1977 (5) TMI 77 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Whether the contracts between the dealer and Indian Explosives Limited were works contracts or contracts of sale.
2. Whether the direction for local inspection to determine if goods remained movable after installation was justified.
3. Whether the assessment of sales tax on the dealer was valid based on the nature of the contracts.

Issue-wise Detailed Analysis:

1. Nature of Contracts:

The dealer, General Electric Company of India (P.) Limited, engaged in the manufacture, sale, and installation of electrical goods. The Superintendent, Commercial Taxes, assessed the dealer for sales tax for the periods 1st April 1956 to 30th June 1959 and 1st July 1959 to 31st July 1961, without allowing deductions for labor charges due to lack of separate figures for supply and labor charges. The dealer contended that the contracts were works contracts, not contracts of sale, and thus not subject to sales tax. The Deputy Commissioner remanded the case for fresh assessment, emphasizing the need to examine all contracts to determine their nature, and provided specific findings on three contracts (Nos. 1117, 3066, and 1225/ABM/BS).

2. Direction for Local Inspection:

The Deputy Commissioner directed local inspections to ascertain whether certain goods remained movable after installation, which was challenged by the dealer. The Tribunal upheld this direction, stating it conformed with the Supreme Court's decision in Gannon Dunkerley's case. The Tribunal clarified that the assessing officer must consider the intention of the parties and the overall execution of the contracts, not solely whether goods remained movable.

3. Validity of Sales Tax Assessment:

The Supreme Court's decisions in Gannon Dunkerley and Carl Still's cases were pivotal. The Deputy Commissioner outlined criteria for taxability, including whether the contract was divisible and whether goods remained movable after installation. The Tribunal affirmed these criteria, emphasizing the need to consider any agreement for the sale of movables. The High Court agreed, stating that the fact of goods remaining movable is relevant to determining whether the transaction was a works contract or a contract of sale.

In conclusion, the High Court answered the question in the affirmative, upholding the Deputy Commissioner's and Tribunal's directions for local inspection and the criteria for assessing the nature of the contracts. The assessment of sales tax was deemed valid based on the detailed examination of the contracts.