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TMI Blog1991 (4) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... till the four quarters ending March 31, 1975. For the said year ending March, 1975 a gross turnover of Rs. 42,140 was assessed and a tax and surcharge amounting to Rs. 2,436.16 were levied by the C.T.O. by his order dated January 15, 1979. An appeal against the said assessment order was unsuccessful. It was rejected by an order dated March 22, 1982, although another appellate authority held similar transactions of the previous year under the same contract to be an indivisible works contract. It is complained that, although the doctrine of res judicata does not apply to taxation matters, there was no reason why the second appellate authority did not follow the finding of the previous appellate authority. A revision was taken from the appellate order to the West Bengal Commercial Taxes Tribunal, respondent No. 1. The revision, however, was dismissed by an order dated September 6, 1983. On receipt of the order, the disputed amount of tax was, however, paid. The case of the applicant is that the authorities below wrongly construed the document of contract which should have been interpreted as a whole. Since it is claimed to be a turnkey contract it was not possible to make it divisibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose, as it was unilateral and quite distinct from the written agreement. 4.. Applicants filed two supplementary affidavits-one on November 13, 1990 and another on December 7, 1990. During the course of arguments, the question arose whether bills were submitted in lump sum. To meet the query, the applicants stated that it was so and for that purpose they relied on a notice inviting quotation and certain letters, copies of which were furnished. By the second supplementary affidavit, applicants stated that while inviting quotation for the execution of works in question, the contractee department supplied typed pro forma for schedule of rates. The contractors while submitting their quotations, also submitted those pro forma duly filled in. They pointed out that the total security demanded was 2 per cent of the total value of the contract, apart from security at 10 per cent which was deducted from running bills. According to applicants, this indicated that it was an indivisible works contract. 5.. The dispute relates to assessment under the Bengal Finance (Sales Tax) Act, 1941 for the period of four quarters ending March, 1975. Thus, the period was prior to the 46th Amendment t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate rates for carriage to the sites and erection of vertical gates and hoisting equipments. Copy of letter No. 9G2087 dated May 22, 1978 written by the department to the contractor was filed along with certain other correspondence as the annexures to the supplementary affidavit affirmed by the applicant No. 2 on November 12, 1990. The said letter dated May 22, 1978 stated that the work was deemed to be completed only when the gate parts had been installed in position, embedded in concrete, masonry, etc., and tested against full water pressure. Even if we do not take notice of that letter, it is our duty to find out whether the contract was indivisible or a divisible one providing for supply of materials as chattel qua chattel. From the foregoing summary of the terms of the agreement it is clear that the rates charged by the contractor for supply of the fabricated gates and equipments according to specifications, included therein the charges for service, i.e., design and fabrication. We do not also see how it could be possible to separate such charges from the cost of gates and equipments, as fabricated. We shall, for the purpose of ascertaining whether it was an indivisible w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also after satisfactory testing against full water pressure. It is difficult to hold that the property in the gates and equipments passed from the contractor to the department as soon as either those were fabricated or as soon as those were carried to the sites. Erection and testing, being integral parts of the agreement, passing of the property in the goods could not occur until and unless erection and testing were complete. Passing of property in the goods can be said to occur at the point of time when the department accepted the goods, as installed at sites. If the terms of the agreement are interpreted as a whole, it is difficult to say that the department accepted the goods before performance of that part of the contract which required erection and testing. Therefore, in our opinion, property in the gates and equipments passed to the department on the completion of erection and testing. In this connection, we may refer to the case of Hindustan Aeronautics Ltd. v. State of Karnataka [1984] 55 STC 314 (SC); (1984) SCC 706; (1984) SCC (Tax) 90. In that case, it was held that the spare parts of the aircraft supplied by the appellant as a result of their use in the process of repai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract for the above reason and also for the reason that the charges for skill, labour and consumables used for design and fabrication, which cannot be any more identified, were not specified separately and could not be ascertained from the lump or total charges. These are the reasons for which the mere supply of fabricated gates and equipments cannot be exigible to sales tax in the instant case. The ratio of the decision in Vanguard Rolling Shutters Steel Works v. Commissioner of Sales Tax [1977] 39 STC 372 (SC) can thus be well applied here. 10.. Mr. Udayan Chakraborty then referred to [1978] 42 STC 409 (SC). In that case (Sentinel Rolling Shutters Engineering Company Pvt. Ltd. v. Commissioner of Sales Tax) also, it was a works contract for fabrication, supply, erection and installation of two rolling shutters. The bills were submitted by the contractor after completion of the fabrication of the rolling shutters but before they were erected and installed at the premises of the company. The Supreme Court held that it was a single and indivisible contract and erection and installation were as much a fundamental part of the contract as the fabrication and supply. The contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embedded to the earth or to the concrete and masonry constructions on the earth and the contractor had no ownership on the gates and equipments as soon as those had been installed. That being the position, there was no transfer of property in the gates and equipments by the contractor to the department as a chattel qua chattel. We do not find any reason for not applying the ratio of [1979] 43 STC 195 (SC) (Ram Singh Sons Engineering Works v. Commissioner of Sales Tax) to the instant case. In our view, the attempt on the part of Mr. Majumdar, learned State Representative, to distinguish these cases has not been successful. 12.. From the above discussion, it is manifest that the Commercial Tax Officer (third respondent) fell into an error when he held that erection was merely incidental to the supply of the gates. In our opinion, erection was an integral and vital part of the contract. Moreover, we have also held the contract for supply simpliciter to be indivisible, because the charges for labour and services rendered could not be separated. We are also unable to agree with the view adopted by the appellate authority and the West Bengal Commercial Taxes Tribunal. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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