1979 (7) TMI 213 - HC - VAT and Sales Tax

Summary

Issues:
1. Assessment of rubber seals for sales tax under item 5 of the First Schedule or at the general rate under section 5.
2. Addition of an estimated turnover for section 5A purchases.
3. Determination of whether the sale and supply of rubber seals constitute a contract for work and labour or a sale of goods.

Analysis:
1. The High Court addressed the issue of assessing rubber seals for sales tax under item 5 of the First Schedule or at the general rate under section 5. The Sales Tax Officer initially assessed the turnover at 7 per cent under item 5, but the Appellate Tribunal held that rubber seals did not fall under the description of "rubber products" in item 5. The Tribunal also considered the transaction as a contract for work and labour, not a sale of goods. The High Court found that the Tribunal did not approach the question correctly and emphasized that the intention to transfer the rubber seals as a chattel and pass property in them should be considered. The Court concluded that if assessable, rubber seals should be taxed at 3 per cent under section 5, not 7 per cent under item 5. The matter was remanded to the Tribunal for fresh disposal based on the nature of the transaction.

2. The Court also examined the addition of an estimated turnover for section 5A purchases. The Sales Tax Officer proposed an estimate of Rs. 8,000 for section 5A purchases, which was later reduced to Rs. 4,000 by the Appellate Assistant Commissioner. The Tribunal questioned the basis for this estimate, but the High Court held that since the assessee did not provide acceptable records, the estimate was justified. The Court disagreed with the Tribunal's interference in this matter and upheld the estimate of Rs. 4,000 for section 5A purchases.

3. Lastly, the Court considered whether the sale and supply of rubber seals constituted a contract for work and labour or a sale of goods. The Tribunal viewed it as a contract for work and labour, exempt from taxation. The High Court emphasized that the nature of the transaction and the intention of the parties should determine if it is a sale of material or a contract for work and labour. The Court set aside the assessment order and remanded the matter to the Tribunal for reevaluation based on the correct legal principles.