962] 13 STC 812 (AP), the assessee-company, which was a manufacturer of fertilizer mixtures, had agreed to supply to a sugar factory sugarcane fertilizer mixture which includes groundnut oil-cake. The sugar factory agreed to supply groundnut oil-cake to the assessee for being used in the mixture on the condition that the fertilizer mixture should be sold at a particular price fixed by them. Against that price, a rebate will be given for the value of the groundnut oil-cake supplied by the sugar factory and the balance will have to be paid by the sugar factory towards the price of the mixture. The question that fell for consideration by this Court was, whether the value of the entire mixture should be taken as the turnover of the assessee or only the price paid by the sugar factory should be taken as the turnover. It was held that the contract between the parties was not for work and labour, or a mixed contract of labour and material, in other words works contract, but a contract for the sale of the finished fertilizer mixture de hors its ingredients and that the assessee received groundnut oil-cake at fixed price as part of the price and that would not make the transaction anything but a sale of the entire fertilizer mixture.
9. The facts stated in Hyderabad Chemicals and Fertilizers Ltd. v. Deputy Commissioner, Commercial Taxes [1962] 13 STC 812 (AP) are clearly distinguishable from the facts of the present case as what was supplied by the assessee in that case was specified goods (fertilizer mixture) at a particular price. The groundnut oil-cake was not given to the assessee for conversion into a different commodity to be returned to it. In that case, out of the sale price, part price was received in cash and part price was received in kind, namely, as groundnut oil-cake, therefore, that decision does not help the petitioner.
10. In State of Andhra Pradesh v. Hotel Sri Lakshmi Bhavan [1974) 33 STC 444 the question before a Division Bench of this Court was whether the food supplied to the employees of a hotel, the assessee, amounts to sale and the value of the food will have to he included in the turnover of the assessee. The Division Bench held that, having regard to the definition of 'sale' under section 2(n) of the State Act, the supply of food by the assessee to its employees did not amount to 'sale' as the supply could not be brought within the meaning of 'any other valuable consideration'.
11. In Goel & Co. v. Sales Tax Officer : 1988(38)ELT733(SC) , the assessee, who was a building contractor, was granted a tender for construction of foodgrain godowns and other ancillary buildings. The Public Works Department of Madhya Pradesh supplied iron, steel and cement for being used in the construction work and deducted their value or their prices from the final bill. The Sales Tax Officer assessed the value of the iron, steel and cement supplied to the contractor under the relevant provisions of the Madhya Pradesh Act. The assessment was upheld by the Deputy Commissioner. Challenging the order of the Deputy Commissioner writ petition was filed in the High Court, which was also dismissed. On appeal to the Supreme Court, it was held that the fact that the value of the, materials supplied was specified at a rate and was set-off or deducted from any sum due to the contractor, indicated that a sale inhered from the transaction as by the use or consumption of the materials in the work of construction, there was passing of the property in the goods to the assessee from the Public Works Department and by the agreement there was a sale from the Public Works Department to the assessee. In that case there was a clear finding that the property in the goods passed of to the assessee, but in the case on hand, as already concluded by us, the property in the goods did not pass of to the assessee. Therefore, this decision also does not help the petitioner.
12. In the view we have expressed, it is unnecessary to consider the second question.
13. For the above reasons, we do not find any merit in the tax revision cases and we, accordingly, dismiss them without costs.
14. Petition dismissed.