2018 (5) TMI 178 - HC - VAT and Sales Tax

Nature of activity - job-work or sale? - Form 3-D - Whether the learned Tribunal was justified in declaring that payment of ₹ 18,98,008, in absence of any material of evidence or single whisper of evidence, was made towards the job Work and was not sale? Held that - In Form 3-D, there is a declaration in regard to the goods sold to any Company / Corporation or Undertaking referred to under Section 3-G. The form ends by a certification to the effect that the goods are meant for our own requirement and are not meant for re-sale or for use in the manufacture or packing of any goods, other than electrical energy, for sale - it may not be correct on the part of the revisionist to contend that non-production of Form 3-D by the assessee is fatal to his setting up the case of job work. Whether a contract is to be treated as the contract of sale of goods or the contract of work? - Held that - It is significant to note that in the revision filed, there is no challenge to the findings given by the Tribunal that the entire raw materials, including the land and electricity were supplied by the contractee to the respondent assessee. Therefore, we have no occasion to go into the validity of the findings by the Tribunal, which is after all the final fact-finding authority that the raw materials, besides electricity, have all been supplied by the contractee Department to the respondent assessee. There is a definite case for the respondent assessee that the tiles, which are subject matter of the controversy, have been supplied under a contract, which was executed in the year 1986. The respondent assessee was assessed to tax in respect of the tiles, which were supplied apparently under the same contract in the year 1986-87, but the said assessment was interfered with by the order passed by the Tribunal. The Tribunal apparently has proceeded to hold that the transaction is in the nature of a job work. It is true no doubt that the contract as such has not been made available, but in the light of the fact that the Tribunal has rendered a finding at any rate that all the materials, including land and electricity have been supplied by the contractee Department, we are of the view that what is involved is a job work. Revision dismissed.

Issues Involved:
1. Whether the Tribunal was justified in declaring that the payment of ?18,98,008 was made towards job work and not sale.
2. The nature of the transaction between the respondent and the contractee Department.
3. The applicability of previous judgments and findings to the current case.
4. The significance of non-production of Form 3-D and the agreement in question.
5. The distinction between a contract for sale of goods and a contract for work and labour.

Issue-wise Detailed Analysis:

1. Whether the Tribunal was justified in declaring that the payment of ?18,98,008 was made towards job work and not sale:
The Tribunal found that the payment of ?18,98,008 received by the respondent was for job work and not for the sale of goods. The Tribunal based its decision on the assessment for the year 1986-87, where a similar transaction was determined to be job work. The Tribunal noted that all materials were supplied by the contractee Department, and the respondent only provided the labour. Consequently, the Tribunal declared the respondent exempt from tax for the year 1987-88.

2. The nature of the transaction between the respondent and the contractee Department:
The core issue was whether the transaction was a contract for the sale of goods or for job work. The Assessing Officer initially assessed the transaction as a sale of cement tiles, leading to a tax demand. However, the Tribunal found that the transaction was job work since the contractee Department supplied all the materials, including land and electricity, and the respondent only provided the labour. This finding was consistent with the assessment for the year 1986-87, which was upheld by the jurisdictional High Court.

3. The applicability of previous judgments and findings to the current case:
The Tribunal relied on the previous assessment year’s decision (1986-87), where the transaction was considered job work. The Tribunal and the jurisdictional High Court had previously determined that the respondent's activities were job work, not a sale of goods. The Tribunal's decision for the current year (1987-88) was consistent with the earlier findings, as there was no change in the nature of the contract or the transaction.

4. The significance of non-production of Form 3-D and the agreement in question:
The revisionist argued that the non-production of Form 3-D and the agreement was fatal to the respondent's case. However, the Tribunal found that the absence of Form 3-D did not negate the job work nature of the transaction. The Tribunal relied on the previous year's findings and the fact that the contractee Department supplied all materials. The High Court supported this view, stating that the non-production of Form 3-D did not undermine the job work nature of the transaction.

5. The distinction between a contract for sale of goods and a contract for work and labour:
The High Court referred to several judgments, including M/s Chandra Bhan Gosain vs. State of Orissa and Commissioner Sales Tax vs. M/s Sabarmati Udyog Sahkari Mandali, to distinguish between a contract for sale of goods and a contract for work and labour. The key determinant was whether the essence of the contract was the transfer of chattels as chattels or the provision of labour. In this case, the Tribunal found that the contract involved the provision of labour, as all materials were supplied by the contractee Department. The High Court upheld this finding, noting that the previous year's decision, which classified the transaction as job work, was applicable.

Conclusion:
The High Court dismissed the revision, supporting the Tribunal's finding that the transaction was job work and not a sale. The Court emphasized the importance of the previous year's findings and the fact that all materials were supplied by the contractee Department. Consequently, the respondent was declared exempt from tax for the year 1987-88.

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