1969 (7) TMI 95 - SC - VAT and Sales Tax

Supreme Court: Tax liability for contractor in works contract upheld

State Rajasthan and Others Versus Nanu Ram  

The Supreme Court of India held that the respondent, a contractor, was liable to pay sales tax for supplying and fixing wooden windows, doors, frames, and ... Whether the respondent was liable to pay sales tax for supplying and fixing wooden windows and doors together with frames and painting them when the construction of the police lines building took place at a place called Pali? Held that:- Appeal dismissed. The primary undertaking of the contractor was not merely to supply the windows but to fix the windows. If the windows were not properly fixed the contract could not be complete. The view of the High Court accepted that it was only upon the fixing of the window-leaves and when the window-leaves had become a part of the building construction that the property in the goods passed under the terms of the contract. Issues:1. Liability to pay sales tax for supplying and fixing wooden windows and doors together with frames and painting during construction.2. Maintainability of writ petition under article 226 of the Constitution.3. Determination of a single and indivisible contract for supply and fixing of wooden doors on the spot.4. Interpretation of the contract as a combination of sale of movable chattels and supply of services and labor.5. Application of the test to determine if the object of the party sought to be taxed is the passing of chattel or incidental services.Analysis:The judgment by the Supreme Court of India involved a case where the respondent, an approved contractor of the Public Works Department, was held liable to pay sales tax for supplying and fixing wooden windows, doors, frames, and painting during the construction of a building. The primary issue was whether the contract was a single and indivisible works contract or a combination of sale of movable chattels and supply of services and labor. The Sales Tax Officer assessed the total sales made by the respondent, leading to a demand for tax payment. The respondent contended that no tax was payable as the contract was indivisible. The High Court determined that the contract was indeed single and indivisible, with property passing only upon fixing the wooden doors and windows at the site.Regarding the maintainability of the writ petition under article 226 of the Constitution, the High Court held that as the case involved an illegal levy and recovery of tax, relief should be granted to the assessee even if statutory remedies under the Act were not availed. The High Court's decision was based on the finding that the contract was for the supply and fixing of wooden doors on the spot for an inclusive price, with property passing upon installation. The appellant argued that the contract was a combination of sale and services, but the High Court's conclusion was upheld by the Supreme Court.The Supreme Court referenced a previous case to establish the test for determining tax liability, focusing on whether the object of the party was the passing of chattel or incidental services. The Court agreed with the High Court's finding that the primary undertaking of the contractor was to fix the windows and doors, with property passing only upon installation. The judgment of the High Court was upheld, and the appeal was dismissed with no order as to costs due to the absence of representation by the respondent.