VIKRAMA ENGINEERING COMPANY Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) The petitioner in these revision petitions filed under section 38 of the Tamil Nadu General Sales Tax Act, 1959 carries on business as manufacturing dealers in trailers, wheel-barrows and also as mechanical and structural engineers. For the assessment year 1974-75, the petitioner reported a total and taxable turnover of Rs. 18, 78, 446.62 and Rs. 12, 74, 682.04 respectively. After verification of the accounts, the assessing authority excluded certain inter-State sales and disallowing the claim for exemption made by the petitioner in respect of works contract executed by the petitioner and after making an addition of 5 per cent. for probable omission in the sales, the total turnover was fixed at Rs. 13, 32, 688 and the taxable turnover at Rs. 13, 28, 355. For the assessment year 1975-76, the petitioner reported a total turnover of Rs. 16, 97, 927.75 and a taxable turnover of Rs. 12, 49, 428.24. In respect of this year also, after verifying the accounts and excluding the inter-State sales and negativing the exemption claimed by the petitioner for works contract and making an estimated addition of 5 per cent. for omissions, the assessing authority determined a total turnover at Rs. 14, 59, 254 and the taxable turnover at Rs. 14, 48, 042. The petitioner preferred appeals to the Appellant Assistant Commissioner in Appeals Nos. 336 and 335 of 1977 in respect of the assessment years 1974-75 and 1975-76 respectively. Before the Appellate Assistant Commissioner, for the year 1974-75, the petitioner disputed its liability on a turnover of Rs. 1, 11, 281.94 as well as the rate of tax in respect of a turnover of Rs. 6, 98, 627.11. In the appeal preferred by the petitioner, for the assessment year 1975-76, the petitioner disputed its liability on a turnover of Rs. 2, 04, 543 and the rate of tax on a turnover of Rs. 8, 23, 819. The Appellate Assistant Commissioner confirmed the order of assessment for the assessment year 1974-75 and dismissed the appeal. However the petitioner was given partial relief in respect of the assessment year 1975-76 by deletion of a turnover of Rs. 68, 954 being the additions made to the book turnover. Thereupon, the petitioner preferred appeals to the Sales Tax Appellate Tribunal in T.A. Nos. 1071 and 1072 of 1977, for the assessment years 1974-75 and 1975-76 respectively. At the time of hearing of the appeals before the Tribunal, the petitioner confined the dispute to the addition on the basis of best of judgment in respect of the assessment year 1974-75 and the disallowance of the claim of the petitioner under works contract in both the years 1974-75 and 1975-76. The Tribunal was of the view that there was no justification for the rejection of the accounts and resorting to a best judgment assessment and in that view deleted the addition of a taxable turnover of Rs. 63, 254 in respect of the assessment year 1974-75. Dealing with the claim of exemption put forth by the petitioner in respect of works contract for the year 1974-75, the Tribunal concluded that the nature of the transactions was such that the erection part of the floor beams was incidental to the contract of supply of beams and therefore, it cannot be said that the petitioner fixed floor beams to the immovable property of the customers and that the property in the floor beams passed only when they became part of the immovable property. On that basis, the Tribunal held that in respect of the assessment year 1974-75, a turnover of Rs. 13, 339 will be liable to tax. Considering the claim for exemption made by the petitioner on the basis of works contract for the assessment year 1975-76, the Tribunal concluded that the transactions were for the sale of manufactured goods by the petitioner and that separate transport and erection charges for the trusses had also been contemplated but the transport, erection and the labour charges and other amounts partly representing lump sum works contract cannot be properly included in the taxable turnover and directed their deletion. It is against these orders of the Tribunal that the petitioner has come up in revision before this Court questioning the propriety of the disallowance of the exemption as works contract claimed by the petitioner in respect of a turnover of Rs. 13, 339 and Rs. 1, 24, 910.58 for the assessment years 1974-75 and 1975-76 respectively.

(2.) The principal contention of the learned counsel for the assessee is that the disputed turnover are not referable to outright sale transactions, but were only in the nature of works contract and that only a lump sum had been fixed as the value of the contract. Attention in this connection was drawn by the learned counsel for the assessee to the quotations given by the assessee as well as the invoices in respect of the transactions claimed to be works contract to establish that a lump sum amount alone had been fixed as the value of the contract for fabrication, supply and erection of trusses and purlins and floor beams in the premises of the customer. Reliance in this connection was placed by the learned counsel for the assessee upon the decision in K. A. Ramachar v. State of Madras and Hindustan Aeronautics Ltd. v. State of Karnataka. On the other hand, the learned Additional Government Pleader submitting that the petitioner delivered manufactured goods at the site of the customers and the erection work was merely incidental to the contract of supply of finished goods, which was also attended to by the customers by carrying out the civil works and therefore, the contracts were for the supply of finished goods justifying the inclusion of the turnover referable to those transactions in the assessable turnover of the petitioner.

(3.) Regarding the turnover of Rs. 13, 339, exemption in respect of which has been claimed by the petitioner for the assessment year 1974-75, we find that the relevant quotations as well as invoices have been made available. The break-up of this turnover of Rs. 13, 339 is an under : Mr. N. Zachira Rs. 9, 200, Mr. M. L. Sheik Dawood Rs. 3, 258.40 and Mr. Abdual Shukoor Rs. 880.60. We find that the assessee was asked by the persons earlier referred to to fabricate, supply, transport and erect at site floor beams of different lengths. The assessee had, in accordance with the specifications given by the customers, quoted a lump sum rate for fabrication, supply, transport and erection of floor beams at site of the customers, without separately showing the cost of the floor beams as such. This quotation given by the assessee had been accepted by the customers referred to above and invoices have been issued in the name of the customers accordingly. Even in the invoices, the cost of fabrication, supply, delivery and erection at site has been shown in a lump sum and no separate amount had been fixed for the cost of the floor beams as such. The invoices dated 1st October, 1974, 10th October, 1984 and 18th October, 1984, 22nd January, 1975 and 1st October, 1974 (found at pages 102, 107 and 111 of the typed set of papers) bear this out. The question is, whether the amounts received by the assessee in respect of these transactions can be considered to be the sale price of the floor beams or whether they have been received towards a works contract. The correspondence resting with the invoices issued by the assessee in favour of several customers shown that the contract is one in its entirety and indivisible and incapable of being dissected into one of sale of floor beams and the other relating to erection in the site of the customer. In such a case, the property in the floor beams passed to the customers only upon erection in the site of the customer. We are unable to subscribe to the view taken by the Tribunal that the erection part of the contract is negligible and is incidental to the supply of floor beams. As we have already pointed out, it is difficult to cut up the contract into one of sale of floor beams and the other relating to the erection of the same. Floor beams of specifications required by one customer may not be required by another and it is difficult also to sell floor beams of different specifications required by different customers in the open market. In that sense, the erection part cannot be considered to be either a negligible part or even being merely incidental to the supply of the floor beams. The actual operation relating to the erection is found in the affidavit of the Sales Manager of the petitioner which is extracted in paragraph 6 of the order of the Tribunal. We are unable to draw therefrom the conclusion drawn by the Tribunal that it cannot be said that the petitioners themselves fixed the floor beams to the immovable property of the customers and that the property in the floor beams passed only after they became part of the immovable property. Having regard to the nature of the operations carried out in the process of erection as found in the affidavit of the Sales Manager of the petitioner, we are inclined to take the view that only on erection of the floor beams, the property in them passed to the customers and not at any anterior point of time. We are, therefore, unable to accept as correct the view taken by the Tribunal in this regard.4. For the assessment year 1975-76, the assessee has claimed exemption as works contract a turnover of Rs. 95, 490.10 and Rs. 20, 420.30 with reference to the work done for M/s. Abirami Theaters Private Limited, Madras. With reference to these transactions also, the correspondence as well as the relative invoices have been made available (at pages 94 to 98 of the typed set of papers).