1987 (7) TMI 570 - HC - VAT and Sales Tax

Summary

Issues:
1. Determination of whether the contract between the assessee and the Director General of Supplies and Disposals, Government of India, was a contract for work and labour or a contract for sale of goods.

Analysis:
The High Court of Kerala heard a case where the Revenue petitioned against the decision of the Sales Tax Appellate Tribunal regarding the tax assessment of turnover under the Central Sales Tax Act. The Tribunal had directed the assessing authority to delete the turnover, considering the contract between the assessee and the Government of India as a contract for work and labour. The Revenue contended that the contract was, in fact, a contract for the sale of goods. The court referred to previous judgments to analyze the nature of such contracts. The Tribunal had emphasized clauses in the contract indicating the supervision and control of the authorities over the construction process, leading them to conclude it was a contract for work and labour. The court disagreed, highlighting payment terms, insurance provisions, and ownership clauses in the contract that indicated a sale of goods rather than a contract for work and labour.

The court examined the payment schedule in the contract, where payments were linked to construction milestones, and the requirement for insurance to protect the purchaser's advance payments. It noted that these clauses did not transfer ownership of the craft to the purchaser but aimed to safeguard the amounts advanced. The court also highlighted a clause stating that the contractor was responsible for the care and protection of the craft until acceptance by the purchaser. Additionally, a clause on ownership after the first instalment payment was seen as indicating ownership subject to the contract's terms. The court emphasized that the contract did not involve the supply of materials by the purchaser for construction, further supporting the view that it was a sale of goods. Therefore, the court concluded that the contract was indeed for the sale of hulls, overturning the Tribunal's decision.

In conclusion, the High Court allowed the Revenue's petition, reversing the Tribunal's decision and restoring the assessing authority's order. No costs were awarded in the case.