2012 (3) TMI 388 - HC - VAT and Sales Tax

Whether the exchange of a defective compressor with a reconditioned compressor along with receipt of repair charges will amount to a transaction of deemed sale under section 3B of the Tamil Nadu General Sales Tax Act 1959? Whether in the absence of any taxable event in the State of Tamil Nadu is the Tribunal justified in affirming the levy of tax on the transactions relating to mere exchange which are outside the purview of levy of sales tax? Held that - Whole transaction forms part of an implied contract for repair of the defective compressor in the State. It is only a replacement with a re-conditioned compressor of the same model instead of a defective compressor. Therefore the authorities below are correct in coming to the conclusion that there is no contract for sale of compressors. Therefore the transaction has to be treated only as works contract. After considering the nature of the transaction all the authorities have given a categorical finding that there is a works contract and the transfer of property acquired within the State in the said contract. Further the authorities below are correct in holding that in the absence of separate particulars towards labour charges and the value of property transferred the provisions of section 3B of the Act were attracted and allowed 30 per cent deduction towards labour charges and only the remaining turnover was chargeable to tax at the appropriate rate. The concurrent findings given by the authorities below are based on valid materials and there is no error or illegality in the order of the Tribunal warranting interference. Thus answer the questions of law as against the assessee and in favour of the Revenue.

Summary

Issues Involved:

1. Whether the exchange of a defective compressor with a reconditioned compressor along with receipt of repair charges amounts to a transaction of deemed sale under section 3B of the Tamil Nadu General Sales Tax Act, 1959.
2. Whether the levy of tax is sustainable when the defective compressor is sent to Hyderabad for repairs and no transfer of property occurs in Tamil Nadu.
3. Whether the Tribunal can reconsider an issue already decided in similar cases for other assessees and take a different view.
4. Whether the Tribunal is justified in affirming the levy of tax on transactions that are mere exchanges and outside the purview of sales tax.

Issue-wise Detailed Analysis:

1. Deemed Sale under Section 3B of TNGST Act, 1959:
The court examined whether the exchange of a defective compressor with a reconditioned one, along with the receipt of repair charges, constitutes a deemed sale. The petitioner-assessee argued that the transactions were exchanges and not taxable under the Tamil Nadu General Sales Tax Act. However, the court held that the transactions amounted to works contracts involving the transfer of property in goods and thus were taxable. The authorities determined that the transaction was completed within the state, and the provision of section 3B was applicable, allowing a 30% deduction towards labor charges and taxing the remaining 70% of the turnover.

2. Transfer of Property and Tax Levy:
The court addressed whether tax could be levied when the defective compressor was sent to Hyderabad for repairs, with no transfer of property occurring in Tamil Nadu. The petitioner contended that the transfer of property took place in Andhra Pradesh, not Tamil Nadu. However, the court upheld the Tribunal's view that the entire transaction, including the replacement of the defective compressor with a reconditioned one, was completed within Tamil Nadu. Therefore, the transaction was subject to tax under the Tamil Nadu General Sales Tax Act.

3. Reconsideration of Issues by the Tribunal:
The petitioner argued that the Tribunal should not reconsider issues already decided in similar cases for other assessees. The court noted that the Tribunal had previously held that similar transactions were not liable to tax. However, the Tribunal, in this case, took a different view, holding that the transactions amounted to works contracts and were taxable. The court upheld the Tribunal's decision, stating that the authorities correctly treated the transactions as works contracts involving the transfer of property within the state.

4. Taxable Event and Exchange Transactions:
The court examined whether the Tribunal was justified in affirming the levy of tax on transactions that were mere exchanges and outside the purview of sales tax. The petitioner contended that the transactions were exchanges and not taxable events. However, the court found that the transactions involved the replacement of defective compressors with reconditioned ones and the collection of repair charges, which constituted works contracts. The authorities correctly applied section 3B of the Act, allowing a 30% deduction for labor charges and taxing the remaining turnover.

Conclusion:
The court confirmed the Tribunal's order, holding that the transactions were works contracts involving the transfer of property within Tamil Nadu and thus taxable. The authorities correctly determined the taxable turnover and allowed appropriate deductions for labor charges. The court dismissed the tax case revisions, answering the questions of law against the assessee and in favor of the Revenue.