HINDUSTAN AERONAUTICS LTD. Vs. STATE OF ANDHRA PRADESH

JUDGEMENT

(1.) THIS appeal is filed against the revision order of the Deputy Commissioner (CT), Hyderabad Rural Division, Hyderabad, for the assessment year 1999 -2000 APGST. The turnovers which have been brought under the APGST Act by the Revisional authority relate to repair and overhaul charges collected by the appellant for repairing of Aeroplanes belonging to the Indian Air Force. It is the contention of the appellant that the appellant's organization is a Government of India Undertaking which has been set up specially for servicing, maintenance and overhauling of the Aircrafts belonging to the Indian Air Force. Both the Indian Air Force and HAL are organizations of the Government of India. The materials, spare parts and other goods required for servicing, maintenance and overhaul or repair of the Aircrafts are either procured directly by the Government of India or are procured by the appellant on behalf of the Government of India. The Government of India however allows the appellant a profit margin of about 10% for the services rendered. But, all the goods and materials used by them are the property of the Government of India and therefore no transfer of property in goods takes place when the IAF Aircrafts are fitted with the spare parts or when other materials are used for overhauling and repair of the aircrafts belonging to the IAF. It is the contention of the appellant that the Deputy Commissioner is not justified in his revision proceedings and he is wrong in distinguishing the Hon'ble Supreme Court's decision in the appellant's own company reported in, (1984) 55 STC 314 on the ground that the appellant company undertakes composite work of repair and overhauling and some of the material purchased by them has been used and therefore there is a sale of material to the Air Force. The appellant has also relied on the decision of the Apex Court in their own case reported at : 55 STC 327. They have produced before us a letter issued by the Ministry of Defence, Air Head Quarters, dated 24.8.2007 which testifies that material imported or procured by HAL for manufacture, overhaul of aircraft, accessories and other equipment and also the other material, goods, stocks, work in progress etc., are the property of Government and such items are to be supplied only to the Indian Air Force and other defence services as authorized by the Government of India. The letter further emphasizes that all the materials at all the times belong to the Government of India.

(2.) THE learned State Representative in his written submissions has supported the orders of the Revisional authority and relied on the judgments of the Apex Court reported in : 73 STC 370, 88 STC 204,142 STC 209. He has further relied on the decisions of the Hon'ble A.P. High Court reported in : 105 STC 227 and 140 STC 245. The learned State Representative has also submitted that all submissions made by the appellant and decisions on which the appellant is relying are all prior to introduction of the provisions of charging sections of APGST Act, 1957, i.e., Secs. 5F, 5G, 5H and read with Rules 6(2) and 6(3) of the APGST Rules, 1957 which came into effect only from 1.4.1995. Since, the dispute in question relates to the assessment year 1999 -2000, it is the contention of the learned State Representative that the decisions relied by the appellant are not applicable.

(3.) THE Hon'ble Apex Court also followed the judgments in the case of State of Himachal Pradesh v. Associated Hotels of India Ltd.,, (1972) 29 STC 474 (Supreme Court) and State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd. : (1958) 9 STC 353 (Supreme Court), in which it was held that a contract of sale of goods must be distinguished from a contract of work and labour. The distinction is often a fine one. A contract of sale is a contract whose main object is the transfer of the property in, and the delivery of the possession of, a chattel as a chattel to the buyer. Where however the main object of work undertaken by the payee of the price was not the transfer of chattel qua chattel, the contract is one of work and labour. The test is, whether or not the work and labour bestowed end in anything that can properly become the subject of sale; neither the ownership of the materials, nor the value of the skill and labour as compared with the value of the materials, is conclusive, although such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract was in substance one for work and labour one for the sale of a chattel.