1963 (7) TMI 70 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the turnover of Rs. 98,518 is exempt from taxation under the Madras General Sales Tax Act, 1939, as it relates to "works contracts."
2. Whether the State can file additional grounds relating to a turnover of Rs. 3,67,608.89 nP. after the expiry of the limitation period.
3. Whether the delay in filing the application for additional grounds can be excused.

Detailed Analysis:

1. Exemption of Turnover from Taxation:
The primary issue was whether the turnover of Rs. 98,518 was exempt from taxation under the Madras General Sales Tax Act, 1939, on the grounds that it related to "works contracts." The Tribunal held that the contracts involved labour and skill, and were composite bargains to furnish air-conditioning equipment, with materials and parts supplied by the assessees. The Tribunal concluded there was no element of sale of goods as these were agreements to execute works for a stated consideration. The Court referenced the Supreme Court's decision in Carl Still G.m.b.H. v. State of Bihar, which laid down the test to determine whether a contract is a combination of two distinct agreements (sale of materials and supply of labour) or an indivisible agreement for execution of works. The Court found that the contracts in question were indivisible and primarily for executing works, thus exempting the turnover from sales tax. The Court upheld the Tribunal's decision, stating that the turnover of Rs. 98,518 is wholly outside the ambit of the Act.

2. Filing Additional Grounds After Limitation Period:
The State sought permission to file additional grounds relating to a turnover of Rs. 3,67,608.89 nP., alleging it was wrongly excluded from taxation on the erroneous view that it represented sales in the course of import. The Court examined whether it is permissible under section 38 of the Act to raise questions of law relating to a turnover not included in the original petition by filing a miscellaneous petition after the limitation period. The Court emphasized that a revision petition is restricted to the questions raised in the original memorandum and that additional grounds should relate to matters already forming the subject-matter of the revision. The Court concluded that it is not permissible to challenge a turnover not included in the original petition under the guise of additional grounds. Hence, T.C.M.P. No. 65 of 1961 was deemed not maintainable.

3. Excusing Delay in Filing Application for Additional Grounds:
The State also filed T.C.M.P. No. 88 of 1962 to excuse the delay in filing T.C.M.P. No. 65 of 1961. The Court noted that section 5 of the Indian Limitation Act does not apply to proceedings under the Sales Tax Act. The Court found the affidavit filed by the State to be vague and lacking in sufficient detail to justify the delay. The Court held that even if the application were maintainable, the grounds presented were insufficient to warrant excusing the delay. Consequently, T.C.M.P. No. 88 of 1962 was also dismissed.

Conclusion:
The Court dismissed T.C. No. 51 of 1961, T.C.M.P. No. 65 of 1961, and T.C.M.P. No. 88 of 1962. The turnover of Rs. 98,518 was held to be exempt from taxation as it related to indivisible works contracts. The State's applications to file additional grounds and to excuse the delay in filing were found to be not maintainable and were dismissed without costs.