2019 (3) TMI 24 - HC - VAT and Sales Tax

Whether the specific contract entered into by the assessee herein was for transfer of goods in the form of goods or not in the form of goods; the fact admitted being that it is a works contract? Held that - It is a composite contract of supply of materials and labour. The work is of supply of materials which are to be fabricated in accordance with the specifications and measurements as stipulated by the awarder, attached to the plastic moulds of seats and fixed in the stadium. Going by the description of the work as also the classification of the different works involved, 86% involves fabrication and 14% involves supply of poly propylene chair which are also fixed in the fabricated steel frames - thus, the transfer is not in the form of goods. The goods in the form of stainless steel sheets are cut to size and fabricated into frames to which is fixed the seating element made of PVC, which as stand alone cannot be used as seats or sold as such in the market. In this case the State does not contest that the assessee executed a works contract; but, however, the contention is that there is transfer in the form of goods since the agreement has described it as providing PVC chairs on stainless steel framework . One has to look at the work description as such extracted herein above as available in the Annexure attached to the agreement. The description of the work as enumerated to the Department by the awarder also assumes significance - the Tribunal has correctly answered the question based on the various facts as found in the agreement and answer the question, though on facts, in favour of the assessee and against the Revenue. Revision dismissed.

Issues Involved:
1. Nature of the contract: Whether the contract is for the transfer of goods in the form of goods or not in the form of goods.
2. Applicability of previous judicial decisions.
3. Determination of the nature of the transfer in the context of the Kerala Value Added Tax Act, 2003.

Detailed Analysis:

1. Nature of the Contract:
The primary issue revolves around whether the specific contract entered into by the assessee was for the transfer of goods in the form of goods or not. The contract in question was for "providing PVC chairs on stainless steel framework" for a sports stadium. The assessee contended that it was a works contract involving fabrication and installation, not a simple transfer of goods. The Tribunal's fact adjudication was challenged as potentially perverse.

2. Applicability of Previous Judicial Decisions:
- EDRSF Association Case: This case involved the fitting of rolling shutters and was held to be a works contract with the transfer in the form of goods. The court considered Section 8 of the Kerala Value Added Tax Act, 2003, which restricts the applicability of the compounding provision to works contracts where the transfer is not in the form of goods.
- Indian Hume Pipe Co. Ltd. Case: This case dealt with a pipeline contract, which was deemed a works contract with the transfer in the form of goods.
- B. Narasamma Case: This case emphasized the importance of whether the identity of the goods is maintained in the works or if it is lost. It dealt with steel rods used in construction, which retained their identity and were transferred in the form of goods.
- Kone Elevator India Pvt. Ltd. Case: The Supreme Court overruled a previous decision, emphasizing that a composite contract for supply and installation, such as that of lifts, should be treated as a works contract, not a sale of goods.

3. Determination of the Nature of the Transfer:
- The Tribunal examined the contract's description: "providing and fixing superior quality PVC outdoor stadium chairs on stainless steel framework," which involved significant fabrication work (86%) and a smaller portion of supply of poly propylene chairs (14%).
- A letter from the Superintending Engineer, GCDA, clarified that the work involved extensive fabrication and fixing of stainless steel pipes and chairs, supporting the assessee's contention that it was a works contract.
- The court concluded that the transfer was not in the form of goods. The stainless steel sheets were fabricated into frames to which PVC seating elements were attached, making it a composite contract involving significant labour and fabrication.

Conclusion:
The court found that the Tribunal correctly determined the nature of the contract based on the facts and previous judicial decisions. The transfer was not in the form of goods, and the revision was rejected, with the parties bearing their respective costs.

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