9911796707
TMI Blog1969 (2) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... had to pay a nominal rent of Re. 1 per month. The assessee was required to build altogether 14 coaches-eight first-third class coaches and 6 janata tourist cars. The assessee was to receive payment at the rate of Rs. 62,300 for each first-third class coach plus a sum of Rs. 800 for fixing dynamo, suspension, gear, etc., and Rs. 57,900 for each C.T.T. coach plus Rs. 800 for fixing dynamo, suspension, gear, etc. This was inclusive of the cost of all materials and labour charges for building, furnishing, finishing and polishing. The contract was to be completed within a stipulated time. In the assessment year in question, the assessee received a total payment of Rs. 5,87,265 upon which the Sales Tax Officer levied sales tax at the rate of 3 pies per rupee rejecting the assessee's plea that no sales tax was payable as the payment pertained to a contract of work and labour not involving any sale of goods. The assessee appealed to the Judge (Appeals) but did not succeed. The appellate authority also held the amount in question to be liable to sales tax. The assessee then applied in revision to the Judge (Revisions) who accepted the assessee's plea and held that the contract executed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noticed is that under the contract the property in the bus body does not pass to the Government till the chassis with the bus body is delivered at the destination or destinations to be named by the controller except in the case contemplated in clause 6 of the agreement. That clause provides that if some work is not satisfactorily done and the body builder on receipt of a written order does not dismantle or replace such defective work or material at his own cost within seven days, the controller would be entitled to get the balance of the work done by another agency and recover the difference in cost from the body builder. The controller is entitled for this purpose to take delivery of the unfinished body. But even in this case the property in the unfinished body would not pass to the Government till the unfinished body is seized." The case of Haji Abdul Majid[1963] 14 S.T.C. 435. is also a case relating to the contract of building bus bodies and there also this court after taking into consideration the terms of the contract held the contract to be a contract of sale of bodies. The learned counsel for the assessee, on the other hand, has placed reliance upon a more recent decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , etc. There occurs in that clause the following paragraph which, to my mind, is material: "If after the date of submission of the tender, the Central or State Government imposes any sales tax on finished coaches (as distinct from the sales tax on its component parts) the said tax on finished coaches will be the responsibility of the railway. The sales tax actually payable at the time of the tender, i.e., on 18th December, 1956, will be the responsibility of the contractors and the railway will not be responsible to refund it to the contractors. " This recital shows that according to the understanding of the parties no sales tax was leviable on the finished coaches presumably because the contract did not involve the sale of coaches. The provision that if, after the date of the contract, sales tax on finished coaches came to be levied, the same would be paid by the railway and not by the assessee, shows that the property in the coaches vested automatically in the railway and not as a result of any sale; otherwise there appears to be no rational reason why the railway should have undertaken to accept the liability for sales tax which falls primarily upon the seller under the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ineer can suspend the work for such period as he thinks fit. In a contract of sale a provision like this would be entirely out of place. Clause No. 12 relates to the determination of the contract. It provides that the contract would be liable to determination if the contractor becomes bankrupt or insolvent or suspends payment or compounds with its creditors. A provision like this is consistent only with a contract of work and of service and is wholly irrelevant to a contract of sale under which the railway would be unconcerned with the contractor's bankruptcy or insolvency. After having considered the terms of the contract in the instant case I might as well state the general principle involved in such cases which is now well-settled. The principle is that, "in order that there should be a sale of goods which is liable to sales tax as part of a contract for work under a statute enacted by the Provincial or State Legislature, there must be a contract in which there is not merely transfer of title to goods as an incident of the contract, but there must be a contract, express or implied, for sale of the very goods which the parties intended should be sold for a money consideration, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court need not detain us long. That was a case where a dealer in motor-cars, motor parts and accessories fitted Perkins engines to the vehicles of the customers. The bill that he made specified separately the cost of the supply and fitting of Perkins engines. On these facts the Supreme Court held that the transaction involved the sale of diesel engines even though the same had been fitted by the assessee to the cars of his customers. This case is clearly distinguishable. I, therefore, answer the question by saying that the disputed item was a pure works contract not liable to sales tax. The assessee is entitled to his costs which I assess at Rs. 100. The fee of the learned counsel for the department is also assessed at the same figure. PATHAK, J.-I agree that the contract before us does not envisage the sale of coaches by the assessee to the railway. We are here concerned with what is essentially a works contract. I would answer the question referred accordingly. The cases on the point have been discussed by my brother Gulati, J., but I may mention the reasons which have prevailed with me. The contract between the assessee and the North Eastern Railway required the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplete the work in time. Ordinarily, if it were a contract for the sale of goods, the date of delivery of the goods is alone relevant, and not the efficiency or rate of progress shown during the execution of the work. Where the contract is determined in such circumstances the railway is entitled to entrust its completion to, and get the work done by, another at the risk and expense of the assessee or itself employ labour and supervise the work at the expense of the assessee and supply materials necessary for completing the work or any part of it, and debit the assessee with the cost of labour and the price of materials so used. Throughout, the contract speaks of the execution and completion of work under it. There is specific reference in it to the quality of the work, where it will be carried out, how executed, and to what degree it will afford the basis of interim payments to the assessee. When the railway decides to rescind the contract on account of a default by the assessee while executing it, the contract provides for measuring up the work of the assessee completed so far before entrusting the unexecuted part of the work to another agency for completion. When all these co ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
