1999 (5) TMI 583 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Claim of exemption on works contract disallowed and assessed to tax Rs. 2,21,209.23.
2. Levy of tax on motor control centre on a turnover of Rs. 55,562 at 9 percent instead of 6 percent.

Detailed Analysis:

1. Claim of Exemption on Works Contract:

The assessee contended that the contract with the Director of Sports and Youth Services was to manufacture and supply a swimming pool water purification plant on a turnkey basis, inclusive of erection and commissioning charges, and therefore, no sale was involved in the transaction. The Appellate Assistant Commissioner remanded the issue to the assessing authority for verification of the assessment records. However, the Joint Commissioner of Commercial Taxes, upon suo motu revision, observed that the agreement included sales tax and other duties in the bills, indicating an intention to sell materials and collect tax. The Joint Commissioner concluded that the turnover of Rs. 2,21,209.23 was taxable at 4 percent.

The Tribunal noted that the contract was treated as a sale of goods by both the assessee and the Director of Sports and Youth Services, as evidenced by the inclusion of sales tax in the contract price. The Tribunal referenced various case laws, including Vanguard Rolling Shutters & Steel Works v. Commissioner of Sales Tax and Sentinel Rolling Shutters & Engineering Company Pvt. Ltd. v. Commissioner of Sales Tax, to distinguish between a contract for sale of goods and a works contract. The Tribunal concluded that the contract in question was essentially for the sale of goods, with certain civil works being incidental to the contract of sale. Therefore, the Joint Commissioner rightly assessed the turnover as a sale of goods.

2. Levy of Tax on Motor Control Centre:

The assessee argued that the motor control centre was merely a fabricated box and not an electrical good, and thus should be taxed at 6 percent under item 81 of the First Schedule to the Act. The Appellate Assistant Commissioner had assessed the turnover at 6 percent. However, the Joint Commissioner of Commercial Taxes concluded that the motor control centre was an electrical switch box and assessed the turnover at 9 percent under item 41 of the First Schedule to the Act.

The Tribunal upheld the Joint Commissioner's conclusion, stating that the motor control centre was indeed an electrical switch box, and the levy of tax at 9 percent was appropriate.

Conclusion:

The Tribunal dismissed the tax appeal case, affirming the Joint Commissioner of Commercial Taxes' decision to treat the contract for the swimming pool water purification plant as a sale of goods and to levy tax on the motor control centre at 9 percent. The Tribunal emphasized that the contract was essentially for the sale of goods, with civil works being incidental, and the motor control centre was correctly classified as an electrical switch box.