HINDUSTAN SHIPYARD LIMITED Vs. STATE OF ANDHRA PRADESH

JUDGEMENT

(1.) The question arising for decision in these appeals is whether the transactions involved in manufacture and supply of ships by the appellant to its customers are a 'sale' as defined in clause (n) of Section 2 of the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter 'the Act', for short) as held by the High Court or 'works contract" as defined in clause (t) of Section 2 of the Act and hence not exigible to sales-tax as contended by the assessee-appellant.

(2.) M/s. Hindustan Shipyard Limited, the appellant before us, is a public sector undertaking. It is engaged in the activity of building ships for different ship owners under the orders placed by them and as evidenced by the contract entered into between them.

(3.) The facts in brief. Between the assessment years 1974-75 and 1983-84 (both years inclusive) there were 18 ships involved and formed subject-matter of different assessments. The Assessing Authority and the Commissioner (Appeals) held all the transactions in question as transactions of sale liable to payment of sales-tax by the appellant. Several tax appeals preferred by the appellant were disposed of by the Sales Tax Appellate Tribunal, Andhra Pradesh, Hyderabad by a common order dated 19th July, 1989. It appears that earlier also transaction regarding building of ships by this very assessee have been a subject of controversy travelling up to the High Court of Andhra Pradesh and disposed of by a Division Bench by its order dated 27th January, 1969 reported as Hindustan Shipyard Limited, Visakhapatnam v. The Commercial Tax Officer, Visakha-patnam (1970) 1 Andh WR 197. The High Court having examined several clauses of the contract dated 12-4-1965 entered into between the appellant and its customers concluded that the building of the ships under the contract under scrutiny was works contract and not sale. This decision was heavily relied on by the appellant before the Tribunal. The Tribunal has analysed the terms and conditions of all the contracts forming subject-matter of appeals before it and thereafter divided the contracts into two groups. The Tribunal noticed that the contracts relating to 10 ships before it incorporated recitals identical or similar to the contract dated 12-4-1965 involved before the High Court in (1970) 1 Andh WR 197. As to such contracts the Tribunal held that it was bound to follow the Division Bench decision of the High Court more so when the Department had not pursued its challenge to the correctness of the findings of fact and the principles laid down therein by approaching the Supreme Court. Such contracts were held to be works contract following the abovesaid decision. This time also the Department has not pursued the matter further. Therefore as to the transactions involving 10 ships the order of the Tribunal has become final.