R.S. Pathak, J.
1. The petitioner entered into an agreement with the North Eastern Railway 'for the manufacture and supply of quarry products from a private quarry at Kanakpur'. The Railway paid the petitioner on account of the ballast and boulders supplied by the petitioner at certain rates specified in the schedule of rates, which was made part of the contract. The contract also included a list of special conditions.
2. In the assessment proceedings for the assessment years 1958-59, 1960-61, 1961-62 and 1962-63 the Sales Tax Officer assessed the petitioner to sales tax upon the turnover of the ballast and boulders. In appeal by the petitioner the Judge (Appeals) Sales Tax confirmed the assessment in respect of ballast and boulders. The petitioner proceeded in revision before the Judge (Revisions) Sales Tax but was also unsuccessful there. At the instance of the petitioner the following question of law has been referred in the instant case for the opinion of this Court :
Whether in the circumstances of the case and under the terms of the contract between the applicant, and the North Eastern Railway the supply of ballast was a sale or amounted to a works contract
3. In the connected Sales Tax References, the question referred is :
Whether in the circumstances of the case and under the terms of the contract between the applicant and the North Eastern Railway the supply of boulders etc. was a sale or amounted to a works contract
4. We may point out that the question actually framed by the Judge (Revisions) speaks of the Northern Railway but it appears from the record that it is the North Eastern Railway.
5. The Judge (Revisions) Sales Tax has found that the ballast and boulders were collected by the petitioner from the river-bed upon payment of royalty by the petitioner to the Forest Department. Permission for collecting the ballast and boulders from the river-bed was secured by the petitioner although the Railway intervened in enabling it to secure the permission. The royalty paid by the petitioner was not defrayed by the Railway. The ballast and boulders were prepared in accordance with the size and specifications required by the Railway, and were supplied by the petitioner at specified railway sidings. The Judge (Revisions) noted in particular that the boulders on the river-bed were not the property of the Railway but of the Forest Department. Having regard to the circumstances, he held that there was a sale of the ballast and boulders by the petitioner to the Railway and repelled the contention of the petitioner that it was a works contract only.
6. We have heard the learned counsel for the parties, and we have also come to the same conclusion. The river-bed containing the ballast and boulders belonged to the Forest Department. The dealer paid royalty to the Forest Department for the right to collect and remove them. They were cut down to size and shaped to conform to certain specifications and then transported to the railway sidings. Payment was to be made only on measurement. We are referred by the learned counsel for the dealer to paragraph 14 of the Special Conditions of Contract, Paragraph 14 is set out hereunder :-
If any quantity of quarry product is left surplus in the quarry after completion of the full supply in terms of the agreement, it will be considered as the property of the N.E. Railway and, if required, may be taken over at the rate which will be fixed for it by the Chief Engineer and his decision of the rate shall be final. If such excess is not required by the Railway, the contractor shall be allowed to remove it on payment of 0-8-0 (annas eight only) per cent. CFT. (one hundred cubic feet) for royalty and 0-12-0 (annas twelve) per cent. CFT. for overhead and siding charges and freight charges at public rates. If the materials are not removed by the contractor within two months from the date of service of any requisition by the Railway Administration for the purpose the contractor shall forfeit all right, claim and interest in the same.
7. It appears from a perusal of this paragraph that the quarry product left over after supplying the ballast and boulders according to the specifications in the contract was also liable to be treated as the property of the Railway and could be taken over at a rate to be determined by the Chief Engineer of the Railway. Where the surplus was not required by the Railway it was open to the petitioner to remove it on payment of royalty, overhead and siding charges and freight charges. The paragraph further goes on to say that if the material was not removed by the petitioner within two months from the date of service of any requisition by the Railway for the purpose the dealer would forfeit all right, claim and interest in the same. We are unable to see anything in paragraph 14 which is inconsistent with the case that the ballast and boulders are sold by the petitioner to the Railway. Had the quarry product been the property of the Railway there would have been no occasion for providing for payment to the petitioner in respect of the surplus taken over by the Railway. There would also have been no necessity for adding the further condition that if the material was not removed by the petitioner within two months from the date of service of a requisition by the Railway the petitioner would forfeit all right, claim and interest in the same.
8. We are not satisfied that the finding of the Judge (Revisions) Sales Tax is erroneous in law and accordingly, we hold that this is not a case of a works contract but of a sale of the ballast and boulders by the petitioner to the Railway. We answer the questions of law in all the references accordingly. The Commissioner of Sales Tax shall be entitled to his costs in the instant reference which we assess at Rs. 200. Counsel's fee is also assessed at Rs. 200. There is no order as to costs in the connected references.