Repair contracts are not taxable sales merely because fabricated parts pass to the customer during workshop work.

A repair contract for motor vehicles does not become a taxable sale merely because spare parts, consumed materials or fabricated parts are used and transferred in the course of the work. A sale requires a real agreement to transfer specific goods for a price; mere incorporation of materials into repairs is insufficient. On the facts, the workshop's bills and accounts separated outright spare-part sales from repair charges, and the fabricated parts were made incidentally for the repair rather than under any agreement of sale. The article explains that notional assessment of workshop turnover as sales of materials was therefore unsustainable, while actual spare-part sales remained taxable.

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Issues: Whether charges for fabricated parts supplied in the course of repairing motor vehicles in the workshop constituted taxable sales separate from the works contract, or whether they formed part of an indivisible repair contract not liable to sales tax.

Analysis: The workshop transactions were examined on the footing that the assessee repaired customers' vehicles and, in the process, supplied spare parts, consumed materials, and fabricated certain parts ad hoc. The applicable statutory scheme treated a works contract as taxable by deeming a portion of the turnover to represent materials, but that method could survive only where there was in truth a sale of goods. A sale requires an agreement to transfer the very goods in question for a price, and a mere passing of property in materials incorporated into the repair is not enough. On the facts, the bills and accounts distinguished between outright spare-part sales and repair charges, while the fabricated parts were made only incidentally for the repair and not under any agreement to sell them as such. The assessment therefore could not validly treat 70 per cent of the workshop turnover as taxable sales of materials.

Conclusion: The fabricated parts supplied in the workshop repairs were not independent sales but part of the repair works contract, and the disputed workshop turnover was not liable to sales tax.

Final Conclusion: The revision petitions succeeded to the extent that the workshop assessments based on a notional sale of materials were set aside, while the liability already accepted in respect of actual spare-part sales and collected tax remained unaffected.

Ratio Decidendi: A contract for repair work does not become a taxable sale merely because materials or fabricated parts pass to the customer on completion of the work; there must be a real agreement to sell the specific goods as goods.

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