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TMI Blog2003 (3) TMI 699X X X X Extracts X X X X X X X X Extracts X X X X ..... cant filed appeal before the Assistant Commissioner (Judicial), Sales Tax, Moradabad, which was rejected. Claim of the dealer of works contract was also rejected by Tribunal. Being aggrieved by the order of Tribunal, the present revision has been filed. 3.. The only question for consideration in the present revision is that whether the agreement dated February 28, 1984 between the applicant and M/s. Gunkar Electrodes Private Limited, Rampur, was in the nature of works contract or contract for sale. A copy of the agreement is annexure 2 to the present revision. It has also been referred in the order of Tribunal. The agreement reads as follows: AGREEMENT This agreement is made at Rampur on this 28th day of February, 1984. M/s. Heera Electrodes, Rampur, having its office near Kosi River Bridge, Rampur, represented by Sri Pradeep Kumar Jain, its partner, hereinafter referred to as the first party. AND M/s. Gunkar Electrodes Private Ltd., Rampur, having its registered office at Jwalanagar, Rampur, and being represented by Shri R.B. Jain, managing director of the company, hereinafter referred to as the second party. Whereas the second party is desirous of getting suppli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plant. 9.. That the first party hereby guarantees that the designs are its own and that the plant and machinery to be designed and supplied by it does not infringe any existing patent or trade mark and agrees to indemnify against the latter for any such infringement. 10.. That in case any dispute or difference arises at any time between the parties to this agreement during the period of fabrication and supply of the plant or during the performance guarantee period thereof, or on account of any misinterpretation of this agreement, such dispute or difference shall be referred to an arbitration. Each of the two parties will appoint one arbitrator under the provisions of Indian Arbitration Act, 1940 or any statutory modification or reenactment thereof, for the time being in force. All proceedings in such arbitration will be held at a place or places as may be determined by the arbitrators. In case of any dispute in-between arbitrators, one independent umpire will be appointed, whose decision will be final. In witnessth we have put our signatures on this 28th day of February, one thousand nine hundred eighty four. Relating to aforesaid contract, applicant had prepared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Dring oven 1 L.S. 6. Automatic wire 1 7 Straightening and cutting machines 2 8 Sigma kneeding machine (wet mixer) 1 9. Dry mixer, trays 1 10. Frames 1 11. Eccentricity tester 200 Nos. L.S. 12. Hand tools 20 13. (These specifications are as per our quotation No. 1245/HE/83-84 dated December 1, 1983) 1 1 Kit. Total Rs. 5,15,000 Note: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and are tested to be functional effectively and properly without any defect and during the time of such test the property in machinery and plant remained with the assessee, as is clear from the condition that if any machinery or equipment was found defective, the assessee was liable to take back of the same. Therefore, the contract is one of the primary contract for supply of materials at a price agreed to between the parties for the materials so supplied and the work or service rendered in installation incidental to the execution of the contract, as the cost of work and labour is very nominal in comparison to the cost of the material so supplied and hence the contract is one for sale of material and the sale proceeds would be exigible to sales tax. 5.. To decide the present issue on the facts stated in the Tribunal order, it is necessary to consider various decisions of apex Court, in which the differences between the contract for work and a contract for sale of goods has been considered. In the case of Commissioner of Sales Tax, Madhya Pradesh v. Purshottam Premji [1970] 26 STC 38 (SC), it has been held: The primary difference between a contract for work or servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and their erection and installation so far as the price is concerned. The erection and installation of the rolling shutters is asmuch an essential part of the contract as the fabrication and supply and it is only on the erection and installation of the rolling shutters that the contract would be fully executed. The court then proceeded to examine what is a rolling shutter and how it is erected and installed in the premises and observed that a rolling shutter consists of several component parts and the component parts do not constitute a rolling shutter until they are fixed and erected on the premises. It is only when the component parts are fixed on the premises and fitted into one another that they constitute a rolling shutter as a commercial article and till then they are merely component parts and cannot be said to constitute a rolling shutter. The erection and installation of the rolling shutter cannot, therefore, be said to be incidental to its manufacture and supply. It is a fundamental and integral part of the contract, because without it the rolling shutter does not come into being. The manufacturer would undoubtedly be the owner of the component parts when he fabricat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parts are fixed in position and erected at the site, but at that stage it becomes the property of the customer because it is permanently embedded in the land belonging to the customer. The result is that as soon as 3-motion electrical overhead travelling crane comes into being, it is the property of the customer and there is, therefore, no transfer of property in it by the manufacturer to the customer as a chattel. It is essentially a transaction for fabricating component parts and putting them together and erecting them at the site so as to constitute a 3-motion electrical overhead travelling crane. The transaction is no different than one for fabrication and erection of an open godown or shed with asbestos or tin sheets fixed on columns. There can, therefore, be no doubt that the contract in the present case was a contract for work and labour and not a contract for sale. This view which we are taking is completely supported by the decision of this court in Sentinel Rolling Shutters Engineering Company Pvt. Ltd. v. Commissioner of Sales Tax, Maharashtra [1978] 42 STC 409. 10.. In the contract which was under consideration, there was a clause of mode of payment and replacemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty of customer and therefore, no transfer of property in it by the applicant to the customer as a chattel. It was essentially a transaction for fabrication of various items putting them together fabricating and installing them at the site so as to constitute electrode plant. What is relevant for the determination as to whether contract is works contract or contract for sale, is that in the execution of contract, there is supply of chattel as such or plant as a unit, after being installed. The mode of payment is wholly irrelevant. It is also irrelevant that the agreement provides to take back the plant if it fails to give full performance during the period of one year from the date of installation of the plant. In view of the above, I hold that the work executed by the applicant was in the nature of works contract and not contract for sale. 13.. In the result, the revision is allowed. The order of Tribunal dated March 8, 1991 is set aside and it is held that the contract executed by the applicant for design, manufacture and installation of complete machinery and equipment of electrode plant was in the nature of works contract and not liable to tax during the year under consi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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