1964 (7) TMI 52 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the turnover of Rs. 3,26,075.20 nP. relates to a works contract or a contract for the sale of goods.
2. Whether the sum of Rs. 43,349.05 nP. received for the manufacture and installation of bottle coolers constitutes a works contract or a contract for the sale of goods.
3. Whether the sales tax collected by the petitioner from its customers amounting to Rs. 9,273.70 nP. should be applied retroactively for the entire assessment year, including the period before the amendment came into force on 16th November 1957.

Detailed Analysis of the Judgment:

1. Turnover of Rs. 3,26,075.20 nP. for Fabrication, Supply, and Erection of Steel Structures:
The primary question was whether this amount represented a "works contract" or a contract for the sale of goods. The Tribunal had previously enhanced the turnover by Rs. 3,26,075.20 nP., holding that the contract was not a "works contract," reversing the Appellate Assistant Commissioner's finding.

The Court emphasized that the distinction between a "works contract" and a contract for the sale of goods is often fine and context-specific. The key test is whether the contract's main objective was the sale of goods or the execution of work and labor. If the contract is indivisible and the consideration is for an inclusive lump sum, it is generally a works contract.

The Court examined the contract between the petitioner and the sugar factory, noting that the petitioner was not a dealer in raw steel materials but a structural engineering firm. The contract stipulated a consolidated lump payment based on the weight of steel consumed, with no provision for the passing of property in the goods before the completion of the work. The Court held that the contract was an indivisible works contract for the execution of work, and there was no element of a sale of goods.

The Court concluded that the amount of Rs. 3,26,075.20 nP. should be deleted from the assessable turnover, as it was part of a works contract.

2. Sum of Rs. 43,349.05 nP. for Manufacture and Installation of Bottle Coolers:
The issue was whether the contracts for the manufacture and installation of bottle coolers were "works contracts" or contracts for the sale of goods. The petitioner did not sell bottle coolers as finished products but manufactured them according to customer specifications and installed them at the customer's premises.

The Court noted that the installation work required significant skill and labor, and the contract was for an all-inclusive price for both fabrication and installation. The Court referred to the principles in previous cases, emphasizing that if the goods are specially manufactured and not suitable for sale to others in the ordinary course of business, the contract is generally a works contract.

The Court concluded that the contract for the bottle coolers was a works contract, as the predominant intention was the execution of work and labor, not the sale of goods.

3. Sales Tax Collected Amounting to Rs. 9,273.70 nP.:
The petitioner argued that the amendment exempting sales tax on sales tax collected should apply retroactively for the entire assessment year. The State contended that the benefit should only apply from the date of the amendment, 16th November 1957.

The Court referred to the Supreme Court's judgment in Mathra Parshad & Sons v. State of Punjab, which held that such amendments apply retroactively. Consequently, the Court upheld the petitioner's claim, allowing the benefit of the amendment for the entire assessment year.

Conclusion:
The tax revision case was allowed, with the Court ruling in favor of the petitioner on all three issues. The turnover of Rs. 3,26,075.20 nP. and the sum of Rs. 43,349.05 nP. were deemed part of works contracts, and the sales tax collected amounting to Rs. 9,273.70 nP. was to be applied retroactively for the entire assessment year. No costs were awarded.

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