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State Of Rajasthan v. Nenuram
Factual and Procedural Background
The State of Rajasthan assessed sales tax on the Respondent, an approved Public Works Department contractor, for the financial year 1959-60 in the amount of Rs. 6,314.07 on an alleged turnover of Rs. 1,97,212/-. The assessment stemmed from a contract dated July 17, 1958 under which the Respondent was to “supply and fix” wooden doors, windows, frames and paint them during the construction of police lines at Pali. The Respondent claimed the contract was a single, indivisible works contract and therefore not chargeable to sales tax. After the Deputy Commissioner dismissed the Respondent’s statutory appeal for failure to deposit the assessed tax, the Respondent invoked the High Court’s writ jurisdiction under Article 226 of the Constitution. The High Court held the levy illegal and granted relief. The present appeal, brought by certificate, challenges that decision before the Supreme Court.
Legal Issues Presented
- Whether the contract for supplying, fixing and painting wooden doors and windows constituted an indivisible works contract, thereby excluding the transaction from the charge of sales tax under the Rajasthan Sales Tax Act.
- Whether the High Court could entertain a writ petition despite the Respondent’s failure to exhaust the statutory appellate remedies under the Act.
Arguments of the Parties
Appellant (State of Rajasthan)
- The contract was one of sale, or at least comprised two distinct agreements—one for the sale of movable goods (doors, windows, frames) and another for the ancillary labour of fixing them; therefore the turnover was taxable.
- The Rajasthan Sales Tax Act provides a comprehensive appellate framework; because the Respondent bypassed these remedies, the High Court should have refused writ relief.
Respondent (Contractor)
- The tender and acceptance created a single, indivisible works contract for a lump-sum price covering both materials and the labour of fixing them; no sale of movables occurred.
- Title in the goods passed only after installation, when the items became part of the immovable property, negating any taxable sale.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| State of Rajasthan v. Man Industrial Corporation Ltd., No. 882 of 1966, 1969 WLN (S.C.) 5 | Test for distinguishing a works contract from a contract of sale: whether the chattel passes as chattel or only after it is fixed and becomes part of immovable property. | The Supreme Court applied the same test, holding that the primary undertaking here was to fix the windows and doors; property passed only upon such fixing, making the contract indivisible and non-taxable as a sale. |
Court's Reasoning and Analysis
The Court examined the tender documents, the Executive Engineer’s acceptance letter of July 17, 1958, and a certificate dated December 16, 1960 confirming that departmental rates were “for completed item of wood i.e. for supplying and fixing both.” These materials demonstrated that one composite price covered both supply and installation. Referring to the test articulated in State of Rajasthan v. Man Industrial Corporation Ltd., the Court emphasized that the decisive question is whether the chattel passes as a movable or only upon incorporation into the building. It found that property in the doors and windows transferred only when they were fixed on site, at which point they became part of the immovable structure. Consequently, the transaction could not be dissected into a sale of goods component taxable under the Rajasthan Sales Tax Act. The Court therefore upheld the High Court’s conclusion that the levy and collection were entirely illegal. The Appellant’s procedural objection regarding non-exhaustion of remedies was not pursued in depth at this stage; the Court’s decision turned on the substantive tax question.
Holding and Implications
APPEAL DISMISSED; HIGH COURT JUDGMENT UPHELD.
The Respondent is not liable to sales tax on the disputed turnover, and the assessment is set aside. The decision reinforces the principle that an indivisible works contract, in which property in goods passes only after incorporation into immovable property, falls outside the scope of sales tax on sales of movables. No broader precedent was articulated beyond this reaffirmation, and no costs were awarded owing to the Respondent’s non-appearance.
A.N. Grover, J.
1. This is an appeal by certificate from judgment of the Rajasthan High Court involving the question whether the Respondent was liable to pay sales tax for supplying and fixing wooden windows and doors together with frames and painting them when the construction of the police lines building took place at a place called Pali. The Respondent is an approved contractor of the Public Works Department of the State. Tenders were invited by the Chief Engineer for doing the work mentioned above in April or May 1958. The Respondent's tender being the lowest was accepted by the Executive Engineer by means of a letter dated July 17, 1958, wherein it was stated "the chowkaths will have to be supplied and fixed at site along with the masonary work". The amount which was payable for the entire work was Rs. 1,81,528/- while making the assessment for the year 1969-60 the Sales Tax Officer was of the view that the total sales made by the Respondent amounted to Rs. 1,97,212/-. The position taken up by the Respondent was that the making of doors and windows as also the frames was a part of a single and indivisible works contract and as such no tax was payable. The Sales Tax Officer, however did not accept this contention and held the Respondent liable for payment of tax on sales of materials of the value already stated, the actual demand created being for Rs. 6,314,07, on the above turnover. The Respondent preferred an appeal to the Deputy Commissioner Excise & Taxation but the appeal was dismissed because the Respondent's prayer for permission to file it without depositing the tax was not acceded to. The Respondent then filed a petition in the High Court under Article 226 of the Constitution.
2. In the High Court a good deal of argument proceeded on the maintainability of the writ petition. The Appellant contended, inter alia, that the Rajasthan Sales Tax Act, hereinafter called the 'Act', was a comprehensive and self-contained enactment which provided for a complete set of remedies for the Assessee to get his grievances redressed. As the Respondent had failed to avail of those remedies the High Court should not grant relief in exercise of its extraordinary writ jurisdiction The High Court was of the opinion that the present case was one of levy and recovery of tax which was entirely illegal therefore the court was duty bound to give the necessary relief to the Assessee even if he had not availed of the statutory remedies open to him under the Act.
3. Before the High Court the controversy was confined to a turnover of Rs. 1,81,528/- only. After considering the relevant documents and other evidence the High Court came to the conclusion that "the contract in question was single and indivisible contract for the supply and fixing of wooden doors on the spot and that this contract was given and taken for an inclusive price". It was found that the goods were not sold as moveables and property in them was to pass only when the wooden chowkhats and windows etc. were fixed on the site.
4. Counsel for the Appellant urged before us that the contract was one of sale or was a combination of two distinct agreements one for sale and purchase of moveable chattels and the other for supply for service and labour to fix the moveables at the site. We are unable to agree. On the documents and other relevant facts and circumstances the High Court was fully justified in coming to the conclusion at which it arrived that the contract was one and indivisible. It hardly made any difference it was mentioned in the letter dated July 17, 1951 that the chowkhats were to be supplied and fixed at site along with the masonary work which meant that the same had to be done by the Respondent. In the certificate of the Executive Engineer dated December 16, 1960 which was produced by the Respondent before the Sales Tax Officer it was mentioned' inter alia, that the rate paid to the Respondent as per sanctioned schedule of the rates of the department was for wood work that is "for completed item of wood i.e. for supplying and fixing both". It is obvious that the rates which were charged were inclusive of the price of the materials and the wages or charges for fixing the windows and doors etc. at the site. In State Of Rajasthan v. Man Industrial Corporation Ltd. No. 882 of 1966 : 1969 WLN ( S.C.) 5 decided on February, 4, 1969, this Court had the occasion to consider a case where a contractor carried on the business of fabricating steel doors windows and other goods. A tender was made by him for providing and fixing windows and composite windows in the building and to make no separate charge for that service. It was contended, inter alia, on behalf of the State in that case that the contract was for sale of windows and the turnover in respect of such sale was liable to tax. After a careful consideration of the relevant case law the test was laid down in these words:
The test in each case is whether the object of the party sought to be taxed is that the chattel as chattel passes to the other party and the service rendered in connection with the installation and under a separate contract are incidental to the execution of the contract of sale.
In that case it was held that the primary undertaking of the contractor was not merely to supply the windows but to fix the windows. If the windows were not properly fixed the contract could not be complete. The view of the High Court was accepted that it was only upon the fixing of the window leaves and when the window-leaves had become a part of the building construction that the property in the goods passed under the terms of the contract. A similar position obtains in the present case.
The judgment of the High Court must be upheld. The appeal is dismissed but as there is no appearance on behalf of the Respondent, there will be no order as to costs.
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