1967 (9) TMI 137 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Nature of the contract (works contract vs. sale of goods)
2. Entitlement to deduction of transport charges

Issue-Wise Detailed Analysis:

1. Nature of the Contract (Works Contract vs. Sale of Goods):
The primary issue was whether the arrangement between the assessee and the Neyveli Lignite Corporation constituted a works contract or a sale of goods. The assessee argued that the contract was for the manufacture and supply of bricks, implying a works contract, and thus, the entire turnover should not be liable to sales tax. The contract detailed that the bricks were to be manufactured using clay provided by the Corporation, under its supervision, and delivered at specified sites. The rate was Rs. 24 per 1,000 bricks at the kiln site and Rs. 39 per 1,000 bricks if transported to the Neyveli Township. The Tribunal initially held that the arrangement was a sale of goods, not a works contract, influenced by the Supreme Court decision in Chandra Bhan Gosain v. State of Orissa. However, the High Court disagreed, noting that the facts of the present case were distinct. The contract's terms indicated that the bricks remained the Corporation's property throughout the manufacturing process, distinguishing it from the Chandra Bhan Gosain case. The High Court concluded that the contract was indeed a works contract and not a sale, thus exempting the entire turnover from sales tax.

2. Entitlement to Deduction of Transport Charges:
The secondary issue concerned whether the assessee was entitled to deduct transport charges from the turnover. The assessee claimed that Rs. 15 per 1,000 bricks was for transport, which should be exempt from sales tax. The Tribunal rejected this claim, as the transport charges were not separately specified and charged in the bills, as required by rule 6(c) of the Madras General Sales Tax Rules. The High Court upheld this decision, emphasizing that transport charges must be distinctly itemized in the bills to qualify for deduction. Since the assessee did not meet this requirement, the plea for exemption of transport charges was rightly denied.

Additional Cases:
For T.C. No. 165 of 1964 and T.C. No. 207 of 1964, the High Court noted that the assessees did not produce relevant contracts. The supplied bricks were not under the same contract as T.C. No. 206 of 1964. The available certificate indicated a different contract, requiring the contractor to find their own clay and supply bricks at a specified rate. This contract did not exhibit the same characteristics as the one in T.C. No. 206 of 1964, leading the High Court to conclude that these were not works contracts. The plea for exemption of transport charges was also rejected for similar reasons as in T.C. No. 206 of 1964.

Conclusion:
The High Court allowed the revision petition for T.C. No. 206 of 1964, recognizing the contract as a works contract and exempting the turnover from sales tax. However, the claims for transport charge deductions were denied due to non-compliance with the specified billing requirements. The revision petitions for T.C. No. 165 of 1964 and T.C. No. 207 of 1964 were dismissed, as the contracts did not qualify as works contracts and the transport charge deductions were not substantiated. No costs were awarded in any of the cases.