1963 (5) TMI 46 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the contract of fitting and building bodies on chassis supplied by the customer constitutes a "sale" under the Punjab General Sales Tax Act, 1948.
2. Whether it was necessary to separately mention the items for the material used and the labor involved to be entitled to the exemption.

Detailed Analysis:

Issue 1: Contract of Fitting and Building Bodies as a "Sale"
The primary contention was whether the contract for fitting and building bodies on chassis supplied by the customer could be regarded as a contract for the sale of goods or an indivisible contract for work and labor. The petitioner-firm argued that the contract was for work and labor, emphasizing that the chassis was supplied by the customer, and the body was built according to specific requirements, making each contract unique. Conversely, the respondents argued that the sale was of goods (the bodies) manufactured on a large scale according to standard sizes and specifications, and the price was agreed upon for the sale of the body, which was then fitted on the chassis.

The court referred to precedents such as Gannon Dunkerley and Co. (Madras) Ltd. v. State of Madras and Jubilee Engineering Co. Ltd. v. Sales Tax Officer, which discussed the nature of building contracts and whether they involved an element of sale of materials. These cases concluded that building contracts did not involve the sale of materials as such but were contracts for work and labor.

However, the court distinguished the current case by noting that the respondents were taxing the sale of the body fitted onto a chassis as goods, not merely the supply of materials in a works contract. The court examined whether the agreement and the sale related to the same subject matter, concluding that if the agreement was for the sale of the body when ready and complete, then the property passed in those very goods, making it a transaction of sale.

The court also considered Mckenzies Limited v. State of Bombay and Commissioner of Sales Tax v. Haji Abdul Majid and Sons, which supported the view that contracts for constructing and delivering motor bodies fitted on chassis supplied by the customer were contracts of sale. The court adopted the observations from these cases, concluding that the transactions entered into by the petitioner-firm were sales within the meaning of the Act.

Issue 2: Necessity of Separately Mentioning Items for Material and Labor
The second issue was whether it was necessary to separately mention the items for the material used and the labor involved to be entitled to the exemption. The petitioner-firm conceded that this question did not arise in light of the definition of "contract" in section 2(c) of the Act, which did not apply to the present cases. Therefore, the court did not delve deeply into this issue, as it was rendered moot by the definition provided in the Act.

Conclusion:
The court concluded that the transactions entered into by the petitioner-firm were sales within the meaning of the Punjab General Sales Tax Act, 1948. The first question was answered affirmatively, indicating that the contract for fitting and building bodies on chassis supplied by the customer constituted a "sale." The second question was deemed not applicable due to the definition of "contract" in the Act. No order as to costs was made.