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TMI Blog2009 (7) TMI 1160X X X X Extracts X X X X X X X X Extracts X X X X ..... as justified in holding that the activity of manufacture and supply of "flange assembly" to Telco carried out by M/s. Auto Comp Corporation is not a transaction of "sale" as contemplated under section 2(28) of the Bombay Sales Tax Act, 1959? (ii) Whether, on the facts and in the circumstances of the case, the Maharashtra Sales Tax Tribunal was justified in holding that the activity of manufacture and supply of "flange assembly" is a sale under section 2(l) of the Maharashtra Sales Tax on the Transfer of Property in Goods involved in the Execution of Works Contracts (Re-enacted) Act, 1989? The relevant facts leading to the present application are briefly stated below: M/s. Auto Comp Corporation, the respondent herein, is engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d steel sheets to the respondent who converts them into an auto part known as "assembly-flange". The assembly-flange consists of two parts, viz., "outer-flange" and "innerflange". From the imported steel sheets supplied by Telco, the respondent manufactures outer-flange. So far as inner-flange is concerned, the respondent uses its own raw material and prepares the inner-flange which is then welded together to the outer-flange. The welding is so done that the inner-flange and outer-flange cannot be separated from each other and they together constitute and make the auto part, i.e., "assembly-flange". The assembly-flange so manufactured is then despatched by the respondent to Telco. For doing this job-work of converting the imported steel sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. [1958] 9 STC 353 (SC). The Supreme Court has held that in a building contract which is entire and indivisible, there is no sale of goods by the contractor to the owner and it is not within the competence of the Provincial Legislature under entry 48 of List II of the Seventh Schedule to the Government of India Act, 1935 to impose tax on supply of raw materials used in such contract treating it as a sale. This decision led to the 46th Amendment of Constitution of India in 1982 by which the Legislatures of the States were empowered to levy sales tax on certain transactions described in clause (29A) of article 366 of the Constitution and conferring power on the State Legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the outer-flange amounts to a sale and taxable under the Works Contract Act. However, that cannot be a "sale" as defined under section 2(28) of the Bombay Sales Tax Act. The contention of the applicant that a part of the conversion charges received by the respondent from Telco as conversion price represents the value of the goods (inner-flange) which are sold and/ or transferred by it to Telco and therefore that value is exigible to tax under the Bombay Sales Tax Act cannot be accepted. In our view, the transfer of the property in the goods (inner-flange) by the respondent to Telco does not amount to "sale" within the meaning of the Bombay Sales Tax Act. The Bombay Sales Tax Act defines the word "sale" under section 2(28) as follows: "&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther valuable consideration; shall be deemed to be a sale." In Hindustan Aeronautics Ltd. v. State of Karnataka [1984] 55 STC 314, the Supreme Court was concerned with an agreement between Hindustan Aeronautics Ltd. (HAL) and the President of India whereby HAL had agreed to accomplish the service and maintenance of certain air force planes to the specified standard. For the works to be carried out, payment was to be made by the Government at cost plus ten per cent profit basis or at the HAL's fixed rates wherever applicable. Clause 3 of the agreement provided that the Government would provide all necessary spare parts and materials (except those expendable such as paints, dopes, cleaning rags, etc.). Where, however, there was delay the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere supplied by the appellant in the case of execution of works contract and therefore there was no sale exigible to sales tax. In our opinion, the ratio of this case squarely applies to the controversy before us. The main raw material is imported steel plates which are supplied by Telco. The steel plates belong to Telco and the respondent only converts the said steel plates into the assembly-flange. In converting these steel plates into assembly-flange the respondent undoubtedly uses some of its own material but the contract of conversion of steel plates under the assembly-flange is single and indivisible and the passing of the property in the goods of the respondent used in the said conversion is incidental to the main contract which is t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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