GOVERNMENT OF MADRAS Vs. SIMPSON AND COMPANY LIMITED

JUDGEMENT

(1.) These two appeals by special leave are directed against the judgment of the High court of Madras, dated 18/01/1963, in Tax Cases Nos. 189 and 192 of 1961. The respondent, M/s. Simpson and Co. Ltd. , hereinafter referred to as the assessee, is a dealer in motor-cars, motor parts, and accessories and it also dealt with the sale of Perkins Diesel Engines. For the assessment year 1950-51, the assessee was assessed to sales tax under the Madras General Sales Tax Act, 1939, hereinafter referred to as the Act, on a taxable turnover of Rs. 10,55,070-4-0 representing 70 per cent. of the value of the said diesel engines supplied and fitted to the chassis of the customers' vehicles. For the assessment year 1954-55, the disputed turnover in respect of diesel engines was Rs. 5,23,380. 00 representing the value of the Perkins Diesel Engines. The assessee appealed to the appellate authority, Appellate Assistant Commissioner of Commercial Taxes, without any success. The assessee then filed a second appeal to the Sales Tax Appellate tribunal. The tribunal heard these appeals together with other appeals of the assessee for the years 1951-52, 1952-53 and 1953-54. All the appeals were deposed of by a common order dated 14/02/1961.

(2.) The Appellate tribunal repelled the contention of the assessee that the turnover relating to the figment of Perkins Engines to the vehicles of the customers was really the turnover arising from "works contract" within the decision of Sundaram Motors (Private) Ltd. v. The State of Madras'. The tribunal held: "in our opinion, however, this was a case where the engines as such were sold to customers but were fitted on to the vehicles of the customers, some charge being made for the fitment, and therefore it cannot be said that this was a works contract. " It further observed: "as a matter of detail we may point out that it was stated by the State Representative, and the files confirm it, that the appellants separately exhibited the cost of the engines and the cost of fitment in the bills for the years 1951-52, 1952-53 and 1953-54, but so far as the years 1950-51 and 1954-55 were concerned, they did not split them up and made only a consolidated charge; but for the purpose of assessment the departmental officer called upon the appellants to give the cost of labour separately for , the two years 1950-51 and 1954-55 also. Accordingly the appellants showed the cost of labour separately and what was subjected to tax was I only the cost of the engines. ' The tribunal referred to some typical bills for the years 1950-51 and 1954-55 and concluded that there was a sale of the engines as such, and, therefore, the benefit of the decision in Sundaram Motors v. State of Madras' could not accrue to the assessee.

(3.) The assessee then filed revisions under section 38 of the Madras Act 1 of 1959 before the High court. The High court partly accepted revision No. 108 of 1961 (Tax Case No. 189 of 1961) arising out of the assessment for 1950-5). The High court observed: "in our opinion, there is no reason to disbelieve the version of the petitioner that in regard to these contracts, they were not truly sales of engines to the customers, but that they really amounted to works contract under which for a consolidated amount the engines were fitted into the vehicles. The fact that the petitioner is not able to produce an agreement for each and every one of the transactions would not really affect his contention. In the very nature of things, it is impossible to produce a written contract in respect of each transaction. The customer goes to the petitioner and wants an engine to be fitted into his vehicle and the petitioner quotes a figure which no doubt includes the value of the engine as also the cost of fitting. But the true nature of the transaction is however that of an ordinary works contract. " The High court felt that the fact that a' consolidated bill was submitted helped the assessee. It observed that "the subject-matter of the levy is the transaction, taken as a whole and not a transaction which can be disintegrated and from and out of which a component called a sale may be extracted. " The revision was partly allowed because it was conceded before the High court that out of the turnover of Rs. 10,55,070. 00 a turnover of Rs. 62,092. 00 represented the value of spare parts and extras supplied by the assessee to the customer. A similar order was passed by the High court in Revision No. Ill of 1961 (Tax Case No. 192 of 1961). in respect of the assessment year 1954-55. The learned Advocate-General who appears for the appellant contends that on the facts of this case it is quite clear that there was contract to sell Perkins Engines and fit these on the chassis. The learned counsel for the respondent contends that it was a works contract and relies on the decisions in Sundaram Motors v. State of Madras', Clark v. Bulme referred to in State of Madras v. Gannon Dunkerley fy Co, and the decision of this court in the State of Gujarat v. Kailash Engineering Co. In Sundaram Motors v. State of Madras', the Madras High court took as a sample the supply and fixing of four king pin bushes which were specially fabricated by Sundaram Motors for the customer. The court held that on the facts "it was a manufacture of the material occasioned by reason of the undertaking to repair the car and not one done as part of a commercial undertaking; to quote the words of the learned Advocate for the petitioners, it was 'an ad hoc manufacture in connection with the repair of the car'. "