STATE OF MADRAS Vs. VOLTAS LIMITED

JUDGEMENT

(1.) THE Bombay Mutual Insurance Building, which houses the units of the Life Insurance Corporation, is a building which consists of six floors besides the ground floor. THE construction of the building called for as an integral unit thereof provision for air-conditioning the entire building. THE building space consists of nearly 67, 000 sq. ft., the cubic contents calling for air-conditioning being nearly 8 1/4 lakhs c. ft. When the construction of the building was undertaken Messrs Voltas Limited were assigned the contract for providing the building with a system of air-conditioning of the building. This air-conditioning called for a complete air change of fresh chilled air within the space of 45 to 50 minutes to serve the needs of an approximate number of 1, 000 persons distributed throughout the building. THE design had to take into account the temperatures inside and outside the building during different parts of year and the humidity of the air as well. Provision had to be made for locating the complicated machinery required for the purpose in the basement of the building, and the layout had to be specially designed to carry the heavy load and to be free against vibration. It also called for integral air-ducts or passages to be constructed to take the chilled air from floor to floor and for the removal of the used air from the conditioned space. Messrs Voltas Limited submitted its proposals in this regard, and finally a a contract was entered into on the 23rd July, 1952.

(2.) THE value of the contract was Rs. 6, 95, 500 for the supply and installation of an air-conditioning plant. THE contract contained detailed particulars of the work that had to be done by Messrs Voltas. It specified in particular the manner in which the distribution of the conditioned air had to be made throughout the building to the provision of false ceilings as a measure of insulation, the fabrication on the spot and fixing to the building, and embedding in the structure various parts of the machinery, including pipes, etc. It also set out in some detail the different types of machinery that would be utilised in the fabrication of the air-conditioning unit and the insulation material that would be employed. It specified in particular that the material that would be imported would be of the value of Rs. 2, 75, 000, but that the overall price of the contract of Rs. 6, 95, 500 was not subject to any change in the factory prices ruling at the time of the shipment. THE price was however subject to fluctuation arising from the exchange rate or freight, insurance or import duty.

(3.) THE State of Madras through the Deputy Commissioner of Commercial Taxes is the petitioner and the conclusion reached by the Tribunal is attacked as erroneous. It is urged that the agreement amounts in substance to a sale of the air-conditioning plant and does not cease to be a sale merely because the seller has undertaken to fix the machinery in the purchaser's premises.One important feature that has to be mentioned is that in the carrying out of a contract of this description, the assessees had in fact to supervise the construction of the building itself in order that the air-conditioning of the building as a whole could be efficiently designed and erected. A note in this regard was submitted to the Tribunal, the contents of which were accepted as substantially correct by the department, and this note was to a large extent relied upon by the Tribunal in reaching its conclusion. An examination of both the contract and the note clearly indicates that this is not analogous to a case where a dealer in refrigerating machinery supplies a self-contained unit for the purpose of air-conditioning one or more rooms. Where such air-conditioning on a small scale is called for, there are units indicated as 1 ton, 2 tons, etc. up to 5 tons, which can, without modification air-condition spaces of limited area and volume. Provision of such air-conditioning calls for nothing more than making the room more or less air-tight and fixing the unit in question to a window or other apperture and sealing off any draught of air except through the air-conditioning apparatus. Had it been a case of a dealer supplying air-conditioning units of that type in large numbers to air-conditioning individual rooms even of a large building, it might perhaps follow that what was really involved was a sale of the air-conditioning unit, though certain charges might be levied for the purpose of fixing the unit. THE present is not a case of that type. Admittedly there is no air-conditioning unit which is available as such for the purpose of providing air-conditioning for a building as a whole. Where the air-conditioning of a building of this type consisting of several floors is called for, the contractor undertaking the work has in fact to design the lay-out and the various items of machinery involved in the fabrication of such a unit and provide for its installation in a particular manner, the method of installation necessarily varying with the type of the building, the space available and other attendant features.