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TMI Blog1992 (9) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessing officer, by his order dated March 26, 1980 determined a total and taxable turnover of the respondents-assessees for the year in question at Rs. 6,83,891. As noticed supra, the exemption claimed on receipts in respect of what the respondents-assessees claimed to be works contract was not allowed. 2.. Aggrieved, the respondents-assessees filed an appeal before the Appellate Assistant Commissioner, Commercial Taxes, Kancheepuram. About three items of turnover including the receipt relating to the works contract referred to and the levy in respect of the same were challenged. Reliance was placed on the fact that the contract was for manufacture, supply and fixing or installation of the rolling shutters and the rate fixed therefor was all including erection charges and taxes. The assessees also placed reliance upon the decision of the apex Court in Sentinel Rolling Shutters & Engineering Company Pvt. Ltd. v. Commissioner of Sales Tax [1978] 42 STC 409 (SC) to substantiate the plea that the contract was for work and labour and does not attract any liability to sales tax. The department has filed a petition for enhancement in respect of a turnover of Rs. 56,302.12 which was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timately executed or performed was one merely of supply of shutters, and therefore, is to be viewed as contract, of sale and supply of shutters, etc., and not a works contract. The learned counsel for the respondents-assessees submitted that out of 400 items of supply and installation, the assessees not only supplied but erected and installed the shutters also of about 265 items and only in respect of the balance of 135 items the installation and erection was incomplete and partial deductions were made in effecting payments and that even in respect of such items, subsequently, though belatedly the installation and erection works also have been completed by the assessees and consequently the Revenue is not justified in its stand. It is also stated that belated performance is not the concern of the taxing authorities and since ultimately the installation of balance of 135 items also was completed by the assessees for which also they were duly paid, the nature of the contracts as works contract was not altered and the plea of variation or frustration has no basis or relevance for the present case. The decisions referred to by the counsel appearing on either side would be referred to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Works [1976] 38 STC 229 held that the contract was a works contract and the transaction was not exigible to sales tax. While analysing the contract in that case, the apex Court expressed the view that the transaction is a composite consolidated contract which is one and indivisible comprising labour and services executed for a lump sum and, therefore, the materials are not supplied to the customer so as to pass as chattel simpliciter but really became an accretion to the immovable property when fixed and erected. It was also emphasised therein that the question as to under what circumstances a contract can be said to be a works contract is not free from difficulty and has to depend on the facts of each case and it would be also difficult to lay down any rule of universal application, but the issue has got to be decided only in accordance with the wellrecognised tests laid down by judicial pronouncements. In referring to such guidelines, the apex Court observed as hereunder: "One of the important tests is to find out whether the contract is primarily a contract for supply of materials at a price agreed to between the parties for the materials so supplied and the work or service r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n his property. In the case of a contract for sale, the thing produced as a whole has individual existence as the sole property of the party who produced it sometime before delivery and the property therein passed only under the contract relating thereto to the other party for price. 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. It was urged before us that contract of sale is one whose main object was to transfer property in and the delivery of the possession of a chattel to the buyer. If the principal object of works undertaken by the party was a transfer of a chattel qua chattel, the contract would be for sale. It is necessary to find o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or successfully contend that the contracts entered into between parties in these cases, in respect of about 400 items of work are not contracts for work and labour. On the other hand, the plea of the Revenue is that as observed by the Tribunal itself, the shutters were actually fixed by the customers themselves in position by engaging the services of civil contractors and that as a matter of fact the erection charges were deducted from the lump sum contract and on that view the contract as preformed by the assessees was only of supply and sale of shutters, as goods and, therefore, the turnover in question would be liable to sales tax. As could be seen from the order of the first appellate authority, the assessees specifically contended before that authority that the contract was for supply and fixing in position of 400 shutters for an all-inclusive price of Rs. 900 per shutter with delivery charges alone being extra, that as against the total price payable in a sum of Rs. 3,60,000 payment of a sum of Rs. 3,42,066.75 representing notional value of materials together with tax paid by the assessees were sought for to wipe out the heavy burden of investment by them and that the custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Ltd. [1969] 24 STC 349, Vanguard Rolling Shutters Steel Works v. Commissioner of Sales Tax [1977] 39 STC 372 and Sentinel Rolling Shutters & Engineering Company Pvt. Ltd. v. Commissioner of Sales Tax [1978] 42 STC 409 squarely applies to the case before us on all fours and governs the issue raised before us in favour of the respondents/assessees with one reservation which will be considered hereinafter. The contracts to fabricate, deliver and erect the shutters in question in the present case are pure and simple works contracts and the findings of the assessing officer and the first appellate authority are not only baseless and proceed upon conjectures and surmises but also are vitiated on account of a predetermined and perversity of approach. Those findings and conclusions cannot be justified in the face of the law declared or the principles laid down by the decisions referred to supra, in similar and identical cases and consequently, the Tribunal was perfectly right in its conclusions rendered that contract was only a works contract applying the ratio of the decision of the apex Court. But at the same time, the Tribunal also, in our view, committed an error in not separately ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter of principle it has to be necessarily declared that the order of the Tribunal cannot be said to be correct or valid in respect of those balance of 135 items in respect of which there is no material whatsoever available on record or in the assessment files or appellate records about the subsequent completion of the erection work in terms of the initial agreements, though belatedly. The learned counsel for the respondents/assessees was very firm about the stand taken by him factually regarding the subsequent development and execution claimed of the erection work also and the payment of the balance of the initially agreed all-inclusive price, by the customer thereafter. 13.. Though we declare the correct position and principle of law as above, we cannot foreclose the adjudication of the claim made by the assessees once and for all in respect of the 135 items of balance of works. Interests of justice would require that the assessing authority should be directed to verify this aspect and if on the basis of the relevant materials and records, it is proved by the assessees that they have fulfilled their obligations and carried out erection work also, as originally agreed to in res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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