2004 (10) TMI 564 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Taxability of transactions involving supply, erection, commissioning, and trial production.
2. Nature of the contract: whether it is a composite works contract or a sale of chattel.
3. Relevance of obtaining C forms in determining the nature of the contract.
4. Examination of the intention of parties in the absence of a written contract.

Detailed Analysis:

1. Taxability of Transactions:
The core issue revolves around the taxability of transactions where the dealer supplied, erected, and commissioned pulverisers. The Revenue argued that these transactions amounted to the sale of chattel, thus attracting sales tax. Conversely, the assessee contended that these were composite works contracts, exempting them from sales tax liability.

2. Nature of the Contract:
The Tribunal's decision, which was upheld by the High Court, determined that the contracts in question were composite works contracts. The Tribunal noted that the contracts included supply, erection, commissioning, and trial production, making them indivisible and not merely sales of chattel. The High Court referenced the Supreme Court's guidelines from the Sentinel Rolling Shutters case, emphasizing that the primary test is whether the contract's main object is the transfer of property in a chattel or the execution of work involving labor and materials.

3. Relevance of Obtaining C Forms:
The Revenue argued that since the assessee obtained C forms for two contracts, these should be considered sales rather than works contracts. The High Court dismissed this argument, stating that the intention of parties must be gathered from all surrounding circumstances, not just one factor. The Tribunal had observed that the C forms were obtained for abundant caution and were not decisive in determining the contract's nature.

4. Examination of the Intention of Parties:
The High Court emphasized that the intention of the parties can be discerned from the surrounding circumstances and correspondence, not necessarily from a written contract. The Tribunal had based its findings on the invoices and other documents, concluding that the contracts were for composite works involving supply, erection, and commissioning, thus not subject to sales tax.

Conclusion:
The High Court affirmed the Tribunal's decision, holding that the transactions were composite works contracts and not sales of chattel. Therefore, the assessee was not liable to pay sales tax on these transactions. The Court also noted that the factual findings of the Tribunal were not challenged by the Revenue, and thus, the Court could not re-examine the nature of the contracts. The question was answered in favor of the assessee and against the Revenue. No costs were awarded.