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The Commissioner of Sales Tax Vs. Universal Flush Door Mfg. Co. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMumbai High Court
Decided On
Case NumberS.T.R. No. 9 of 1972
Judge
Reported in(1976)5CTR(Bom)362
ActsBombay Sales Tax Act, 1959
AppellantThe Commissioner of Sales Tax
RespondentUniversal Flush Door Mfg. Co.
Appellant AdvocateC.A. Phadkar, Adv.
Respondent AdvocateNone
Excerpt:
.....involving no sale of goods - assessee given contract for doing furniture works in newly constructed tenements - in view of precedents contract was for execution of work not involving sale of goods - amount received under contract not liable to sales tax. - - teak wood doors as per the approval of the garrison engineer, assistant garrison engineer or his representative at a rate which included all painting, been waxing or oiling as per the contract as well as fixing of hold fasts with screws or bolts & nuts tarring glazing and any other thing required as per the contract agreement. the assessees appealed to the assistant commissioner of sales tax against the assessment orders passed by the sales tax officer but without success. the tribunal held that the supplies made by the..........that decision. in connection with the aforesaid items a composite rate was fixed for providing and fixing the items concerned. by the second contract, which was dated 2nd march, 1963, the assessees, who have been referred to therein as the 'sub-contractor', agreed with m/s. fadia dalal and co. to provide and fix c.p. teak wood doors as per the approval of the garrison engineer, assistant garrison engineer or his representative at a rate which included all painting, been waxing or oiling as per the contract as well as fixing of hold fasts with screws or bolts & nuts tarring glazing and any other thing required as per the contract agreement. the assessees also agreed to provide and fix c.p. teak wood windows or ventilators or louvers at the stated rate. it is needless to set out in detail.....
Judgment:

Kania, J.

1. This is a reference under section 61(1) of the Bombay Sales Tax Act, 1959, made at the instance of the Commissioner of Sales Tax. The question referred to us for our consideration is as follows :

'Whether having regard to the facts and circumstances of the case, the Tribunal was correct in law in holding that the contracts entered into by the respondents with the two parties, namely, (1) Messrs. Poona Engineering & Construction Co. and (2) Messrs. Fadia Dalal & Co. were, barring items Nos. 6, 7, 8 and 9, works contracts involving no sale of goods ?'

This question is somewhat misleading, because admittedly items 6, 7, 8 and 9 referred to in the question are in connection with the contract between the assessees and M/s. Poona Engineering and Construction Company. Hence, we reframe the question as follows :

'Whether having regard to the facts and circumstances of the case, the Tribunal was correct in law holding that the contracts entered into by the respondents with the two parties, viz. (1) M/s. Poona Engineering and Construction Co. barring Items Nos. 6, 7, 8 and 9, and (2) M/s. Fadia Dalal & Co., were works contracts involving no sale of goods ?'

2. The facts giving rise to this reference are as follows : During the assessment period from 1-4-1962 to 31-3-1963 and 1-4-1963 to 31-3-1964 respectively, the assessee entered into and completed two contracts. The first contract was dated 12th May, 1962 and was entered into between the assessee and the Poona Engineering and Construction Co. (hereinafter referred to as 'the Poona Company'). The recitals in this contract show that the Poona Company had obtained a contract of constructing 224 tenements for the Bombay Municipal Corporation. By this contract dated 12th May, 1962, the assessees, who were referred to in the contract as 'Carpenters', were given a sub-contract, inter alia, for providing and fixing teak wood in square scantlings; teak wood doors, glass fanlights, brass fixtures and fastenings, teak wood false panelled doors, teak wood partly panelled and partly glazed windows, partly fixed and partly movable shutters, meshes and teak wood railings of the description contained in the Schedule to the contract. We may make it clear that we have no where referred to the other items set out in the said Schedule to the contract, because in connection with those items the Tribunal has held the transaction to be one of sale, and we are not concerned with the correctness of that decision. In connection with the aforesaid items a composite rate was fixed for providing and fixing the items concerned. By the second contract, which was dated 2nd March, 1963, the assessees, who have been referred to therein as the 'sub-contractor', agreed with M/s. Fadia Dalal and Co. to provide and fix C.P. teak wood doors as per the approval of the Garrison Engineer, Assistant Garrison Engineer or his representative at a rate which included all painting, been waxing or oiling as per the contract as well as fixing of hold fasts with screws or bolts & nuts tarring glazing and any other thing required as per the contract agreement. The assessees also agreed to provide and fix C.P. teak wood windows or ventilators or louvers at the stated rate. It is needless to set out in detail the terms of these contracts because it is not disputed before us that these contracts stipulate for providing and fixing of the items concerned at certain composite rates.

3. The Sales Tax Officer, who assessed the assessees, treated both the contracts entirely as contracts of sale and passed the assessment orders on that footing. The assessees appealed to the Assistant Commissioner of Sales Tax against the assessment orders passed by the Sales Tax Officer but without success. The assessees then preferred second appeals to the Tribunal. The Tribunal held that the supplies made by the assessees in respect of items 6, 7, 8 and 9 contained in the Schedule to the contract between the assessees and the Poona Company should be treated as taxable sales and assessed to tax, but the rest of that contract as well as the contract between the assessees and M/s. Fadia Dalal & Co. were treated as contracts of work and labour and the amounts received thereunder were treated as not liable to be included in the taxable turnover of the assessees. The correctness of the decision of the Tribunal is sought to be challenged by the Department in this reference.

4. The only question which arises for considerations is whether there are two separate contracts, one for work and labour and the other for supply of goods or whether the contracts are composite and goods have been supplied as ancillary to the supply of work and labour. In connection with the determination of this question, it would be useful to refer to the decision of the Supreme Court in State of Rajasthan vs. Man Industrial Corporation Ltd. 24 S.T.C. 349. In that case, pursuant to an invitation of the Executive Engineer, the respondent submitted its tender for fabricating and fixing certain windows in accordance with specifications, designs, drawings and instructions. The windows were to be fixed to the building, withdrawal plugs in cut stone-works. The rate quoted by the respondent was based on the current price of mild steel billets and the price was to be revised if there was a change in the controlled price of billets supplied to the respondent. The tender was accepted and the respondent carried out the contract. The question was whether the sum received under the contract could be included in the taxable turnover for the purpose of sales tax. It was held that the contract undertaken by the respondent was to prepare the window leaves according to the specifications and to fix them to the building. There were not two contracts, one of sale and another of service. Fixing the windows to the building was also not incidental or subsidiary to the sale, but was an essential term of the contract. The window leaves did not pass under the terms of the contracts as window-leaves. Only on the fixing of the windows as stipulated could the contract be fully executed and the property in the windows passed on the completion of the work and not before. It was held that the contract was for execution of work not involving sale of goods. This decision has been followed by the Supreme Court in State of Rajasthan vs. Nenu Ram 26 S.T.C. 268. In that case, the contract was for supplying and fixing wooden windows and doors together with frames and painting them in the police lines building when it was being constructed at Pali. It was held that the contract was one and indivisible for the supply and fixing of wooden doors and windows at the site. The goods were not sold as movable and the property was to pass only when the wooden chowkhats and windows etc., were fixed on the site. The amount received under the contract was not liable to sales tax.

5. Mr. Phadkar, learned counsel for the Revenue, fairly stated that the contracts in the case before us are, in substance, similar to the contracts referred to in the aforesaid two Supreme Court decisions. In our opinion the case before us falls squarely within the ratio of the aforesaid two decisions. Hence the Tribunal was right in the conclusion to which it has arrived.

6. In the result, the question as reframed by us must be answered in the affirmative. As the assessees have not remained present, there will be no order as to costs.


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