1990 (1) TMI 293 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of taxable turnover for a works contract involving fabrication, supply, and installation of switch boards.

Analysis:
The case involved a revision by the assessee against an order confirming the assessment of taxable turnover for the assessment year 1979-80. The petitioner, engaged in the manufacture and sale of electrical goods, undertook a works contract for fabrication, supply, and installation of switch boards. The assessing authority included the contract amount in the taxable turnover, leading to an appeal and subsequent affirmation by the Appellate Assistant Commissioner and the Appellate Tribunal.

The key contention on behalf of the assessee was that the contract was a composite works contract involving designing, fabrication, and installation, rather than a simple sale of goods contract. The petitioner argued that the skill and works part of the contract were predominant, and the value of materials was incidental, relying on decisions by the Supreme Court and High Courts supporting this interpretation.

In contrast, the Revenue contended that the contract primarily involved the sale of switch boards, with minimal value attributed to the skill and works part of the contract. The Government Pleader argued that the contract should be treated as a simple sale of goods contract, justifying the inclusion of the contract amount in the taxable turnover.

The High Court analyzed the contract details, emphasizing the preparation of drawings, designing, assembly, supply, and erection specified in the order. The Court noted that the contract was for works, with the technical skill and preparation of drawings being of greater importance than the materials supplied. The Court highlighted that the switch boards were designed for a specific purpose, indicating a works contract rather than a sale of goods contract.

The Court criticized the Tribunal's failure to apply the crucial test to determine whether the contract was for work and skill or for the sale of goods. It referenced decisions by the Supreme Court, emphasizing that contracts involving specific designs and assembly are typically works contracts, not sales of goods contracts. The Court concluded that the contract in question was a works contract, not a sale of goods contract, and directed that the disputed amount should not be included in the taxable turnover.

In conclusion, the High Court allowed the tax revision case, ruling in favor of the assessee, and held that the amount related to the works contract should not be included in the taxable turnover for the assessment year 1979-80.