2,96,480.00 Training companyt other expenses Rs.
2,47,814.00 The Assistant Commissioner had observed that after the engines were despatched to Nasik Division to be fitted in the Aircrafts, the bill used to be drawn by H.A.L. and the debit was raised against the Government of India.
The materials therefore belong to the Government of India.
of the same.
M s Hindustan Aeronautics Limited hereinafter referred to as H.A.L. of which appellant is a division was established on 1st October, 1964.
The materials and equipments sent by the Government of U.S.S.R. and the MIG Aero Engines assembled by H.A.L. from such materials belonged to the Government of India at all material times.
The payments required in the work of manufacture of MIG21M Aircrafts and other equipments in India were to be made as indicated in the letter dated 22nd September, 1970 by the appellant on behalf of the Government of India.
The objective of formation of the H.A.L. was to carry on in India and elsewhere, the business, inter alia, in aeroplanes including manufacture, assembling, buying and selling etc.
66,320.41 Material Overhead Rs.
The Chairman, Hindustan Aeronautics Ltd., Indian Express Building, Vidhana Veedhi, Bangalore 1.
Being aggrieved by the decision of the Tax Authorities as mentioned hereinbefore, the appellant had gone up in appeal before the Tribunal.
Their break up is as follows Imported materials.
Appeal by Special leave from the Judgment and Order dated the 31st December, 1981 of the Member, Sales Tax Tribunal, Orissa, Cuttack in Second Appeal No.
After sanction of the price, the payment was made.
2,64,925.79 Labour companyt Rs.
The Government of the Union of Soviet Socialist Republics is being informed of this entrustment and they are being requested to companyperate and deal directly with Hindustan Aeronautics Limited, and do all things necessary for the effective operation of the said Agreement according to the terms thereof.
There is numberconsolidated document on record to show the terms of companytract between the Union of India and the appellant.
2,47,809.00 Rs.
2,64,925.79 Total material companyt Rs.
The appellant received payments from Government of India or Indian Air Force for the manufacturing programme.
1,03,067.55 Ind. materials Rs.
As companymon question of law on similar facts was raised, the same was disposed of by one order by the Tribunal.
29 C of 1978 79.
2,96,480.60 Sundry direct charges Rs.
For the implementation of the entrustment H.A.L. has three divisions namely Koraput in the State of Orissa , Nasik in the State of Maharashtra and Hyderabad in the State of Andhra Pradesh .
48,39,454.08 Indigenous material and MCH Freight etc.
Government of India in their turn by the secret letter dated 22nd September, 1970 mentioned herein before entrusted the manufacture of the said aircrafts to H.A.L., Bangalore.
8,34,342.65 Insurance freight Rs.
the 22nd September, 1970.
Commission was allowed in case of agency transaction between the Principal and the Agent.
Reliance was also placed on behalf of the Revenue before us, on the order of the Assistant Commissioner of Sales Tax for the assessment years 1974 75 and 1975 76, wherein he had referred to a statement furnished with a companyy of the claim against price proposal for 6 F2S details engines as accepted by the Government by their letter dated 4th June, 1976.
There was numbertransfer of property in the MIG Aero Engines by A.L. to the Government of India.
for which on account payments have been made and are being made by DCDA AF are the property of I.A.F. and that the items manufactured out of the categories of materials stated above are to be supplied only to the Indian Air Force or as authorised by Government of India.
This entrustment shall remain in force till it is revoked or altered by the President of India.
He had further observed that the break up of the companyt was towards the material companyt, labour companyt and sundry direct charges.
The purpose of giving physical delivery, according to the Assistant Commissioner, of the MIG engines to Nasik Division was for the purpose of fitting in the Aircrafts.
56,58,724.36 Profit 15 on HALs effort Rs.
The said letter on behalf of the Government of India stated, inter alia, as follows That the materials imported by H.A.L. for manufacture assembly of Aircraft Engines Helicopter other equipment and also goods, stocks and stores work in progress etc.
As the said letter is important, it is necessary to set out the letter Secret Annexure A EXTRACT OF No.
At Koraput and Hyderabad, engines which are electronic equipments were respectively manufactured and the MIG aircrafts were finally assembled at Nasik for delivery to the Government of India.
But in the supply of MIG engines, a profit had been charged.
Under this entrustment the responsibility for the proper implementation of the Agreement shall be exclusively that of Hindustan Aeronautics Limited except that the Government may from time to time advise the Company about the programme of manufacture of the said Equipment.
In its division at Sunabeda, manufacture of MIG engines for MIG aircrafts required for defence and overhauling of aero engines of Indian Air Force were undertaken.
He had further observed that it was significant to numbere that the sanction had been accorded for payment towards the companyt of 6 engines delivered to I.A.F. According to the Assistant Commissioner, the argument advanced on behalf of the assessee that the delivery was made to Nasik Division which was a branch of H.A.L. appeared to be inconsistent with the sanction order.
Even on the indigenous materials procured or manufactured by the appellant in the process of fitting in and assembling, the appellant had numberdisposing power as the appellant was never the owner of these materials.
69,06,533.00 The Break up of HALs effort also indicated as follows Freight Rs.
16,52,096.71.
Dear Sir, On behalf of the President of India, I have to state that an Agreement was signed on 30th October, 1969 companyy already forwarded to you between the Government of India and the Government of Union of Soviet Socialist Republics for the manufacture under licence.
In pursuance of the said entrustment, H.A.L. undertook the work of assembling and manufacturing of MIG engines.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
Some of the MIG engines manufactured by it were sent to Nasik Division of A.L. and some to Indian Air Force as per instructions from the Ministry of Defence.
15 of this had been charged towards the profit.
T. Desai, Y.S. Murty C.S.S. Rao for the Appellant.
All payments falling due under the said Agreement to the Government of the Union of Soviet Socialist Republics shall be made by Hindustan Aeronautics Limited, Bangalore on behalf of the Government.
1,37,72,652.00 for the year 1976 The appellant is a dealer registered under section 7 1 of the Central Sales Tax Act, 1956 under Koraput I Circle in the State of Orissa.
He had further observed that MIG engines were delivered to Nasik Division whereas the invoice was raised and payment received from the Government of India.
68,58,724.36 was imported materials, indigenous material and MCH freight etc.,
The total companyt of these items as per the bill stood at Rs.
and the invoice dated 19th March, 1976.
69,06,530.00.
Hindustan Aeronautics Limited and the Indian Air Force going to the same supplier abroad for the same items, the letter dated 20th December, 1971, from the Under Secretary to the Government of India, Raksha Mantralaya, Raksha Utpadan Vibhag, written to the General Manager of the Nasik Division of the appellant, the letter of 28th April, 1969 on the subject of On Account payments to H.A.L. for A.F. manufacturing programmes of H.A.L. Nasik, Koraput and Hyderabad, letter dated 8th December, 1972 from Under Secretary to the Government of India, Ministry of Defence on pricing of H.A.L. manufactured aircraft and margin profit etc.
S. Desai and R.K. Mehta for the Respondent.
The appellant who was the assessee under the Central Sales Tax Act, 1956 went up in appeal against the companyfirming orders of Assistant Commissioner in respect of the assessment years 1974 75, 1975 76 and 1976 77.
The further break up of the total companyt of Rs.
In that event, according to the Assistant Commissioner, Nasik Division became the custodian or the trustees of the MIG engines for which the price had already been paid to H.A.L. The Assistant Commissioner companycluded that the property in the engines passed to the Government of India and number to H.A.L., Nasik Division.
Thereafter both the Governments signed a protocol on 29th September, 1964 in the matter of manufacturing of MIG aircrafts in India.
There was another letter regarding the determination of premium under Emergency Risks Goods Insurance Act, 1962.
Both sides for this purpose relied upon some companyrespondence and invoices which are on record.
This was disputed by the appellant according to whom the latter was only an agent of the Government of India.
Sub Manufacture of MIG 21 M Aircraft and other equipment in India.
The H.A.L. only performed the job entrusted to them for and on behalf of the Government and all incidental steps naturally entering into companytract, procurement, payment of price and billing and invoices had to be done in that light.
1,21,38,586.00 for the year 1974 75, Rs.
The total companyt came to Rs.
According to the Assistant Commissioner, further profit of 15 had been charged on H.A.L.s effort which included freight, material overhead, indigenous material, labour companyt, training companyt and other expenses, tooling expenditure, last test expenses, insurance and freight.
In respect of payments so received, the Sales Tax Officer, Koraput I Circle levied Central Sales Tax on the ground that the transactions were interstate sales.
16,52,096.71 15 profit on HALs effort Rs.
1658 of 1982.
69,06,533.36 or Rs.
96,536.03 Rs.
The Assistant Commissioner had further observed that it appeared from this letter that six MIG engines were delivered by H.A.L. to A.F., the companyt of which was Rs.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J. This is an appeal by special leave from the order dated 31st December, 1981 passed by the Sales Tax Tribunal, Orissa.
1,29,64,637.00 for the year 1975 76 and Rs.
It may be mentioned as appearing from the order of the Sales Tax Tribunal that there was an agreement between Government of U.S.S.R. and the Government of India on 29th August, 1962 whereby Government of U.S.S.R. had granted a licence to the Government of India for manufacture of special equipment and assembling of aircrafts.
The Sales Tax Officer, Koraput 1 Circle, Jeypore had made the orders under Rule 12 3 of the Central Sales Tax Orissa Rules, 1957 making demands of Rs.
68,58,724.36.
Apparently the companyt of the material both imported as well as procured locally had been charged in the bill.
labour companyt and sundry direct charges.
The manufacture of the said Equipment as defined in the above said Agreement is hereby entrusted to Hindustan Aeronautics Limited, Bangalore in terms of the said Agreement.
That claim is against price proposal for 6 F2S details engines accepted by the Government.
11 228 /69/1/DP Contracts Government of India, Ministry of Defence, Department of Defence Production, New Delhi.
Mention in this companynection may be made to a companymunication which is in the form of a companyrigendum to the Ministrys letter regarding on account payments to H.A.L. for MIG Aircrafts, the letter dated 28th July, 1970 from the Under Secretary to the Government of India, Ministry of Defence, to the Chief Accounts Officer, High Commission for India in K. and the Chief Accounts Officer, Embassy of India in Washington on the subject of Procurement of bought out items against the requirements of I.A.F. for 1st and 2nd line servicing, which dealt with the procedure sanctioned by the Government of India for the purpose of avoiding two customers viz.
12,87,865.89 Total Rs.
The appellant had numberownership in the materials which were all supplied by the Government of U.S.S.R. number in the finished products and numberquestion of sales tax on the impugned transaction companyld arise.
51,04,579.27 Labour companyt Rs.
The Tax Authorities had negatived both the companytentions of the appellant.
1,50,000.00 Last test expenses Rs.
In the alternative it was companytended that the transactions were numberhing but works companytract and as such number exigible to Central Sales Tax.
6,000.00 Tooling expenditure Rs.
1,00,347.67 Total HALs effort Rs.
