1990 (8) TMI 374 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Nature of Contracts: Whether the contracts were pure works contracts or composite contracts.
2. Taxability of Bricks and "Jhama": Whether the supply of bricks and "jhama" constituted sales liable to tax.
3. Deduction of Carriage Charges: Whether deductions should be allowed for carriage, loading, unloading, and stacking charges from the price of bricks.

Issue-wise Detailed Analysis:

1. Nature of Contracts:
The primary issue was whether the contracts between the petitioner and the Public Works Department (PWD) were pure works contracts or composite contracts involving both sale and work/labour. The court analyzed the nature of the contracts by examining the terms and conditions, noting that the contracts were for the construction/improvement of roads and included six distinct items of work. The court emphasized that each item was independent, and tenders could be submitted for one or more items. The court referred to various Supreme Court judgments, highlighting that the main object of the contract determines its nature. It concluded that the contracts in question were composite, comprising both supply of materials and work/labour. Specifically, items 2 and 5 were identified as pure and simple contracts for the sale of materials, thus constituting sales.

2. Taxability of Bricks and "Jhama":
The petitioner, a manufacturer of bricks, supplied bricks and "jhama" to the PWD during the period from July 1, 1976, to March 31, 1980. The petitioner contended that the supply of "jhama" was not taxable and did not pay tax on it, while taxes were paid on the supply of bricks. The Superintendent of Taxes included the turnover of "jhama" in the taxable turnover, which was contested by the petitioner. The Assistant Commissioner of Taxes allowed the petitioner's objection regarding the tax on "jhama" until September 12, 1978, but rejected the claim for deduction of carriage charges. The court upheld the Tribunal's decision that the contracts for items 2 and 5 were for the supply of materials, thus constituting sales subject to tax under the Tripura Sales Tax Act, 1976.

3. Deduction of Carriage Charges:
The petitioner argued that the turnover should exclude expenses for carriage, loading, unloading, and stacking of bricks. The Tribunal rejected this claim, stating that the rate was fixed for the supply of bricks at the site, and there was no provision for separate carriage charges. The court referred to the Supreme Court's decision in Hindustan Sugar Mills Ltd. v. State of Rajasthan, which established that "freight and handling charges" are part of the sale price if they are incurred to make the goods available to the purchaser at the place of sale. The court concluded that the petitioner was not entitled to any deductions for carriage and related expenses, affirming that the total amount received for the supply of bricks constituted the sale price for taxation purposes.

Conclusion:
The court dismissed the writ petitions, deciding against the petitioner on all points. It concluded that the contracts were composite, involving both sale and work/labour, and that the supply of bricks and "jhama" constituted taxable sales. Additionally, no deductions were allowed for carriage and related charges from the sale price of bricks. The court made no order as to costs.