Madras High Court
N. Srinivasamoorthy vs State Of Tamil Nadu on 21 September, 1990
Equivalent citations: [1991]81STC52(MAD)
JUDGMENT Venkatasami, J.
1. This tax (revision) case is filed against as order of the Sales Tax Appellate Tribunal (Main Bench), Madras, in T.A. No. 668 of 1979 dated October 1, 1980.
2. Brief facts relating to the case are the following : The petitioner is not a registered dealer either under the Tamil Nadu General Sales Tax Act, 1959, or under the Central Sales Tax Act, 1956. For the assessment year 1973-74, the Deputy Commercial Tax Officer, Adayar Division, by order dated April 18, 1978, determined the total and taxable turnover of the petitioner in a sum of Rs. 1,76,000 taxable at 3 1/2 per cent. In addition to the tax, the assessing authority also levied penalty in a sum of Rs. 9,240 under section 12(3) of the Act for not disclosing the turnover to the department till it was detected. The turnover, according to the assessing officer, represents the sale consideration received by the petitioner towards supply and fixing of auditorium chairs. On appeal, the Appellate Assistant Commissioner dismissed the appeal, confirming the assessment order, including the levy of penalty. On further appeal, the Sales Tax Appellate Tribunal, while confirming the levy of tax, reduced the penalty to Rs. 5,000.
3. Mr. K. J. Chandran, learned counsel appearing for the petitioner, submitted that all the three authorities blindly applied the ratio in the judgment in A. R. Brothers v. Government of Tamil Nadu reported in [1979] 44 STC 500 (Mad), without appreciating the fine distinction available on facts. According to the learned for the petitioner, when the assessment proceedings are under process, all the records were taken by the Central excise authorities for the purpose of finding out whether there was manufacturing of any commodity liable to excise duty and, therefore, the petitioner could not place all the materials. However, before the Tribunal, a detailed affidavit giving the nature of transaction was filed, which was not disputed by filing of any counter, and in spite of that, the Tribunal has applied the ratio in [1979] 44 STC 500 (Mad). (A.R. Brothers v. Government of Tamil Nadu). It is seen from the affidavit that the petitioner has given the following facts :
"At the outset, I would like to state I do not have any factory or workshop wherein the chairs in question were manufactured. The entire work was done only at the site of the customer. The chairs in question came into existence by fabrication at the site and there was no chair in existence which was moved to the site of the theatre for being installed.
At the first instance, the owners of the theatre and the architects gave me the requisite design of the theatre and the various rows of seats to be erected distinctly marked therein. I had to buy the requisite raw materials for carrying out the work and the owners of the theatre undertook to furnish to me for the work only MM foam rubber and foam leather fabric which were required for carrying out the work. I had to work in co-ordination and in concert with the instructions given by the architect and the owners and in keeping with the work in progress of the civil engineering contractor. I had to buy the necessary timber and bring the same to the site and manufacture the wooden frames required for the seats and the backs. I had also to obtain steel frames, links, back sheets from various workshops and arrange for their arrival at the site in a phased manner. Work had to be done on wooden frames, like, bale patti, gunny, hardboard, fixing, etc. I had to do some preliminary work, like, fixing MM foam rubber seats on the wooden frames, cutting of foam leather fabric as per templates, stitching of covers for the seats and the backs. Insertions had to be made of U foams for backs after cutting U foam into necessary strips. Thereafter, lining work, i.e., fixing the stitched covers skillfully so that no wrinkles were formed on the fabric after fixing, had to be done. Painting of steel parts as and when they were received also was my job.
As and when the flooring was prepared by the civil contractor by pouring concrete to the required dimensions, I had to co-ordinate my work with the civil contractor. I had to prepare the necessary reapers and keep them ready so that I had to lay them on the floor when the concrete was poured by civil contractor and have them duly anchored with nails. Subsequently, I had to do assembly of the links on to seats. Assembling of steel frames in rows as per the layout drawing furnished to me and aligning of the rows after tightening of the joints by securing of rows to the floor reaper was carried out. Thereafter, I had to fix back steel assets on to the backs and fix aluminium beading tops and sides of backs after previous bending of the aluminium angle in a bending jig.
Fixing of necessary backs on the steel rows and aligning of the backs and levelling of the backs had to be made. Finally, fixing of the springs and oiling of the moving parts was my work."
In the light of the above facts brought out in the affidavit which have been noticed by the Tribunal, the learned counsel for the petitioner submits that the ratio in [1979] 44 STC 500 (Mad). (A.R. Brothers v. Government of Tamil Nadu) will have no application at all. On the other hand, the ratio laid down by the Supreme Court in State of Rajasthan v. Man Industrial Corporation Ltd. reported in [1969] 24 STC 349, will apply to the facts of this case. He also cited another Supreme Court decision in Government of Andhra Pradesh v. Guntur Tobaccos Ltd. reported in [1965] 16 STC 240. He placed reliance on another judgment of the Supreme Court in Ram Singh & Sons Engineering Works v. Commissioner of Sales Tax .
4. On the other hand, Mr. R. Karuppan, learned Additional Government Pleader (Taxes), while supporting the order of the Tribunal, placing reliance on the decision reported in [1979] 44 STC 500 (Mad.) (A.R. Brothers v. Government of Tamil Nadu), also cited another Division Bench judgment of this Court in State of Tamil Nadu v. Dunlop India Limited reported in [1981] 48 STC 521.
5. We have considered the rival submissions. In [1979] 44 STC 500 (Mad.) (A.R. Brothers v. Government of Tamil Nadu), also cited, another Division Bench while sustaining the assessment order, has pointed out an important distinction on fact. The Division Bench has observed in that case as follow :
"The learned counsel for the assessee was at pains to point out that it was also under an obligation to erect the chairs in the auditorium and unless that also was done, the work was not complete and it will not be entitled to be paid and that, therefore, it would amount to a works contract. We are unable to discern any clause in the special terms and conditions of the tender suggesting any obligation of fixing the auditorium chairs in the auditorium building. The learned counsel referred to certain correspondence that passed between the department and the assessee. Even from these letters we are not able to spell out any obligation to fix the chairs to the ground to make it as part of the building itself. Clause 8 of the special terms and conditions relied on by the learned counsel for the assessee only refers to an obligation on the part of the assessee to remove any of the defective materials within a period of 12 months from the date of erection. But it does not make it obligatory on it to erect the chairs in the auditorium as part of the building itself. In fact, the Tribunal pointed out that the assessee had not produced the relevant records and correspondences, that passed between the assessee and the department to determine the nature of the contract in this particular case. In these circumstances, we are unable to hold that the contract in this case was a composite contract for the sale of the chairs as also the erection of the same in the auditorium, making it a works contract."
We have noticed on facts that the work undertaken by the petitioner is that he has to carry all the materials to the theatre, fabricate them, satisfy the design given by the architect and engineer and the whole work has to be done at the premises of the theatre. Further, he has to work in co-ordination and concert with the instructions given by the architect and the owners and also in keeping with the work in progress of the civil engineering contractor. The portion extracted from the affidavit leaves no doubt that the contract was for fixing the auditorium chairs in the auditorium building. Therefore, the decision in [1979] 44 STC 500 (Mad.) (A.R. Brothers v. Government of Tamil Nadu) wherein the facts were not like the present one, cannot be applied. Likewise, the decision in [1981] 48 STC 521 (Mad.) (State of Tamil Nadu v. Dunlop India Limited) will have no application as the finding in that case was to the effect that the property in the rubber portion did not pass during the process of fixation of vulcanisation. Only when the rubberised wheel as such was delivered to the Government, the property in the rubber portion passed to the purchaser-Government. The facts as noticed by us are entirely different. On the other hand, the ratio laid down by the Supreme Court in the various decisions, as noticed above, clearly supports the case of the petitioner.
6. In [1965] 16 STC 240 (Government of Andhra Pradesh v. Guntur Tobaccos Ltd.), the Supreme Court has that in business transactions, the works contracts are not frequently recorded in writing setting out all the covenants and conditions thereof. The same can be gathered from the evidence and the attendant circumstances. This decision of the Supreme Court is cited to get over the adverse remark of the Tribunal to the effect that no written contract is produced by the petitioner. In the light of the ratio of the Supreme Court judgment, we hold that the absence of written contract by itself will not lead to an inference that the transaction is not "works contract".
6A. In passing, we may point out that the petitioner, we are told, was ultimately let-off from the clutches of excise liability.
7. In [1969] 24 STC 349 (State of Rajasthan v. Man Industrial Corporation Ltd.), the Supreme Court has held as follows :
"Held, on the facts, 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 contract 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. The contract was for execution of work not involving sale of goods."
This decision of the Supreme Court definitely supports the case of the petitioner. Likewise, the decision in (Ram Singh & Sons Engineering Works v. Commissioner of Sales Tax) approved the ratio laid down in [1969] 24 STC 349 (SC) (State of Rajasthan v. Man Industrial Corporation Ltd.).
8. Bearing in mind the ratios laid down in the various decisions of the Supreme Court and applying the same to the facts as found by us hereinbefore, we have no doubt that the transaction in question is "works contract" pure and simple. The contrary view taken by the authorities below under the impression that the ratio in [1979] 44 STC 500 (Mad.) (A.R. Brothers v. Government of Tamil Nadu) will squarely apply, cannot at all be sustained, and accordingly, the tax case is allowed. No costs.
9. Petition allowed.