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TMI Blog1992 (9) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... n common. they are dealt with together. 2.. The respondents-assessees were said to be ship repairers and engaged in doing repair works to ships at harbour and also supplying necessary materials in effecting such repairs. On March 18, 1980, the place of business of the assessees appears to have been inspected, as a result of which, action was taken to assess the respondents for the assessment year 1974-75. After giving due notice and opportunity, the assessing officer, by his order dated October 21, 1980, determined the total and taxable turnover of the respondents at Rs. 1,94,551 and levied a tax of Rs. 11,120. Penalty under section 12(3) to the tune of Rs. 16,680 was also levied at 1 times the tax due. 3.. Aggrieved, the respondents-assessees pursued the matter before the Appellate Assistant Commissioner. The said appellate authority, while noticing the facts that the assessees are the ship repairers, that they have produced parts and accessories of the ships and used them while carrying out repairs and reconditioning them, that they have not maintained any agreements in writing with the parties to the transaction, that the only evidence available consisted of the account boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to the details furnished or made available in the accounts maintained, the only conclusion possible was that the spare parts supplied constituted sale of goods inasmuch as the contract itself was a divisible one. It is the contention of the learned counsel that the predominant object was supply of materials and the assessees have effected supplies of materials, while executing the works, making out separately the charges for labour and consequently the Tribunal erred in holding that the assessees were mainly repairers and the amounts received were only for services rendered. 6.. Mr. Inbarajan, learned counsel appearing for the respondents-assessees adopted the reasoning of the Tribunal and supported the findings arrived at, referring to the consideration made by the Tribunal with reference to the nature of the transaction. It is also contended for the respondents that the Tribunal, as a final fact-finding authority, on appreciation of the nature of the transaction as disclosed from the materials made available, rendered a categorical finding that the transactions in question are pure works contract and the materials supplied in the course of execution of contract was merely in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as that of the Andhra Pradesh High Court, came to the conclusion that the transactions in question are essentially contracts to do repair works in ships and that the separate value for materials shown in the bills is only to determine the reasonableness of the total work of the contract and that the supply of material was incidental to the contract which according to the Tribunal was primarily a works contract. 8.. Further from the order of the Tribunal we find that it adverted to some of the bills and their contents and relied upon them to come to the conclusion that the transactions in question were primarily works contracts. The materials noticed in paragraph 6 of the Tribunal, in our view, would squarely justify the factual findings rendered by the Tribunal that the primary nature of the contract is that of works contract and not a contract for supply of material. In Vanguard Rolling Shutters Steel Works v. Commissioner of Sales Tax [1977] 39 STC 372, the apex Court had an occasion to consider the principles relating to a works contract in the context of an agreement for supply and fixing of iron shutters at the customer s premises for lump sum payment. The court pointed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e work and labour bestowed end in anything that can properly become the subject of sale; neither the ownership of the materials nor the value of the skill and labour as compared with the value of the materials is conclusive, although such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract was in substance one for work and labour and one for the sale of a chattel. 9.. After considering the relevant decisions on the subject, the apex Court quoted with approval the principles to be borne in mind as enunciated in Benjamin s Treatise on the Law of Sale of Personal Property with reference to the French Code and Civil Law, Eighth Edition (1950) at pages 167-168, where the learned editor has deduced the principles that would be applicable in deciding the controversy before us. These principles are: 1. A contract whereby a chattel is to be made and affixed by the workman to land or to another chattel before the property therein is to pass, is not a contract of sale, but a contract for work, labour and materials, for the contract does not contemplate the delivery of a chattel as such. 2.. When a chattel is to be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not make any difference. The nature of the work undertaken by the assessee, in our view, by themselves provide an indication about the primary object of the parties to the contract and that the intention between the parties was only to do the works undertaken as one job and that there was no intention whatever to pass any property in any chattel qua chattel. In our view, it is unnecessary to refer to all the other decisions cited from the Bar and the two decisions referred to are more than sufficient for the purpose of the case before us and for analysing the nature of the transaction under consideration in this case. The conclusions arrived at by the Tribunal, when considered in the light of the principles laid down supra by the apex Court, will go to show that the Tribunal was perfectly right in its findings that the contract was primarily a works contract for work and labour and that the supply of material was merely incidental to the execution of the said works contract and that no contract of sale of chattel qua chattel could be inferred from the transactions of the assessee. On that view we are of the opinion that the factual findings rendered by the Tribunal could not be s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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