1976 (7) TMI 158 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the Board of Revenue was correct in law in including the price of goods specified in the dealer's certificate of registration in the net turnover of the dealer.
2. Determining if the transactions were purely works contracts or contracts for the sale of goods.
3. Applicability of the proviso to section 15(1)(b)(i)(c) of the Assam Sales Tax Act, 1947.
4. Definition and interpretation of "contract" under the Assam Sales Tax Act, 1947.
5. Interpretation of "sale" under section 2(12) of the Assam Sales Tax Act, 1947.

Detailed Analysis:

1. Inclusion of Price of Goods in Net Turnover:
The primary issue was whether the Board of Revenue was correct in including the price of goods specified in the dealer's certificate of registration in the dealer's net turnover for the periods ending 30th September 1963 and 31st March 1964. The Superintendent of Taxes included amounts of Rs. 2,36,842 and Rs. 2,24,794 in the net turnovers, arguing that the assessee used the materials for manufacturing and selling finished products rather than for the execution of contracts as specified.

2. Nature of Transactions:
The Board had to determine whether the transactions were purely works contracts or contracts for the sale of goods. The Board observed that constructing goods according to customer specifications does not necessarily mean the transactions were contracts of work and labor. If the essence of the contract is the construction of something to be sold, it would be a contract for sale.

3. Applicability of Proviso to Section 15(1)(b)(i)(c):
Section 15 of the Act allows deduction from a dealer's gross turnover for sales to a registered dealer intended for use in the execution of any contract. The proviso to section 15(1)(b) states that if goods purchased tax-free are used for purposes other than those specified in the certificate of registration, their price should be included in the net turnover. The Board concluded that the assessee, being a manufacturing dealer, used the goods for manufacturing articles sold to customers, thus invoking the proviso.

4. Definition of "Contract":
The definition of "contract" under section 2(2) of the Act includes any agreement for carrying out the preparation, construction, fitting out, improvement, or repair of any movable property for cash or deferred payment. The court found that when the assessee prepared items like iron gates and water tanks according to customer specifications, it constituted a contract as defined under the Act. Therefore, the materials used were for the execution of contracts, not for purposes other than those specified in the certificate of registration.

5. Interpretation of "Sale":
Section 2(12) of the Act defines "sale" as any transfer of property in goods for cash or deferred payment, including goods involved in the execution of a contract. The department argued that the transactions involved a sale of finished products to customers. However, the court emphasized that the proviso to section 15(1)(b) could not be applied since the goods were used in the execution of contracts as defined under the Act.

Conclusion:
The court concluded that the Board of Revenue was not correct in law in including the price of the goods specified in the dealer's certificate of registration in the net turnover of the dealer. The materials purchased tax-free were used in the execution of contracts as specified in the registration certificate, and thus the proviso to section 15(1)(b) was not applicable. The question of law was answered in the negative and against the department, with no order as to costs.

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