1978 (11) TMI 146 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Nature of Contracts: Whether the contracts were for the sale of ballast or for work and labour.
2. Tax Exemption and Refund: Whether the petitioners were entitled to a refund of sales tax paid from 1963-64 to 1969-70.

Detailed Analysis:

1. Nature of Contracts:
The primary issue was to determine whether the contracts between the petitioners and the Southern and South Central Railways were contracts for the sale of ballast or for work and labour. The petitioners argued that the contracts were for work and labour, emphasizing terms such as "works," "workmanlike manner," and "perform the said works." The court scrutinized the agreements and additional materials, including a certificate from the Additional Chief Engineer, South Central Railway, and the general conditions of the contract.

The court referred to the definition of "works contract" under Clause (t) of Section 2(1) of the Andhra Pradesh General Sales Tax Act, which includes agreements for the construction, fitting out, improvement, or repair of immovable or movable property. The court also cited several Supreme Court decisions, including State of Gujarat v. Variety Body Builders and Government of Andhra Pradesh v. Guntur Tobaccos Ltd., to establish that distinguishing a contract of sale from a contract for work and labour depends on the facts and circumstances of each case.

The court concluded that the dominant intention of the contracts was the supply of ballast, and any labour involved was incidental. The agreements did not contemplate dissecting the value of the ballast supplied and the value of work and labour bestowed. The court noted that the contractors had to make their own arrangements to obtain ballast from quarries, and the quarries did not belong to the railway department. The payment was made based on measurements of the ballast stacked, and the contracts did not include any obligation to repair the railway track.

The court dismissed the petitioners' argument that the contracts involved significant work and labour, such as spreading the ballast along the railway track, noting that this was not supported by the terms of the contracts or the additional material. The court also rejected the relevance of the Additional Chief Engineer's certificate, which was not based on the terms of the contract.

2. Tax Exemption and Refund:
The petitioners sought a declaration that the collection of sales tax was illegal and a direction for a refund of the tax already paid for the years 1963-64 to 1969-70. They had voluntarily submitted their returns for these years without claiming any exemption and had paid the tax. However, they later claimed exemption for the year 1970-71, which was granted, and based on this, they sought a refund for the previous years.

The court noted that the petitioners had not claimed any exemption during the relevant years and had paid the tax voluntarily. The court held that the contracts were for the sale of ballast, and therefore, the petitioners were liable to pay sales tax. Consequently, the request for a refund of the sales tax paid for the years 1963-64 to 1969-70 was denied.

Conclusion:
The court concluded that the contracts in question were for the sale of ballast and not for work and labour. The petitioners were rightly assessed on the turnover of the supply of ballast and were not entitled to a refund of the sales tax paid for the years 1963-64 to 1969-70. The writ petitions were dismissed with costs.