Bishambhar Dayal, C.J.
1. The judgment in this case shall also govern the disposal of the connected reference--Miscellaneous Civil Case No. 271 of 1968--made at the instance' of the assessee. Both these references are made under Section 44 of the Madhya Pradesh General Sales Tax Act, 1958, and arise out of the same assessment.
2. The assessee in these cases is M/s. Hindustan Steel Limited, Bhilai Steel Project, Bhilai (hereinafter referred to as 'the company'). While the said company were in the process of constructing their buildings and roads, etc., they employed contractors for the purpose of making constructions. Since the building materials were controlled, the contractors found it difficult to obtain them for the said construction work. The company, therefore, agreed to procure the materials themselves and supply the same to the contractors for building purposes. For these supplies they charged their cost price plus 10 per cent. for supervision and storage, etc. In the agreement Clause 51, it is expressly stated:
All materials supplied to the contractor shall remain the absolute property of the employer and shall not on any account be removed from the site of the work and shall at all times be open to inspection by the Engineer.
3. On these facts the taxing authorities came to the conclusion that the assessee was not carrying on the business of selling building material, nor did the supply of material under the agreement to, the contractors amount to a sale of the material to the contractors. But the taxing authorities also held that in so far as the material supplied over and above the contracted quantity was concerned, although it was also supplied for the same purpose and under the same conditions, it amounted to a sale to the contractors.
4. In the reference which is made at the instance of the department (Miscellaneous Civil Case No. 270 of 1968) and which is regarding the supplies made as per the contract, the question referred to us is as follows:
Whether under the facts and circumstances of the case, the supplies of material amounting to Rs. 75,65,993.91 to its contractors under the written agreements amount to sales and are liable to sales tax
The other reference which is made at the instance of the assessee relates to the supplies to the contractors over and above the contracted quantity (Miscellaneous Civil Case No. 271 of 1968) and the questions referred therein are as follows:
(1) Whether on the facts and circumstances of the case, the supply of building material to the contractors for getting the construction completed without written agreements amounted to 'sales' within the meaning of the C. P. and Berar Sales Tax Act, 1947 ?
(2) Whether the assessee-company is a 'dealer' within the meaning of Section 4 of the C. P. and Berar Sales Tax Act, 1947, in respect of the supply of building material to its own contractors without written agreements for the purpose of execution of the contracts of constructions for and on behalf of the assessee?
5. After hearing the learned counsel for both parties, we are quite clear that upon the findings arrived at by the Tribunal that the company was not carrying on business in the building material which it was supplying to its own contractors for preparing its own buildings and that the ownership in the material did not pass to the contractors, there can be little doubt that there was no sale either in respect of the material supplied under the written contract or the supplies which were made later over and above the quantity stipulated under the contract, The mere fact that the company charged from the contractors 10 per cent. over and above the cost price at which it purchased the material is wholly immaterial. This charge was made for the supervision over the materials from the stage when they were brought in the possession of the company up to the stage when they were utilised in the building constructions and ultimately when the material was so utilised even this extra charge of 10 per cent. was adjusted in the accounts because the material was to be adjusted by the contractor at the rate at which he purchased it.
6. The learned counsel appearing for the State drew our attention to another portion of Clause 51 of the agreement which is as follows:
Any such materials unused and in perfectly good condition at the time of the completion or determination of the contract shall be returned to the Engineer store, if by a notice in writing under his hand he shall so require, but the contractor shall not be entitled to return any such materials unless with such consent and shall have no claim for compensation on account of any such materials so supplied to him as aforesaid being unused by him, or for any wastage in or damage to any such materials.
In this portion of the clause there is nothing to indicate that the ownership of the material was to pass to the contractor. This provision had been made only for the purpose of safeguarding 'the interest of the company in case the contractor starts saying that some material has remained unused which the company thinks is wrong or which the contractor may unnecessarily waste and may claim damages for waste of material which remained unused in the building. In order to avoid such unseemly controversies this provision in the agreement has been made and it only affects the matter of adjustment of accounts. It does not affect the passing of the material to the contractor. We, therefore, see no element in the case by which the assessee would be a dealer and the transaction between the assessee and its contractor would become a sale.
7. The result, therefore, is that the question referred to us in the reference made at the instance of the department (i.e. Miscellaneous Civil Case No. 270 of 1968) is answered m the negative as follows:
Under the facts and circumstances of the case, the supplies of material amounting to Rs. 75,65,993.91 made by the company to its contractors under the written agreements do not amount to sales and are not liable to sales tax.
Similarly, the questions referred in the reference made at the instance of the assessee-company (Miscellaneous Civil Case No. 271 of 1968) are answered in the negative as follows:
(1) Under the facts and circumstances of the case, the supply of building material to the contractors for getting the construction completed without written agreements did not amount to 'sales' within the meaning of the C. P. and Berar Sales Tax Act, 1947.
(2) The assessee-company is not a 'dealer' within the meaning of Section 4 of the C. P. and Berar Sales Tax Act, 1947, in respect of the supply of building material to its own contractors without written agreements for the purpose of execution of the contracts of constructions for and on behalf of the assessee.
8. The assessee-company will be entitled to its '. costs in both the references which we assess at Rs. 200 in each case.