STATE OF TAMIL NADU Vs. DUNLOP INDIA LIMITED

JUDGEMENT

(1.) IN these tax revision cases relating to the assessment years 1969-70, 1970-71 and 1971-72, the liability to tax of the turnover representing what is stated as rubberisation of steel wheels and top rollers, arises for consideration. The assessee is a public limited company manufacturing and dealing in tyres. They have entered into a contract with the Government of India for rubberising the wheels and top rollers and the consideration to be paid is described at a particular rate for each unit. The contract entered into was in a standard form used for supply of goods for sale. The wheels and top rollers are manufactured and supplied by Messrs. Wheels India Limited to the Heavy Vehicles Factory at Avadi and the Central Vehicle Depot, Avadi, which are Government of India concerns. These wheels are intended for use in the construction of tanks for defence purposes. The wheels are delivered to the assessee for the purpose of rubberisation. The processes involved in rubberisation as given by the assessee are as follows :

(2.) "The metal wheels are stacked in rows of fours outside in open and sprayed with salt water and allowed to weather. The weathered wheels are then put in a degreasing plant to remove oil and other extraneous substances. The degreased wheels are grit-blasted on the rubberising surfaces. The rubberising surfaces are then coated with special solutions of metal-to-rubber-adhesives using hand brushes. A thin uncured compound (also called tie strip) is fitted on the wheel manually. Over this, a rubber based solution is applied and the solvent allowed to evaporate. Then a thick sheet of calendered uncured rubber compound is applied to the wheel and consolidated by hammering. The whole unit is then put inside a mould and put in an autoclave and steamed for a specified period to effect vulcanisation. Then the vulcanised wheel is removed from the mould, excess rubber, spews trimmed, and inspected and bare metal portions painted with primer coat."

(3.) THE Tribunal was of the view that the process involved in rubberising is something akin to retreading of old motor tyres and that therefore the principle of the decision in Stanes Motors (South India) Ltd., Coimbatore v. State of Madras would apply and the contract shall have to be held to be a works contract and not a sale of chattel.The facts as found by the Tribunal itself show that the contract was for fitting or fixing a rubber compound over the wheels. The consideration to be paid is described as a price per unit and there is no separate rate prescribed for the uncured rubber compound used and for the labour or vulcanising separately. The price fixed is a composite price for the entire process as a whole. Neither the rubber compound nor any of the chemicals or adhesive or other articles used in the process of rubberising belonged to the Government of India. The property in the rubber portion or any of its components did not pass till the rubberised wheel as such is delivered to the Heavy Vehicles Factory. The wheel on which the rubber compound is settled or rubberisation is effect, belonged to the Government of India and the assessee had no right, title or interest in it. The entire risk until the goods are delivered to the Government of India or the Heavy Vehicles Factory or the Government of India's nominee is on the assessee. The form of contract is the one that is normally used for sale and purchase of the specified articles and it required the Government to pay sales tax. The property in the rubber compound portion in the wheel that passed on delivery, was not immovable property, but it was movable property affixed to the wheel. The main grounds on which the Tribunal held that it was a works contract were as follows