9911796707
TMI Blog1990 (8) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... tax under the abovesaid enactments [prior to the amendment made to the Tamil Nadu General Sales Tax Act, 1959, with effect from May 29, 1984, by Tamil Nadu Act 28 of 1984, consequent upon the Constitution (Forty-sixth Amendment) Act, 1982]. In the assessee's appeal, the Appellate Assistant Commissioner only confirmed the assessment made. In its second appeal to the Tribunal, the latter set aside the assessment order relating to the said disputed turnover on the ground that the transaction was only a works contract and there were no sales. Hence, the State has filed these tax revision cases. 3.. The assessee-company is a manufacturer of rubber goods and it also undertakes rubber lining of industrial equipments. The Tribunal set out in its order the nature of the business of the assessee and the process involved in the abovesaid rubber lining (as per the affidavit of the assessee's Director, Mr. Gangwal) which, as the Tribunal itself states, "are undisputed by the State". "(a) The appellant effects outright sales of rubber components for which the components are manufactured according to specific drawings. On those sales, sales tax is charged and paid. (b) The appellant-comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing any amount of wear and tear. After this once again the equipment is thoroughly checked and tested and then the equipment of the customer is delivered back to the customer." 4.. The assessing officer held that the alleged rubber labour receipts to the extent of the abovesaid Rs. 6,52,851 were actually sales exigible to tax, as was held in State of Tamil Nadu v. Dunlop India Ltd. [1981] 48 STC 521 (Mad.) and the Appellate Assistant Commissioner also concurred with him, holding further that the earlier contrary judgment dated December 10, 1979 of another Division Bench of this Court in State v. Madras Industrial Lining Ltd. (T.C. Nos. 1208 to 1214 of 1979) would not apply in view of the abovesaid latter decision reported in [1981] 48 STC 521 (Mad.) referred to above. In the subsequent second appeal by the assessee to the Tribunal, the latter also noted down the typical contract order given to the assessee by its customer as follows: -------------------------------------------------------------------------------- Quantity Description Rate Per -------------------------------------------------------------------------------- RUBBER LINING CHARGES FOR THE FOLLOWING ITEMS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision in T.C. Nos. 1208 to 1214 of 1979 (State v. Madras Industrial Lining Ltd.) will squarely apply to the facts of this case. He also placed reliance on the following decisions, namely, Government of Andhra Pradesh v. Guntur Tobaccos Ltd. [1965] 16 STC 240 (SC), Jariwala and Bros. v. State of Gujarat [1965] 16 STC 942 (Guj), State of Gujarat v. Kailash Engineering Co. (Pvt.) Ltd. [1967] 19 STC 13 (SC) and Hindustan Aeronautics Ltd. v. State of Karnataka [1984] 55 STC 314 (SC). 7.. Let us consider the rival submissions and the ratios laid down in various decisions cited at the Bar. 8.. As rightly pointed out by the learned counsel for the respondent State of Tamil Nadu v. Dunlop India Limited [1981] 48 STC 521 (Mad.) is distinguishable on facts. 9.. The learned Judges, on facts of that case, pointed out as follows: "Further, as we have noticed already, the parties themselves at the time of entering into the contract contemplated the supply as a contract for sale and purchase of so many units of tyres and there was a provision for payment of sales tax as well. The assessee charged sales tax on the turnover relating to this rubberisation of the wheels and it also gave the ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgeable to sales tax and the Supreme Court found on facts that the property in the materials used by the assessees in constructing the bus bodies never passed to their customers during the course of construction and that it was only when the complete bus with the body fitted to the chassis was delivered to the customer that the property in the bus body passed to the customer. So, the Supreme Court held that the supply of bodies constituted a sale. The following observations of the Supreme Court in that case, which follows its own earlier decision in Patnaik and Company v. State of Orissa [1965] 16 STC 364 (SC) are significant: "The question with which we are concerned, as would appear from the resume of facts given above, is whether the construction of the bus bodies and the supply of the same by the assessees to their customers was in pursuance of a contract of sale as distinguished from a contract for work and labour. The distinction between the two contracts is often a fine one. A contract of sale is a contract whose main object is the transfer of the property in, and the delivery of the possession of, a chattel as a chattel to the buyer. Where the main object of work undertak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial 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, i.e., there must be in the contract for work an independent term for sale of goods by one party to the other for a money consideration. No useful purpose will be served by entering upon a detailed analysis of the large number of cases cited at the Bar. The cases relied upon lay down no general principle and the ultimate decision in all the cases turned upon what the courts found were the true agreements between the parties." (Underlining* is ours). 14.. Even in Sundaram Motors (Private) Ltd. v. State of Madras [1958] 9 STC 687, this Court also emphasised the following passage in State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. [1958] 9 STC 353 (SC): "We are accordingly of opinion that on the true interpretation of the expression 'sale of goods' there must be an agreement between the parties for the sale of the very goods in which eventually property passes." 15.. In A.A. Jariwala and Bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey value of the spare parts which the appellant supplied to the Indian Air Force. The Supreme Court held that the property in these materials which were used in the execution of the jobs entrusted to the appellant was not taxable. In that context, the Supreme Court observed as follows: "It is necessary, therefore, in every case for the courts to find out whether in essence there was any agreement to work for a stipulated consideration. If that was so, it would not be a sale because even if some sale may be extracted that would not affect the true position. Merely showing in the bills or invoices, it was contended on behalf of the appellant, the value of materials used in the job would not render the contract as one of sale. The nature and type of the transactions are important and determinative factors. What is necessary to find out, in our opinion, is the dominant object...... In every case, the court would have to find out what was the primary object of the transaction and the intention of the parties while entering into it........... It was held by this Court in Commissioner of Commercial Taxes v. Hindustan Aeronautics Ltd. [1972] 29 STC 438 (SC); AIR 1972 SC 744, that the ans ..... X X X X Extracts X X X X X X X X Extracts X X X X
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