1983 (1) TMI 238 - HC - VAT and Sales Tax

High Court: Mosaic Tile Supply = Works Contract, Not Sale. Consider Transaction as Whole. Clear Evidence Needed.

The High Court determined that the supply of mosaic tiles, laying, and polishing constituted a works contract rather than a sale. Analyzing the bill ... - Issues:1. Determination of whether the supply of mosaic tiles and their laying and polishing constitutes a sale or a works contract.2. Interpretation of the bill issued by the assessee to ascertain the nature of the transaction.3. Application of legal principles from previous judgments to the present case.4. Examination of a similar case involving instalment payments for work done at the site.Issue 1:The High Court examined whether the supply of mosaic tiles and their laying and polishing by the assessee at the consumer's site amounts to a sale or a works contract. The Tribunal held that the works relating to the supply of tiles, their laying, and polishing constituted sales, while in situ work was considered a works contract. The Court analyzed the bill issued by the assessee, which charged the consumer based on the work done at the site per square foot or running foot. The Court concluded that the transaction was a works contract as the consumer paid according to measurements, and the bill indicated that charges were inclusive of laying and polishing. The Court disagreed with the Tribunal's finding that it was only a sale of tiles, emphasizing that the transaction was indivisible and represented a works contract.Issue 2:The Court closely examined the bill issued by the assessee to determine the nature of the transaction. The bill charged the consumer based on work done at the site, irrespective of whether tiles were manufactured at the factory or work was carried out in situ. The Court emphasized that the bill indicated a works contract for supplying, laying, and polishing mosaic tiles, which was one indivisible contract. The Court rejected the Tribunal's conclusion that the bill represented two contracts, one for sale and the other for labor, highlighting that the bill needed to be read as a whole to understand the nature of the transaction accurately.Issue 3:The Court compared the present case with the decision of the Bombay High Court in Hindustan Tiles and Cement Industries v. State of Maharashtra [1975] 36 STC 326. While the Bombay High Court case involved a divisible contract with specified payment terms, the Court found that the bill in the present case did not permit such a break-up of costs. The Court emphasized that the assessing authorities and the Tribunal treated the entire transaction as a sale without attempting to separate costs of tiles and labor. Consequently, the Court allowed the tax revision cases, holding that the transactions represented works contracts not liable to sales tax.Issue 4:In a similar case involving instalment payments for work done at the site, the Court analyzed the bill issued by the assessee, which indicated charges based on work measurements and payable only after completion of work. The Court noted that the bill did not provide a breakdown of costs between tiles and labor. Without additional material to show such a breakdown, the Court could not conclude that a percentage of the bill amount represented tile costs while the rest represented labor charges. Therefore, the Court allowed the tax revision cases, emphasizing the need for clear evidence to determine the nature of the transaction.