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TMI Blog2018 (5) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Tribunal was justified in declaring that payment of Rs. 18,98,008, in absence of any material of evidence or single whisper of evidence, was made towards the job Work and was not sale?" 3. We heard Mr. Mohit Maulekhi, learned Brief Holder on behalf of the State / revisionist. We also had heard Mr. S.K. Posti, learned counsel for the respondent. 4. The Assessing Officer, in this case, by the order which was modified by the Tribunal, proceeded to estimate the turnover of the assessee for the Assessment Year 1987-88 at Rs. 40 lakhs. The tax was assessed at Rs. 5,28,000/-. The respondent-assessee was assessed on the basis that it had manufactured and sold cement tiles to a Government Department (hereinafter referred to as the contractee). The Assessing Officer entered the following findings in passing the order: Form 3-D has not been filed by the assessee. The agreement, under which the tiles were supplied, was not produced. No Account books and Bill books have been presented for scrutiny. Though the assessee claims the benefit of the order passed by the Member, Trade Tax Tribunal for the previous Assessment Year 1986- 87, wherein the Tax Tribunal construed the transaction as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer finds that from the intimation received from the Executive Engineers of the two Divisions at Haridwar available on file, the dealer has been given Rs. 18,98,008/- and a net payment of Rs. 5,72,254/- during the year in consideration by the department. For the year 1988- 89, the dealer was given a gross payment of Rs. 10,62,078/- and a net payment of Rs. 1,97,410/-. Thus, the total amount of Rs. 29,60,086/- for the years 1987-88 and 1988-89 was received. It is also stated in the statement, which is available on the file that payment of the last bill is still outstanding. Thus, it is found that it is but natural that for the supplies made in the year 1987-88, the payment has been received during the year 1988-89 and this shall also be deemed as sale for the year 1987-88. No accounts were presented for scrutiny. On the basis of the same, the sale of the cement tiles was determined as Rs. 40,00,000/-, which was also treated as taxable turnover and the amount of Rs. 5,28,000/- was demanded. The First Appellate Authority has dismissed the Appeal. 6. In the further Appeal, the Tribunal has found that the matter is to be governed by the decision in the Assessment Year 1986-87. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced any such fact before us whereby the mentioned agreement no. 2 / East Ganga Canal Construction Division / section -2/ S.E. / 85- 86 can be proved to be related with the work contract or supply (sale). As per assessment order there is no mention of receipt of payment of Rs. 18,98,008/- to the Dealer against referred agreement no. 2/East Ganga Canal Construction Division / Section -2 / S.E. /85-86, from the Contractee Superintending Engineer, East Ganga Canal Construction Division-3, Haridwar. Except this, there is no mention of any other adverse fact in the assessment order or Appellate order. As such, the learned Appellate Officer has committed mistake by supporting the taxable sale of Rs. 40,00,000/- as assessed for the relevant year by the Assessing Officer, which can not be confirmed. Therefore, after considering all the facts on account of payment of Rs. 18,98,008/- received to the Dealer against agreement no. 2 / East Ganga Canal Construction Division / Section -2 / S.E. /85-86, having come to light as being received as labour charges under job work, it can not be held to be amount for sale. Accordingly, on this amount no tax liability accrues to the Dealer. ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her agreement, nor Form 3-D was produced, and he would rely on the judgments of the Hon'ble Apex Court, which were relied on by the Assessing Officer. 9. Per contra, Mr. S.K. Posti, learned counsel for the respondent-assessee would support the order of the Tribunal and submit that this is a case of a 'job-work'. He would reiterate that the entire materials were supplied by the Department, which include even land and electricity, and he only supplied the labour and there is no sale of chattel. As far as the amount, which is shown as paid as admitted tax and that too at the concessional rate of 4.4% and the production of Form-3-D is concerned, he would submit that under notion that this is taxable and this is a case, where, as found by the Tribunal, having regard to the terms of the contract, the entire material was supplied by the contractee Department and it is only the labour, which is to be supplied by the respondent, the Tribunal has rightly found that the contract is one for supply of labour and not for chattels. 10. It is first of all necessary to notice the nature of the transaction. The contractee Departments are the Government Departments. The respondent assessee has supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o his setting up the case of job work. 12. Coming to the issue as to whether a contract is to be treated as the contract of sale of goods or the contract of work, the issue is no longer res integra and is covered by a catena of judgments of the Hon'ble Apex Court. Suffice it for us to refer to two of them. One of the early decisions on this point is the decision in the case of M/s Chandra Bhan Gosain vs. State of Orissa reported in 1963 -14 STC 866. In fact, the Assessing Officer and the Appellate Authority have relied upon it, whereas the Tribunal has distinguished the said judgment. It is, therefore, necessary to notice the facts and also the law, which has been laid down in the said decision. The facts were that the appellants therein had entered into a contract with the Company for manufacture and supply of bricks. Large quantities of bricks were manufactured and supplied under the contract and the State assessed the appellant to sales tax. The contention of the appellant was that the contract was only for labour and for work done and material found, and that there was no sale of any goods. The Court rejected the contention; firstly, that the bricks were made out of earth belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act? Was it the intention of the parties in making the contract that a chattel should be produced and transferred as a chattel for a consideration? This test has now been accepted as of general application to decide whether a contract was for sale of goods or for labour supplied and materials found: see Benjamin on Sales (8th ed.) p. 161 and Halsbury's Laws of England (3rd Edn.) Vol. 34, p. 6. 8. It is true that the test will often be found to be difficult of application. But no such difficulty arises in the present case. Here the intention of the parties in making the contract clearly was that the Company would obtain delivery of the bricks to be made by the appellant; it was a contract for the transfer of chattels qua chattels. The essence of the contract was the delivery of the bricks, though no doubt they had to be manufactured to a certain specification. It would be absurd to suggest that the essence of the contract was the work of manufacture and the delivery of the bricks was merely ancilliary to the work of manufacture, in the same way as the delivery of the paint and the canvas were held to be ancillary to the contract to paint the portrait in Robinson v. Graves. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for all time vexed jurists all over. The distinction between a contract of sale of goods and a contract for work and labour is often a fine one. A contract of sale is a contract, whose main object is the transfer of the property in, and the delivery of the possession of, a chattel as a chattel to the buyer. (Halsbury's Laws of England, Third Edition, Volume 34, page 6). 10. Mr. V. S. Desai brings to our- notice the common as well as the distinguishing features of this case and of Chandra Bhan Gosain's case (supra). According to him the common features are the following:- 11. The land was given free for manufacture of bricks in both the cases. The materials shall remain at the contractor`s risk till the date of final delivery. In Chandra Bhan Gosain`s case (supra) the contractor could not sell the bricks to third parties without previous permission of the company. Here also the contractor has no right to sell the bricks etc. but if he does sell he will have to pay 10 percent of the value of the materials at the tender rates. Both the Clauses are, therefore, permissive Clauses and are substantially the same. In both the contracts the contracting parties have used the words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire raw materials were supplied by the Department. The materials were made use of by the assessee, who has supplied the labour and he made the tiles, which were supplied. It is significant to note that in the revision filed, there is no challenge to the findings given by the Tribunal that the entire raw materials, including the land and electricity were supplied by the contractee to the respondent assessee. Therefore, we have no occasion to go into the validity of the findings by the Tribunal, which is after all the final fact-finding authority that the raw materials, besides electricity, have all been supplied by the contractee Department to the respondent assessee. 18. Secondly, we must also notice another significant feature. There is a definite case for the respondent assessee that the tiles, which are subject matter of the controversy, have been supplied under a contract, which was executed in the year 1986. The respondent assessee was assessed to tax in respect of the tiles, which were supplied apparently under the same contract in the year 1986-87, but the said assessment was interfered with by the order passed by the Tribunal. The Tribunal apparently has proceeded to hold ..... X X X X Extracts X X X X X X X X Extracts X X X X
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