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TMI Blog2009 (10) TMI 556X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the petitioners to work out their remedies by taking appropriate proceedings under the provisions of the Income-tax Act, 1961 and the Rules as framed thereunder - - - - - Dated:- 15-10-2009 - SIVAGNANAM T. S. J JUDGMENT T. S. Sivagnanam J.-By consent, all the writ petitions are taken up for final disposal. Since the prayers sought for in all the writ petitions are identical, the writ petitions are disposed of by a common order. 2. The question which has been raised for consideration in the above writ petitions is as to whether the contract in question is a contract of sale or a contract of work and labour. 3. Mr. G. R. Swaminathan, learned counsel for the petitioners requested that the facts in W. P. (MD) No. 2571 of 2009 may be taken up for the disposal of all the writ petitions. Accordingly, the facts in the said case are taken up. 4. All the petitioners are suppliers of eggs. The Government of Tamil Nadu in order to ensure that school children are provided adequate nutrition brought out a scheme for supply of eggs in the noon meal centres. The present issue is one such contract between the petitioner and the State Government represented by the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract of sale is the transfer of property and delivery of possession. In respect of contract of work, there is no transfer of property but it is one for work and labour. Therefore, learned counsel would submit that all the petitioners are only vendors and not works contractors. 7. It is next contended by the learned counsel for the petitioners that the subject transactions fall outside the purview of section 194C of the Income-tax Act and the circular of the Central Board of Direct Taxes, dated March 8, 1994, more particularly clause No. 7(vi)(b) of the said Circular amply makes it clear that the transaction cannot be construed as a contract for works. It is further contended that such demands have been made only in respect of the Madurai District and there is discrimination. 8. Learned counsel would further submit that under the contract the supplier is required to give a colour coding for the eggs by adopting a particular colour for a particular day with the emblem of the State Government. It is further contended that the colouring of the eggs is to ensure misuse and also to ensure their quality but this does not change the use of the product. Therefore, the product in que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for damaged/rotten eggs have to be made within 24 hours. It is further stated under the agreement that any revision of sales tax or other taxes will not affect the rates in which supply has to be effected. In the event of delay in supply by the contractor, the Collector of the District is entitled to purchase the eggs from the local market. The contract also contemplates power to terminate for violation of terms and conditions and the earnest money deposit paid by the contractors will be returned after the completion. The agreement also provides for a widely couched arbitration clause. 14. Learned counsel for the second respondent would first contend that the writ petitions are not maintainable. It is contended that in order to deter-mine as to whether the subject contract is a contract of supply or a works contract, it is necessary to delve deep into the facts of the case, appreciate documents on record and examine such other matters including affording opportunity to the assessee and thereafter determine the question. 15. Therefore, it is their submission that when the matter relates to essentially a decision on facts, this court would refuse to entertain the writ peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cases are rejected on account of bad quality the commercial value of the goods becomes zero. Further, learned counsel for the second respondent would submit that the supply of additional quantity of eggs is not essential ingredient of a normal sale transaction. In support of their contentions, learned counsel for the second respondent would place reliance upon the following decisions : (i) In Sentinel Rolling Shutters and Engineering Co. P. Ltd. v. CST reported in [1978] 42 STC 409 ; AIR 1978 SC 1747 ; (ii) In State of Tamil Nadu v. Anandam Viswanathan [1989] 73 STC 1;AIR 1989 SC 962 ; and (iii) In Hindustan Aeronautics Ltd. v. State of Karnataka [1984] 55 STC 314 ; AIR 1984 SC 744. 21. Therefore, learned counsel would submit that based on the above facts and the legal position, the writ petitions should not be entertained and the petitioners should be directed to avail of alternative remedy under the provisions of the Income-tax Act. 22. Heard Mr. G. R. Swaminathan, learned counsel for the petitioners, Mr.Pala Ramasamy, learned Special Government Pleader for the first respondent and Mr. R. Sathiyamoorthy, learned senior standing counsel for the second respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a particular contract is one for sale of goods or for work and labour depends upon the main object of the parties gathered from the terms of the contract, the circumstances of the transaction and the custom of the trade." 26. In the case of State of Tamil Nadu v. Anandam Viswanathan [1989] 73 STC 1, 14 ; AIR 1989 SC 962, 971, before the Supreme Court was whether the printing contract for question papers of universities is a works contract. The hon'ble Supreme Court while deciding the said issue, held as follows : "26. The primary difference between a contract for work or service and a contract for sale is that in the former there is in the person per-forming or rendering service no property in the thing produced as a whole, notwithstanding that a part or even the whole of the material used by him may have been his property. Where the finished product supplied to a particular customer is not a commercial commodity in the sense that it cannot be sold in the market to any other person, the transaction is only a works contract." 27.In Hindustan Aeronautics Ltd. v. State of Karnataka reported in [1984] 55 STC 314 ; AIR 1984 SC 744, the hon'ble Supreme Court was considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make us hold that the contract to carry out a work or the contract to supply labour to carry out a work should be confined to `works contract' as was argued on behalf of the appellant. We see no reason to curtail or to cut down the meaning of plain words used in the section. `Any work' means any work and not a `works-contract', which has a special connotation in the tax law. Indeed, in the sub-section, the `work' referred to therein expressly includes supply of labour to carry out a work. It is a clear indication of the Legislature that the `work' in sub-section is not intended to be confined to or restricted to `works contract'. `Work' envisaged in the sub-section, therefore, has a wide import and covers `any work' which one or the other of the organisations specified in the sub-section can get carried out through a contractor under a contract and further it includes obtaining by any of such organisations supply of labour under a contract with a contractor for carrying out its work which, would have fallen outside the `work', but for its specific inclusion in the sub-section . . . 7. The above decision cannot be of any help to the appellant for it does not lay down that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther a particular contract is one for sale of goods or for work and labour depends upon the main object of the parties gathered from the terms of the contract, the circumstances of the transaction and the custom of the trade. 30. Further, the hon'ble Supreme Court in the case of State of Tamil Nadu v. Anandam Viswanathan reported in [1989] 73 STC 1 ; AIR 1989 SC 962 held that where the finished product supplied to a particular customer is not a commercial commodity in the sense that it cannot be sold in the market to any other person, the transaction is only a works contract. Therefore, all these issues are essential questions of fact which cannot be effectively adjudicated in the writ petitions filed under article 226 of the Constitution of India. 31. Learned counsel for the petitioners would submit that the agreement has to be examined as a whole and the nomenclature alone shall not be the criteria. Therefore, it has to be taken whether the subject contract could be construed as a works contract has to decide on facts and which require thorough analysis and the scope of the contract and such other documentary evidence which may be placed by the assessee. Therefore, I am i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or `work and labour', the essence of the contract or the reality of the transaction as a whole has to be taken into con-sideration. The predominant object of the contract, the circumstances of the case and the custom of the trade provide a guide in deciding whether transaction is a `sale' or a `works contract'. Essentially, the question is of interpretation of the `contract'. It is settled law that the substance and not the form of the contract is material in determining the nature of transaction. No definite rule can be formulated to deter-mine the question as to whether a particular given contract is a contract for sale of goods or is a works contract. Ultimately, the terms of a given contract would be determinative of the nature of the transaction, whether it is a `sale' or a `works contract'. Therefore, this question has to be ascertained on facts of each case, on proper construction of terms and conditions of the contract between the parties . . . 9. In the case of Hindustan Shipyard Ltd. v. State of A.P. [2000] 119 STC 533 ; [2000] 6 SCC 579 this court held that if the thing to be delivered has any individual existence before the delivery as the sole property of the party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne the fact of agreement and the assessees are entitled to submit oral and documentary evidence in support of their claim. 37. It has been further stated in the counter-affidavit that in respect of the petitioners in W. P. No. 5262 of 2008, he has already cleared the tax dues and TDS is deducted. Further, it has been stated that the contractors who are undergoing the above contract in different districts of Tamil Nadu on routine basis or regional taking lower/nil deductions certificate obtained from their Assessing Officers at Namakkal and Salem. 38. Therefore, I find that there is no valid reason as to why all the petitioners cannot avail of such a remedy especially when either themselves or persons similarly placed like them have been approaching the authorities under the provisions of the Income-tax Act while effecting supplies in other districts before through jurisdictional Assessing Officer under the Income tax Act. 39. For the above reasons, I find that the writ petitions are not maintainable since the issue involved is essentially a question of fact which cannot be effectively adjudicated in the present writ petitions. Therefore, while dismissing the writ petiti ..... 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