2022 (2) TMI 556 - HC - VAT and Sales Tax

Levy of tax - works contract - receipts by the petitioner from their customers, represent the sale value of mosaic tiles or the works contract executed by the petitioner for laying and polishing the mosaic tiles, which are outside the purview of the TNGST Act, 1959, as it existed during the assessment year 1985-86 - HELD THAT - Admittedly, the petitioner is a mosaic tiles works contractor and the dispute pertains to the assessment year 1985-86. It is also not in dispute that tax is levied on the sale of goods involved in works contract only with effect from 26.06.1986. Thus, it may be relevant to note that if the receipts were to constitute works contract, then, there may not be any liability to tax under TNGST Act, 1959, inasmuch as works contract which was deemed to be a sale pursuant to the 46th Amendment to the Constitution of India, was made liable to tax under TNGST Act, 1959, by introduction of Section 3B of the TNGST Act, 1959, which created a charge on works contract with effect from 26.06.1986. All the lower authorities have treated the receipts to be relating to regular/conventional sale of mosaic tiles on the premise that the petitioner had not come forward with any material whatsoever in support of their stand that the receipts represented works contract, including copies of contract entered into between the petitioner and its customers; and accordingly, they have held that the said receipts are liable to tax under the TNGST Act, 1959. In the absence of any supportive document produced on the side of the petitioner, we do not find any reason to differ with the conclusion so arrived at or interfere with the findings so rendered by the Tribunal. The writ petition is liable to be dismissed, as there is no infirmity or perversity in the order of the Tribunal, warranting interference by this court - Petition dismissed.

Summary

Issues:
Challenge to the order of Tamil Nadu Sales Tax Appellate Tribunal affirming tax levy under TNGST Act, 1959 for the assessment year 1985-86 on the grounds of works contract versus sale of mosaic tiles.

Detailed Analysis:

1. Nature of Receipts - Works Contract or Sale of Goods:
The main issue in this case revolves around determining whether the receipts by the petitioner represent a works contract for laying and polishing mosaic tiles or a sale of mosaic tiles. The petitioner argues that the receipts pertain to works contract brought under the TNGST Act, 1959 only from 26.06.1986 onwards, making the tax levy for the assessment year 1985-86 unjustifiable. The distinction between works contract and sale of goods is crucial in deciding the tax liability under the TNGST Act.

2. Lower Authorities' Findings:
The Assessing Authority, First Appellate Authority, and the Appellate Tribunal all concluded that the receipts were related to the sale of mosaic tiles rather than a works contract. They based their decision on the absence of any agreements or documentation supporting the claim of a works contract. The authorities emphasized the lack of evidence such as agreements, forms, or maintained accounts specific to works contracts, leading to the determination that the petitioner engaged in the sale of materials only.

3. Legal Precedents and Tribunal's Fact-Finding Authority:
The judgment highlights the legal principle that the nature of a contract, whether for sale of goods or works execution, is primarily a factual determination based on contract terms and surrounding circumstances. Quoting precedents, the judgment emphasizes the Tribunal's role as the final fact-finding authority. The court is reluctant to interfere with the Tribunal's findings unless they are shown to be perverse, following established legal principles and Supreme Court decisions.

4. Dismissal of Writ Petition:
In light of the legal proposition and the absence of infirmity or perversity in the Tribunal's order, the court dismisses the writ petition. The judgment emphasizes that there is no ground for interference with the Tribunal's decision, leading to the dismissal of the petition without costs. The connected miscellaneous petition is also closed as a consequential outcome of the dismissal.

In conclusion, the judgment upholds the Tribunal's decision regarding the tax levy under the TNGST Act for the assessment year 1985-86, emphasizing the importance of factual findings, absence of supportive documentation, and adherence to legal precedents in determining the nature of contracts and tax liabilities.