1975 (1) TMI 73 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the turnover of Rs. 1,34,500 made by the assessee in respect of Kamlapati Motilal Sugar Mills amounts to works contract or sale of goods.
2. Whether the turnover of Rs. 2,38,000 made by the assessee in respect of Upper Doab Sugar Mills amounts to works contract or sale of goods.

Detailed Analysis:

Issue 1: Turnover of Rs. 1,34,500 for Kamlapati Motilal Sugar Mills

The primary issue was whether the turnover of Rs. 1,34,500 in respect of Kamlapati Motilal Sugar Mills constituted a works contract or a sale of goods. The court referred to several precedents, including the Supreme Court's decision in State of Rajasthan v. Man Industrial Corporation Ltd., which emphasized that the main object of the parties should be gathered from the terms of the contract, circumstances of the transaction, and trade customs.

The contract specified the supply of a three-motion electrical overhead travelling crane, including erection charges. The terms of payment were structured around the completion of various stages, such as advance payment, payment after erection of bridge and columns, and final payment after satisfactory performance. The court observed that the predominant intention was the supply of a complete crane in running order, with the erection being incidental to the main objective.

The court concluded that the title in the crane passed to the sugar mills at the time of delivery after it had been completed, installed, and shown to be in good running condition. The property did not pass as an accretion to the land but as a movable property. Therefore, the transaction was a contract of sale of goods, and the entire turnover was liable to sales tax.

Issue 2: Turnover of Rs. 2,38,000 for Upper Doab Sugar Mills

Similarly, the issue was whether the turnover of Rs. 2,38,000 for Upper Doab Sugar Mills was a works contract or a sale of goods. The contract involved the supply of two cranes, including erection complete in all respects. The terms of payment were linked to the completion of various stages, such as advance payment, payment after two months, and final payment after satisfactory trials.

The court noted that the assessee fabricated the cranes at its factory and installed them at the site, constructing necessary structures and fitting the cranes. The predominant object was the supply of complete cranes as movable property, with the erection being incidental. The court found that the property in the cranes passed to the sugar mills upon delivery in working condition, not as an accretion to the land.

The court held that the transaction was a contract of sale of goods, and the entire turnover was liable to sales tax. The fact that the contracts provided for payment of sales tax and the assessee charged and the purchasers paid sales tax corroborated the inference that the intention was to buy and sell cranes for a price.

Conclusion:

The court concluded that both turnovers in question amounted to contracts of sale of goods in their entirety. The contract was one and indivisible, and since it was found to be a contract of sale, the entire price constituted the turnover liable to tax. The reference was answered accordingly, with the Commissioner, Sales Tax, entitled to costs assessed at Rs. 200.