1967 (9) TMI 138 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the supply of bus-bodies constructed and fitted onto chassis provided by customers amounted to the sale of specific chattels chargeable to sales tax.
2. Whether the Appellate Assistant Commissioner acted in excess of his jurisdiction in enhancing the assessment.
3. Whether the assessment of the enhanced turnover was barred by limitation.

Issue-wise Detailed Analysis:

1. Sale of Specific Chattels vs. Works Contract:
The primary issue was whether the supply of bus-bodies constructed and fitted onto chassis provided by customers constituted a sale of specific chattels chargeable to sales tax or a works contract. The Tribunal concluded that the transactions were sales of goods, stating: "the predominating element in the transactions was the sale of built body, that the work and labour were only subsidiary." The court noted that the phraseology used by the Tribunal was not entirely accurate but agreed with its conclusion. The court emphasized that the determination of whether a transaction is a sale of goods or a works contract depends on whether the property in the materials used passes to the customer at the time of delivery of the finished article or during the process of work. The court referenced several precedents, including State of Madras v. Gannon Dunkerley & Co., Sundaram Motors (Private) Ltd. v. The State of Madras, and Carl Still G.m.b.H. v. State of Bihar, to elucidate the principles governing such determinations. The court found that the property in the bus-bodies passed at the time of delivery as finished articles, not during the construction process, thereby constituting a sale of goods.

2. Jurisdiction of the Appellate Assistant Commissioner:
The second issue was whether the Appellate Assistant Commissioner exceeded his jurisdiction by enhancing the assessment beyond the scope of the assessee's appeal. The court interpreted section 31(3)(a)(i) of the Madras General Sales Tax Act, 1959, which allows the Appellate Assistant Commissioner to "confirm, reduce, enhance or annul the assessment." The court rejected the narrow interpretation that the power to enhance should be confined to the part of the order objected to by the assessee. The court held that the power to enhance extends to the entire assessment, stating: "The words 'enhance the assessment' in section 31(3)(a)(i) should, as it appears to us, be given their full scope." The court drew support from analogous provisions in the Income-tax Act, 1922, and relevant case law, including Narrondas Manordass v. Commissioner of Income-tax and Commissioner of Income-tax v. McMillan & Co. The court concluded that the Appellate Assistant Commissioner was competent to enhance the assessment by including the bus-body-building contracts as sales of goods.

3. Limitation on Enhanced Assessment:
The final issue was whether the assessment of the enhanced turnover was barred by limitation. The court agreed with the Tribunal's view that the Appellate Assistant Commissioner, in enhancing the assessment, did not act under section 16 as a case of escaped assessment but used his powers under section 31(3)(a)(i) of the Act. Consequently, the enhancement was not subject to limitation constraints applicable to escaped assessments. The court stated: "The Appellate Assistant Commissioner in enhancing the assessment did not act under section 16 as a case of escaped assessment but he was using his powers under section 31(3)(a)(i) of the Act."

Conclusion:
The court allowed the tax cases for the limited purpose of re-examining the nature of the transactions if the contracts are produced before the Tribunal. If no contracts are filed, the Tribunal's view that the transactions are sales of goods will stand. The appeals were remitted to the Tribunal for fresh disposal, allowing both the assessee and the revenue to adduce further evidence. There was no order as to costs in these tax cases.

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