SIMPSON AND COMPANY LIMITED Vs. STATE OF MADRAS

JUDGEMENT

(1.) THE main question we have to decide is as to whether the transactions in dispute as to bus-bodies are sales of goods or works contracts. THE Tribunal in one of these cases and the Board of Revenue in the other, have expressed the view that they are sales of goods and held that they are chargeable to tax under the Madras General Sales Tax Act, 1939. THE Tax Case of 1965 pertains to the assessment year 1956-57 and the other, which is an appeal, the next year. THE assessee is a registered company with limited liability and carries on business with its headquarters at Madras, which includes the manufacture and supply of bus-bodies. THE disputed turnover in both the cases covers the supply of bus-bodies to the State Government under contracts entered into with them in the usual form of tender notice, offer and acceptance. THE department as well as the Tribunal proceeded on the basis that the contracts, read as a whole, amounted to sale of bus-bodies as finished units made according to specifications in terms of the contracts and mounted on chassis supplied by the Government.

(2.) THAT view is vigorously contested before us. For this purpose, nor attention is invited to the tender notice and the offer which was accepted. The tender notice contains certain instructions, specifications and certain conditions of tender. The submission of sealed tenders should be superscribed "tenders for coach-works". The total quantity required was mentioned to be 100 coach-works. The prices should be for delivery of the completed buses at the Government Bus Service. Delivery is to be according to a stipulated programme, and failure to comply with the schedule will involve payment of penalty at the rate prescribed. The contractor must cover the chassis supplied by Government by comprehensive insurance against fire risks and the Government department was not to be liable for any damage or loss to the chassis from the time they were delivered to the contractor until such time the completed buses were taken delivery of. The tender notice contains detailed specifications as to measurements, design, skeleton framework, timber fillets, flooring, panelling, roof, driver's cab, windscreen and windows, destination boxes, seats, illumination, fittings, painting, ventilation, specification of certain parts and materials to be used in the building of bus-bodies. Under the heading "prices" sales tax should be separately furnished. The offer made in response to the tender notice stated that the quotation was for composite bodies and the prices quoted were for the construction and mounting of bus-bodies at the assessee's works on certain type of chassis to be delivered by the Government and collected by their representative ex-works spot. The offer also mentioned that, on account of certain reasons, the rate offered was slightly higher than the rate at which it had executed prior contracts with the Government.

(3.) WITH reference to those terms and conditions of the contract, the argument for the assessee is that the intention of the parties was to treat the transaction as of works and not for supply of finished chattels as such. Reliance is placed on certain phraseology used in the tender notice, offer and acceptance, as for in stance, tenders for coach-works, price for "100 coach-works", for building and mounting, and the like. It is also said that the provision for inspection from time to time by the Government department during the construction of the bus-bodies, right of deviation from specifications and the description in the contract of what was eventually delivered as completed buses, also confirm that the contract is a works contract. We have carefully perused the tender notice, offer and acceptance, but, in our opinion, it is not possible to accept the assessee's view of the contract. There are numerous decisions on the subject, each rendered in the light of the particular facts.