1967 (5) TMI 58 - SC - VAT and Sales Tax

Supreme Court overturns High Court judgment on sales tax assessment for diesel engines

The Supreme Court allowed the appeals and set aside the High Court's judgment in a case involving the assessment of sales tax on the turnover of diesel ... Whether there was works contract in this case? Held that:- Appeal allowed. In the present case the assessee does not manufacture or fabricate Perkins Engines. The learned Advocate-General brought to notice a sample of the bills made out by the assessee which evidences an agreement to sell a particular diesel engine, the price of which is separately mentioned in the bill, and to fit it in the customer's Dodge bus. In other words, this engine was contracted to be delivered as an engine and afterwards affixed to the customer's Dodge bus. Thus the Appellate Tribunal was right in its conclusion that there was no works contract in this case. Judgment of the High Court is set aside and the order of the Appellate Tribunal restored. Issues:1. Assessment of sales tax on the turnover of diesel engines supplied and fitted to customers' vehicles.2. Determination of whether the turnover constitutes a works contract or a sale of goods.The Supreme Court judgment involved an appeal against the High Court of Madras's decision in Tax Cases regarding the assessment of sales tax on the turnover of diesel engines supplied and fitted to customers' vehicles. The appellant, a dealer in motor-cars and accessories, was assessed to sales tax under the Madras General Sales Tax Act for the years 1950-51 and 1954-55. The Appellate Tribunal initially held that the turnover was not a works contract but a sale of engines based on the separate cost of engines and fitting shown in the bills. The High Court partially allowed the revisions, considering the transactions as works contracts due to the nature of the agreements, despite no written contracts for each transaction. The High Court emphasized that the turnover should be viewed as a whole, not separable components. The appellant argued that the transactions were contracts to sell and fit engines, relying on legal precedents distinguishing between works contracts and sales of goods. The Supreme Court analyzed the bills provided by the appellant, which clearly indicated an agreement to sell a diesel engine separately and fit it into the customer's vehicle, supporting the conclusion that there was no works contract. The Court distinguished the present case from previous judgments where specific terms indicated ownership during construction. Consequently, the Supreme Court set aside the High Court's judgment, reinstated the Appellate Tribunal's order, and decided in favor of the appellant. The Court also mentioned that no costs were awarded to the assessee. The appeals were allowed, and no order was given regarding costs.