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TMI Blog1966 (11) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, the said supply of the spare part is treated as a separate sale made by him to the customer and actually submitted for assessment to sales tax. But the position in regard to items covered by the aforesaid sum of Rs. 24,713.90 is different. In cases where the defect in the motor vehicle under repair cannot be rectified by the substitution of the defective part by a part available in the spare parts department, the assessee himself manufactures or fabricates the parts necessary, expending the raw material purchased by him for the purpose and investing labour for the purpose of fabrication. The total cost to him of the raw material as well as the labour is generally found set out as one of the debits in the bill for repairs he prepares in respect of the particular job. It is because the bill is so itemised and the items representing parts actually fabricated by the assessee for the purpose of the job are separately stated with necessary particulars, the assessing authority was able to pick out these items and proceeded on the footing that they should be regarded as separate transactions of sales attracting liability to sales tax. The position in regard to the sum of Rs. 2,408.43 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pects. The earliest attempt made by State legislation to tax works contracts was the subject of consideration from the point of view of its constitutionality by the High Court of Madras in the case of Gannon Dunkerley Co., Ltd.[1954] 5 S.T.C. 216. The opinion of the High Court was accepted by the Supreme Court upon appeal, in the judgment of the Supreme Court reported in The State of Madras v. Gannon Dunkerley Co. (Madras) Ltd.[1958] 9 S.T.C. 353. The general pattern of legislation was to treat works contract as involving a sale of material plus supply of labour for a remuneration and the statutes made a theoretical calculation and directed that a certain percentage shall be treated as sale consideration and subject to sales tax. The attack against the constitutionality in such a provision was that the legislative competence of the State Legislature under Entry 54 of the Second List to the Seventh Schedule of the Constitution was limited to imposing taxes upon actual transactions of sale and that the said competence could not extend to taxing a notional sale, i.e., a transaction treated as a sale for the purpose of tax although actually and in the contemplation of the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf of the department. The case decided by this Court in Shankar Vittal Motor Co. Ltd. v. State of Mysore[1964] 15 S.T.C. 771. has discussed the position on much the same lines as the Madras High Court had done in the case already referred to. After referring to the leading cases decided by the Courts in England and in India, this Court also pointed out that the essence of the matter is that if a contract can be identified as a contract of work, the incidental passing of any items of material from the worker to the promisee under the contract cannot be regarded as a separate contract of sale. In the case of Patnaik[1965] 16 S.T.C. 364. strongly relied upon for the respondent, their Lordships of the Supreme Court did not depart from the principles already stated above, but have actually affirmed the same. On an examination of all the terms of the agreement there concerned, their Lordships found that the inference was inevitable that the bodies of carriages built on the chassis were at all times intended to be sold by one party and purchased by the other as a composite unit and that therefore the clear inference of an actual sale could not be got rid of by reason only of the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to the facts of this case. A close scrutiny of the judgment shows that the true reasons which influenced their decision were the following: At one stage it is stated, "In the instant case, there is an implied contract between the appellant and its customers for the fabrication of spare parts for sale and it is used in the repair of motor vehicles." In another place it is stated, "In these circumstances, there has certainly been a contract of sale, impliedly though it might be, for specific goods like spare parts for the price amounts noted against them in the issued............ ...............Even the fabricated parts so fabricated for the particular requirements of the job on hand should be treated as an item of sale effected to the party just as any other readily available spare part used up in the process of the repair work has been treated in the circumstances." In another place it is stated, "From the facts before us which are already discussed above, the repair work undertaken is, as found earlier, combination of contracts as seen from the bills issued, one for supply of work and labour and one for supply of materials and in this view the repair job undertaken canno ..... X X X X Extracts X X X X X X X X Extracts X X X X
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