1967 (10) TMI 56 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the transaction involving the supply of pebbles constitutes a sale of goods or a works contract.

The High Court of Madras upheld the order of the Board of Revenue, which brought a turnover of Rs. 43,396 to tax as sales of pebbles, considering it a sale of goods and not a works contract. The primary task in such cases is to construe the contract to determine the intention to sell and purchase goods. The Court noted that the property passed during the execution of the contract and the risk associated with the property. The contract involved the supply of pebbles collected from a designated site, with specific terms for payment per unit of pebbles supplied and recovery of seigniorage fee. The Court rejected the argument that the transaction was purely for work and labor, pointing out that the payment terms indicated a sale of goods. The judgment cited relevant cases where the transfer of property determined the nature of the transaction, emphasizing the specific terms and conditions of the contract in question.

2. Application of legal principles from previous judgments to determine the nature of the transaction.

The Court referenced various legal precedents to support its decision on the nature of the transaction. Cases such as Bakthavatsalu v. State of Madras and Mooljee Ramjee and Sons v. Deputy Commissioner were analyzed based on the ownership of goods supplied and the transfer of property. The judgment also discussed the Calcutta Company Limited v. Commissioner of Sales Tax case, finding it difficult to follow the ratio. The Court highlighted Chandra Bhan Gosain v. State of Orissa, where the transfer of property in the goods determined the transaction as a sale of goods. The specific stipulations in the contract, including payment terms and recovery of fees, were crucial in determining the nature of the transaction as a sale of goods. The judgment distinguished a recent Division Bench decision based on the absence of payment for the raw material used in manufacturing goods.

In conclusion, the High Court dismissed the appeal, affirming the tax liability on the turnover of pebbles as sales of goods. The Court emphasized the importance of contract terms, property transfer, and payment conditions in determining the nature of the transaction. The judgment provided a detailed analysis of legal principles from previous cases to support the decision, highlighting the specific provisions in the contract that indicated a sale of goods rather than a works contract.