Indivisible works contracts and limited revisional scope kept installation turnover outside sales tax and blocked new grounds

Air-conditioning and allied installation contracts were treated as composite, indivisible works contracts for a lump sum, with materials supplied in execution of the work; on that basis, the turnover was held outside the sales tax charging provision and exempt from tax. The revisional jurisdiction was also held to be confined to the questions of law raised in the original revision memorandum, so additional grounds could not be used to introduce a new turnover not originally challenged. The miscellaneous petition and the delay application were therefore not entertained and were rejected.

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Issues: (i) Whether the turnover arising from the air-conditioning and allied installation contracts was exempt as a works contract or was liable to sales tax as representing a sale of goods. (ii) Whether, after filing a revision petition in respect of certain turnovers, the State could seek to raise additional grounds by a miscellaneous petition relating to a different turnover not included in the original revision petition, and whether delay in that application could be condoned.

Issue (i): Whether the turnover arising from the air-conditioning and allied installation contracts was exempt as a works contract or was liable to sales tax as representing a sale of goods.

Analysis: The contracts were examined as a whole and were found to be composite bargains for carrying out work for a lump sum consideration, with materials supplied in the course of executing the work. The decisive test was whether the arrangement was one entire and indivisible contract for execution of works, or whether it disclosed separable agreements of sale and labour. Applying that test, and following the earlier view that such contracts could not be split into taxable sales and non-taxable labour components, the turnover was held to fall outside the charging provision.

Conclusion: The turnover was not taxable and the finding of exemption from sales tax was upheld in favour of the assessee.

Issue (ii): Whether, after filing a revision petition in respect of certain turnovers, the State could seek to raise additional grounds by a miscellaneous petition relating to a different turnover not included in the original revision petition, and whether delay in that application could be condoned.

Analysis: The revision jurisdiction under section 38 was confined to the questions of law specifically raised in the memorandum of revision, as indicated by the statutory form and rules. Additional grounds could supplement issues already included in the revision, but could not enlarge the scope of the proceeding to bring in a wholly new turnover not originally challenged. The application was therefore not maintainable, and in any event the affidavit disclosed no sufficient basis for the relief sought. The accompanying application to condone delay in filing that miscellaneous petition was also misconceived.

Conclusion: The miscellaneous petition and the delay application were not entertained and were rejected in favour of the Revenue.

Final Conclusion: The revision on the merits failed, and the State's connected miscellaneous applications were also rejected, leaving the assessee's turnover outside the tax net and the proceedings concluded against the State.

Ratio Decidendi: A contract is not taxable as a sale merely because materials are supplied in the course of executing an indivisible works contract, and the revisional jurisdiction cannot be expanded by adding entirely new turnovers through an application for additional grounds after the original memorandum has been filed.

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