J.P. Bajpai, J.
1. This is a reference under Section 44 of the Madhya Pradesh General Sales Tax Act. The reference has been made on the application dated 7th July, 1970, moved by the Commissioner of Sales Tax, against the order passed by the Tribunal, the Board of Revenue, M. P., on 30th April, 1970, in Appeal No. 109-IV of 1969. By the aforesaid order, the Board of Revenue has decided the other two appeals, Commissioner of Sales Tax, M.P. v. Mohammad Zahoor, P. W. D. Contractor, Sidhi (No. 107-IV of 69) and Commissioner of Sales Tax, M.P. v. Mohammad Zahoor, P. W. D. Contractor, Sidhi (No. 108-IV of 69) also in-between the same parties, but for different periods of assessment. Since the point involved in all the appeals was common, they have been disposed of by the common order. Under these circumstances, the judgment in this case will also govern the following miscellaneous civil cases : (i) Misc. Civil Case No. 34 of 1972 ; and (ii) Misc. Civil Case No. 33 of 1972 : Commissioner of Sales Tax v. Mohammad Zahoor.
2. The Tribunal has referred the following question to be answered by this court:
Whether, under the facts and circumstances of the case, the iron and cement supplied by the P.W.D. to the assessee for use in the works executed by the appellant for P.W.D. was sale and was liable to purchase tax under Section 7(1) of the Act ?
The facts relevant for the purposes of this reference have been stated in the statement of the case which was prepared with due notice to the counsel for both sides and they had no comments on the same. The periods of assessment involved in these three cases relate to the years 1961-62, 1963-64 and 1965-66.
3. It is undisputed that the assessee is a dealer registered under the provisions of the Madhya Pradesh General Sales Tax Act. The assessee executed certain works for the State Government in the public works department. Certain quantity of iron and cement was supplied by the public works department to the assessee for being used in the construction of buildings concerned. Since, according to the terms and conditions of the tender, the price of these articles was already included in the tender offered by the contractor and accepted by the State Government, necessary deductions were made from the final bill towards the price of iron and cement supplied by the department to the assessee : vide assessment order dated 27th February, 1967, for the periods 1961-62 and 1963-64, and the order dated 8th March, 1967, for the period 1965-66. The assessing authority held the assessee liable for purchase tax over the price of iron and cement supplied by the public works department. The assessing authority was of the view that since iron and cement were supplied by the P.W.D. and their price was finally deducted from the payments due to the contractor, the transaction amounted to a sale and since the assessee had accordingly purchased the aforesaid articles for being used in the works and for which he had charged the State Government, he was liable to purchase tax in accordance with the provisions of Section 7 of the Madhya Pradesh General Sales Tax Act. For the sake of convenience, Section 7 of the Act is reproduced below :
7. Levy of purchase tax.-(1) Every dealer who in the course of his business purchases any taxable goods from a registered dealer, in circumstances in which no tax under Section 6 is payable on the sale price of such goods or from any other person and either consumes such goods in the manufacture of other goods for sale or otherwise or disposes of such goods in any manner other than by way of sale in the State or despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, shall be liable to pay tax on the purchase price of such goods at the same rate, at which it would have been leviable on the sale price of such goods under Section 6 :....
4. In order to appreciate the facts and circumstances properly and to decide whether the aforesaid transaction was a purchase liable to purchase tax under Section 7(1) of the Act, it will be necessary to consider the effect of Clause 11 of the contract entered into between the assessee and the department in connection with the work of construction. Clause 11 of the contract is reproduced below :
Stores supplied by Government.-If the specification or estimate of the work provides for the use of any special description of materials to be supplied from the Engineer-in-charge's store or if it is required that the contractor shall use certain store to be provided by the Engineer-in-charge (such materials and store, and the price to be charged thereof as hereinafter mentioned being so far as practicable for the convenience of the contractor but not so as in any way to control the meaning or effect of this contract or specified in the schedule or the memorandum hereto annexed) the contractor shall be supplied with such materials and stores as required from time to time to be used by him for the purposes of the contract only and the value of the full quantity of material and stores so supplied at the rates specified in the said schedule or memorandum may be set-off or deducted from any sums then due or thereafter to become due to the contractor under the contract or otherwise or against or from the security deposit or the proceeds of sale thereof, if the same is held in Government securities, the same or a sufficient portion hereof being in this case sold for the purpose. AH material supplied to the contractor shall remain the absolute property of Government and shall not on any account be removed from the site of work and shall at all times be open to inspection by the Engineer-in-charge. Any such material unused and perfectly in good condition at the time of the completion or determination of the contract shall be returned to the Engineer-in-charge's store if by a notice in writing under his hand he shall so require, but the contractor shall not be entitled to return any materials so supplied to him as aforesaid being unused by him or for any wastage in, or damage to, any such materials.
5. During the course of arguments, it was observed by us that, as necessary information regarding the extent of deductions of the price of iron and cement supplied by the public works department, out of bills due for payment to the contractor was not available on record, additional statement of case may be required for getting the said information. But, however, on perusal of annexure B in all these cases, it is found that the necessary information regarding final deductions of the price of iron and cement supplied by the P.W.D. is available in paragraph 3 of the assessment orders (annexures C, D and E). Under these circumstances, it is not necessary to call for any additional statement.
6. A perusal of Clause 11 of the contract, as reproduced above, indicates that the price of iron and cement supplied by the P.W.D. to the contractor was to be deducted from the bills and no cash payment was necessary then and there. The underlined* portion, i. e., the last sentence of the clause clearly indicates that even if some quantity of supplies was to remain unused at the time of the completion or determination of the contract, the contractor was not entitled to return the same. He could do so only if the department was prepared to take it back. Thus, so far as the contractor was concerned, the articles supplied were his property for which the price, of course, was to be deducted at a later stage at the time of payment of the bills. He had no choice to return the unused materials. There is no dispute that the assessee, who was a registered dealer, disposed of the articles supplied in the manner as stated above, i. e., by using the same in the building works. Under these circumstances, the view of the assessing authority that the dealer was liable to purchase tax appears to be correct. The provisions of Section 7 of the Act are wide enough to cover purchases, even from the public works department, who may not be a registered dealer. Sales tax could not be levied on such transaction because the P. W. D. was not a registered dealer. The purchase having been made by the assessee and the goods having been disposed of by him in the manner stated above, other than by way of sale in the State or despatch outside the State, except with the direct result of sale or purchase in the course of inter-State trade or commerce, the dealer becomes liable for payment of purchase tax.
7. The Board of Revenue committed a mistake while reading the relevant terms incorporated in Clause 11. It is evident from the following observations in paragraph 3 of the order (annexure A) :
It is also provided in the said clause that the unused material will have to be returned to the Engineer-in-charge of the stores.
This is absolutely contrary to the language of the terms incorporated in Clause 11. The learned member of the Board of Revenue failed to see that there was a specific term to the effect that:
the contractor shall not be entitled to return any materials so supplied to him as aforesaid being unused by him or for any wastage in, or damage to, any such materials.
The learned member of the Board also erred in ignoring that the provision for returning the goods was conditional and was dependent on the choice of the Engineer-in-charge of the stores. The goods unused could be returned only if the officer desired so by a written notice and not otherwise. Similarly, the mention of the condition in Clause 11 that
All materials supplied to the contractor shall remain the absolute property of Government and shall not on any account be removed from the site of work and shall at all times be open to inspection by the Engineer-in-charge.
has also been wrongly construed by ignoring the fact that the aforesaid term was operative only during the period prior to completion or determination of the contract. Such provisions were made for avoiding the possibility of pilferage, etc. The price of the articles was not immediately paid and was to be recovered by way of deductions from the bills later on. Under these circumstances, it was quite justified to incorporate the said terms. But once the price has been recovered, and the condition of the contract made it clear that the goods so supplied could not be returned back, even if they remained unused, there is no scope to say that there was no purchase by the contractor. The learned member of the Board of Revenue took the different view due to mistaken inference drawn by him, as stated above.
8. The learned counsel for the assessee appearing before us urged that in view of the language used in Clause 11, as stated above, it cannot be said that there was any transfer of property resulting in sale or purchase even if ultimately the price of the materials had been deducted from the bills of the contractors. This contention cannot be accepted because the clause in the contract is to be read as a whole and the specific term that
at the time of the completion or determination of the contract...but the contractor shall not be entitled to return any materials so supplied ...being unused by him....
cannot be ignored. The language used in the clause makes it clear that the earlier part prohibits the removal of the goods from the work site and states that the materials supplied shall remain the property of the Government. This relates to the period prior to determination or completion of the work. As already stated earlier, it was natural to say so because the payment of the price of the goods so supplied was also to be made by way of deductions from the bills due to the contractor. In order to appreciate the true effect of the clause, it is not possible to ignore the circumstances which are to ensue at the time of the completion of the work. If the purchase is complete, and the deductions of the price of the goods supplied have been already made during the period of assessment, the liability to purchase tax cannot be avoided on the ground that there was no purchase. We must look at the whole instrument inasmuch as there may be inaccuracy and inconsistency. We must, if we can ascertain what is the meaning of the instrument taken as a whole in order to give effect if it be possible to do so to the intention of the parties to the document or the frame of it.
9. Under these circumstances, the question referred to this court is answered in the affirmative by us as below :
Under the facts and circumstances of the case, the iron and cement supplied by the P.W.D. to the assessee for use in the works executed by the appellant for P.W.D. was a sale liable to purchase tax under Section 7(1) of the Act.
10. The case be sent back with aforesaid opinion to the Tribunal for further action according to law.