9911796707
TMI Blog1977 (9) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... 97-00 at 12 per cent .. Rs. 219-00 . Total Rs. 23,89,393-00 The AAC refixed the assessable turnover at Rs. 22,71,158 with the following apportionment. Relief granted by Appellate Asstt. Commr. . . . at 31/2 per cent .. Rs. 21,995-00 1,067-00 at 4 per cent .. Rs.... 5,000-00 at 5 per cent .. Rs. 22,46,047-00 1,12,168-00 at 9 per cent .. Rs. 2,897-00 .... at 12 per cent .. Rs. 219-00 .... . Total Rs. 22,71,158-00 .... In this refixation, the Assessing Officer deleted the turnover of Rs. 1,067 at 3 per cent and Rs. 1,12,168 at 5 per cent and the estimate of Rs. 5,000 at 4 per cent, as the relative defective features outlined by the Assessing Officer at the assessment stage were explained. Aggrieved of this first appellate decision under s.31 of TNGST, the appellants have taken recourse to this instant appeal before us seeking appropriate relief. 3. The disputed turnover of Rs. 11,98,890-00 at 5 per cent relates to the following: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he correspondences, specimens of job card and labour card and other documentary evidences in support the claim for treatment as works contract and exclusion from the scope of the assessment. 5. The State Representative argued that conveyors as such are goods of common merchantability. There are several brands of the type of the conveyors by different manufacturers and their disposals, would naturally involve sales of chattels. He also presented that employment of engineering skill is a commonly prevalent feature in the line of trade. In this trend of approach he stated there is no deployment of any specialised skill to merit the treatment involved contracts as works contracts . The element of fixation as immovable property was argued only as incidental. The main purpose of the contract was sought to be stressed as one for delivery of chattel and the incidental feature of erection was argued as is no way afflicting the elements of sale attracting liability to assessment. The theory of accretion was stated to be not specifically present. The view points of the lower authorities were highlighted. The ultimate stress was for sustenance of for action pursued by the lower authorities. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter, worm reduction gear unit flexible, couplings, pull chord switches, rubber canvas belt, idlers, electromagnetic brake, truss type stringers and walk-a-ways and asbestos covered roof as per Schedule I and design data sheet No. 1 of the contract. (2) Conveyor C2 : Conveyor C2 is an inclined conveyor connecting Hopper No. 4 and the shed. The Conveyor shall be 750mm wide and shall be troughed. It shall have about 7.5 metres centres and shall have a rated capacity of 300 tonnes per hour. The conveyor shall be complete with drive unit, starter, worm reduction gear unit with integral hold back flexible coupling, pull chord switches, rubber canvas belt, idlers, electromagnetic brake, truss type stringers and walk-a-ways and asbestos covered roof as per Schedule 2 and design data No. 2 of the contract. (3) Conveyor C3:-Conveyor C3 shall run longitudinally along the length of the shed inside. The conveyor shall be have a flat belt. It shall have about 110 metres centres and shall have a capacity of 300 tons per hour. The conveyor shall be complete with drive unit starter, warm reduction gear unit, flexible coupling, pull chord switches, rubber canvas belt, idlers, electro-magnetic b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertilizer inside the shed. There are 5 Nos. Of cross conveyors with plough boards (2 Nos. In each). One fixed plough board on the cross conveyor to transfer the fertilizer into the cross conveyor from the longitudinal conveyor. This plough board shall be kept at an angle suitable for the transfer of fertilizer. This plough board shall move along with the Cross Conveyor and be capable of adjustment manually is such a way that each cross conveyor is fed a portion of the fertilizer carried in the longitudinal conveyor which is variable from 1/5 to full of the total quantity. The other movable plough boards on the cross conveyor will stack the fertilizer on the first floor when not discharging into bagging machines...." (e) Clause 7.1.2. stipulates that the appellants have to guarantee the proper performance of the installation for one year. The relevant clause is extracted below: ".... All equipment supplies and erected by the Contractor shall be designed, manufactured, fabricated, delivered at site, erected, tested and commissioned by the Contractor in such a manner that the Contractor is prepared to guarantee the performance of the complete installation in every detail in accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndrails etc.) shall be made with black machine bolts. No structural member or component part thereof shall be supplied or connected by fewer than two bolts. The dimensions for reverted or bolted connections shall confirm to IS: 1915. (j) The details pertaining to `Welding in the process or work are in clause 7.5.4. as under: Welding: All welding, shall conform to IS: 816 and IS: 825. Field welding will not be permitted except under special circumstances in which case the written permission of the Chief Engineer or his representative must be obtained". The maximum size fillet weld applied to a normally square edge of a plate or shape shall be 1.5 mm less than the normal thickness of the edge. The size of fillet weld used along the toe of an angle or the rounded edge of flange shall not exceed 3/4 of the nominal thickness of the angle or the flange. Welding for rigid tubular frame joints and gusset plates for main machinery supporting structure shall be full strength continuous weld. The minimum effective length of the secondary stress carrying fillet weld except for stitch welds shall not be less than 8 times the nominal weld size. (k) The contract has specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be responsible for all misfits, errors and damages and shall make the necessary corrections and replacements. (3) Adjustments: The Contractor shall be responsible for all necessary alignment and adjustment of machinery and equipment to obtain an efficient operation of the whole conveying system: Special attention shall be given to (1) Belt alignment on all conveyors. (2) Adjustment of loading chutes and skirt boards. (3) Alignment of pulleys. (4) Alignment of bearings and shafts. (5) Adjustment of belt take up devices. (6) Alignment of drive assemblies. (7) Adjustment of limit switches. In all cases of critical specialised adjustments to the equipment supplied, the contractor shall obtain the advice of the relevant equipment supplier and shall advice and obtain the approval of the Chief Engineer. The Contractor shall shim and level all assemblies and structural parts to their proper location and elevation. It shall be the contractor s responsibility to fill gear reducers with the correct lubricant at hand over time. (m) (i) The Field Tests are employed after erection. The first test is done by the contractor and is called `Contractor s test . The fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . . `VEEKAY -Inclined Troughed Belt conveyor- 750 mm wide-7.5. metres centres, for conveying muriate of potash urea, diammonium phosphate, Ammonium sulphate and rock sulphate from Conveyor C1 to C3 at the rate of 300 tonnes per hour complete/gear unit with integral hold back, flexible coupling, pull chord switches, Rubber canvas belt, idlers, electro-magnetic brake, truss type stringers and walk-a-ways and asbestos covered roof- generally as per Schedule No. 2 and design data sheet No. 2. 1 No. 61,000 (3) Conveyor C3: . . . . `VEEKAY -Flat Belt Conveyor-900 mm wide-100 metres centres for conveying muriate of potash urea, Diammonium phosphate. Ammonium sulphate and rock sulphate from Conveyor C2 along the length of the, tonnes per hour-starter, worm reduction gear unit flexible coupling, pull chord switches, rubber canvas belt, idlers electro- magnetic brake, truss type stringers and walk-a-way generally as per Schedule No. 3 and design data Sheet No. 3. 1 No. 3,50,000 (4) Conveyors C4 to C8: . . . . `VEEKAY -Flat Belt Conveyor-500 mm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he security amount deposited by the contractor for the due fulfilment of this contract and final closure of the contract thereon. (19) It must be clearly understood that the amount payable under the contract is to be inclusive of everything required to be done by the specifications, conditions of supply and all such work as is necessary for the proper completion of the contract altogether special mention thereof may have been omitted in the specification. (20) The facilities shall be completed, erected and test demonstrated to the satisfaction of the Chief Engineer at his (Contractor s) own cost and entire responsibility. Handling, if any, to be done after unloading before erection will also be the responsibility of the Contractor. The site for erection and the space available for stacking of materials and erecting the materials are marked in the drawing. All erection at site is to be done by the contractor by his own plan, equipment and personnel. Only such of the plant or equipment as can be spared by the Trust may be made available on hire to the Contractor at Trust s scale of rates. (21) Erection shall be done by the contractor entirely at his own costs and responsibility ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreement will also be refunded to the Contractor if he so desires; the balance being held in deposit as security for satisfactorily maintaining the work free from defects for a period of twelve months after the date of completion of the works. If during this twelve months period any defects are noticed which in the opinion of the Chief Engineer, are due to bad materials used and or defective workmanship, the Contractor shall be required to carry out at the Contractor s cost, such repairs, as the Chief Engineer considers necessary or in the event of the Contractor failing to do this within a notified time, the Chief Engineer may arrange for such repairs to be carried out and deduct the cost of such rectification of the defects from the amount retained, without prejudice to the recovery of any amount that may have been spent in excess of the deposit. For purpose of this clause and cl. (4) above, the period of 12 months will count from the date of handing over of the completed part or whole of the works by the Contractor to the Chief Engineer. 7. Thiru K. Venkatesan, Managing Director of the company filed an affidavit before us during the course of the hearing. The affidavit deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnments are checked up in the factory. The materials are consigned by successive loads to the site. The equipment are cleared by our own staff and kept by our watch and ward. The conveyor system as such is not one predetermined unit. The materials are collected at site where the progressive erection is taken up. In connection with this work we deputed our skilled erectors, fitters, engineers and mechanics. We also engaged unskilled labour locally. The civil work was our own responsibility and was involved in respect of erection of C2 to C8 conveyor system. For this civil work we engaged our usual civil contractor for the purpose of preparing foundations cementing, grouting etc. The materials remained our property and lay at our risk and consts; and was protected by our watch and ward. The fabrication and erection are subject to periodical inspection by the engineers of the Madras Port Trust. The entire emphasis was on proper selection of materials as also due erection and commissioning. (c) The actual performance of erection work, conduct of tests, etc. leading to ultimate handing over of the system to Port Trust on 27th Feb., 76 was outlined in para 6 extracted below: "...... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. Swaminathan for the purpose. For roofings works another civil contractor V. Kathavarayan was employed. The bills for labour charges presented by them disclose the civil works done by each of them. Details of cement concrete labour work bills paid to R. Swaminathan Civil Contractor. Bill dt. 28th June, 75 (covering C1, C2 and C3). . . Rs. Np. (1) Excavating preparing cement concrete foundation for the towers to support C1 C2 conveyors at the Madras Port Trust(4 Nos. towards) 2,000-00 (2) Preparing cement concrete foundation for the columns to support C3 conveyors at Madras Port Trust 1,500-00 (Rupees Three thousand and five hundred only) 3,500-00 Bill dated 21st Oct., 75 (covering C4 to C8) . Charges for preparing cement concrete foundation for 5 Nos. conveyors (C4 to C8) at the Madras Port Trust, Madras 2,500-00 Details of roofing etc. Work done by V. Kathivelu: . To cost of Roofing works done at the Madras Harbour premises total sq. ft. 8400 @ Rs. 0-10 np per sq. ft. 840-00 To cost of sheet cutting charges for 84 cuttings at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onveyors. Auto Food Private Limited 8. (i) The work executed in this contract is `Design, Fabrication, Supply, Erection and commissioning of canveyors and elevators . The value of the entire contract was Rs. 9,59,099. (ii) The minutes of discussions held on 8th March, 1974 were reduced to writing and this forms the basic contract. The quality of the equipment was to conform to the Schedule of Henry Simon Limited. Drawings were agreed to be prepared and approved. Cl. 4 referring to custody of materials by the appellants, cl. 5 regarding payment, and cl. 6 outlining the completion of the contract are extracted below: Custody of materials: M/s Aurofood Private Limited shall provide space for storage of material and equipment during and in the course of erection and furnish quarters for the erection engineers. The property in the equipment will remain with M/s. Conveyor Equipment Co. Pvt. Ltd. until erection handover. Payment: The entire contract is lumpsum of Rs. 9,95,099 (Rupees Nine lakh Ninety five thousand and ninety nine only). One third of the lumpsum shall be payable on formal acceptance of order by M/s. Aurofood Private Limited, the further sum on account at 10 per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icating the progress of erection. The directors etc. of Aurofood Limited are indicated to be getting the inspections done along with the progress of works. The daily reports of the Erection Engineer (with workmen) deputed for erection mentioning of (a) the difficulties encountered, the solutions secured (b) the operational features such as vibration etc. met and the manner of resolving them (c) the stages/details/etc. of the commissioning process etc. are specific elaborate and clear. Letter dt. 25th July, 75 of the Engineer speaks of commissioning and test run conducted. Letter dt. 26th July, 75 speaks of further runs after rectification. Letters dt. 29th July, 75/30th July, 75 speak of the permanent supports to the elevators and other completion features (vii) The necessary cement concrete labour works were got done by the appellants by employing an outside contractor R. Swaminathan. Details of work done by him according to his bills are as under: BILL Charge for preparing cement concrete foundation for the following bucket elevators including grouting the bolts at Aurofood Private Limited., Auroville. . . WI 1, WI 2, WI 3, SR 4, WI 4, Pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e site. Periodical site meetings were held at Pondicherry. The supply and erection was completed by Oct/Nov.,1975 and the system handed over. The conveyor system at the flour mill at Pondicherry involves conveyance of flour and by products of the mill from floor to floor and in between process from machine to machine. Horizontal conveyance was done through screw conveyors and chain conveyors. Vertical conveyance was done by bucket elevators. The civil work was done by us by engaging sub contractors. The work was a highly skilled one. 9. (i) The position of law in regard to `works contracts is well settled. We however outline the significant cases which indicate the salient features. (ii) Benjamin s in `Sale of Goods (1974 Edition Sweet and Maxwell ) have expressed as under: "... Chattel to be affixed to land or another chattel. Where work is to be done on the land of the employer or on a chattel belonging to him which involves the use or affixing of materials belonging to the persons employed, the contract will ordinarily be one for work and materials, the property in the latter passing to the employer by accession 67 and not under any contract of sale. Sometimes, however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of, a chattel as a chattel to the buyer. Where the main object of work undertaken by the payee of the price is not the transfer of a chettel qua-chattel, the contract is one for work and labour. The test is whether or not the work and labour bestowed and in anything that can properly become and the subject of sale; neither the ownership of the materials nor the value of the skill and labour as compared with the value of the materials, is conclusive, although such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract is in substance one for work and labour or one for the sale of a chattel". (iv) The Lordships of the Supreme Court in State of Gujarat vs. Variety Body Builders(1) expressed as Under: "......It can be treated as well settled that there is no standard formula by which one can distinguish a contract of sale from a contract for work and labour. There may be many common features in both the contracts, some neutral in particular contract, and yet certain clinching terms in a given case may fortify a conclusion one way or the other. It will depend upon the facts and circumstances of each case. The questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erection of steel structures for a sugar factory. This court on consideration of the material produced on record held that the contract was for a works contract and not one for sale. The case of "Man" Industrial Corporation Ltd. related to a work for fabricating and fixing certain windows in accordance with specifications, designs, drawing and instructions. The windows were to be fixed to the building with rawl plugs in cut stones works. It was held that the window-leaves did not pass under the terms of the contract as window-leaves and that only on the fixing of the windows as stipulated could be contract be fully executed. The property in the windows, it was observed, passed on the completion of the work and not before. The contract, was therefore, held to be a contract for execution of work and not for sale of goods. Nenu Ram s case related to a work of supplying and fixing wooden windows and doors together with frames. The windows has also thereafter to be painted. It was held that under the contract the goods were not sold as movables and that the party therein passed only when the windows and frames were fixed on the site. The liability to pay sales tax was consequently not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the site by the purchaser at his own cost and the assessee was absolved of all responsibility when the shutters left its factory premises. In other words, the sale of shutters was complete as soon as the delivery thereof was taken by the purchaser in the factory premises of the assessee. It is significant to note that the masonary work for the purpose of fixing the shutters is to be done by the purchaser himself according to the directions given by the assessee. These terms and conditions leave no room for doubt that the fixing part is only incidental to the main contract of supply of iron shutters. The assessee is entitled to receive the full price of the shutters at the time of their delivery to the purchase and not after they are fixed at the site of the purchaser. The fixation of the iron shutters to the premises is clearly not the main object of the contract even though the price charged by the assessee includes the fixation charges also. The property in the shutters passes to the purchaser when he takes delivery of the shutters in the factory premises of the assessees and not when they are fixed in his premises...,s The facts of the case in dispute before us and the detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o treat the related contract as an indivisible one, for the purposes of fabricating, erecting and commissioning of conveyors. This system comprehended on all inclusive aspect of fabrication, conforming to the specification involving appropriate, shop testing, both by the appellants and the engineers of Port Trust. The fabricated materials so transported to the work site are supported by delivery challans. The process of erection involved the fixing of the base rails, on the appropriate masonary columns. The grouting, welding, concreting and other types of masonary works and engineering works were got done to the fix the conveyors to the columns from the floor and to link them with the wall with adequate roofing facility. Such works had also to satisfy the statutory requirements of the Indian Factories Act, Indian Electricity Act, Indian Laws of Dock Labours Act, etc. The erection had to be done by way of fixation to the earth which was achieved by concreting masonary work, welding work, riveting work, grouting work and similar other process of work performance. One of the essential elements of the executed erection was the achievement of the total absence of vibration or defalcatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test. These three tests are outlined in 10 (1) (ii), 10 (1) (iii) and 10 (i) (iv) of the contract. (v) The contractors tests are done by the appellants to ensure that they have adhered to specifications, drawing and other agreed matters. The acceptance test is conducted on completion of the contractor s test, after the completion of the erection and test commissioning. The acceptance test is done in the presence of the Chief Engineer, according to the terms of the contract. The purpose of this test is to establish whether the conveyor system complies with all the requirements set out in the technical specification and drawing. If accepted the conveyor system is handed over to the Board. The operational capacity test is done by both the Engineer and the contractor together. The contractor is generally represented by a qualified engineer or Erection Superintendent familiar with the erection and operation of the conveyor system. The adjustment or corrections after the test have to be made by the contractor. (vi) In respect of the contract regarding Port Trust, we find that the available documentary evidence indicating the course of work, the performance of concrete masonary work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the intention of the parties to the contract to treat it as a work contract. 11. In regard to the second contract with M/s. Awro Food Private Limited for Rs. 9,59,009 we find that the appellants had not only to dig pits, but also had to erect columns from the ground with concrete masonary work to which the fixation of the conveyors etc. had to be done. The requisite conveyors and parts thereof were manufactured to specification and transported to the work site after tests. They were stored at the work site at the risk of the appellants. The Erection Engineers of the appellant, with workmen, attended to the installation and erection processes. Such performances, naturally involved alignment, deflection, vibration etc. The deputed staff had to erect the conveyors etc. Preventing vibration, deflection etc. By way of tests. Even in this contract, shop tests, field tests and other integrated tests were similarly employed to achieve adherence to standards and specifications. The inspections done by the contractee are evidenced by the correspondences themselves. The daily performance reports of the erection engineers of the appellants speak of the work done by them daily in such work ..... X X X X Extracts X X X X X X X X Extracts X X X X
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