1991 (6) TMI 250 - HC - VAT and Sales Tax

Court rules vehicle body fabrication as sale, not works contract under Gujarat Sales Tax Act

Dutt Motor Body Builders Versus State of Gujarat

The High Court of Gujarat determined that a transaction involving the fabrication and mounting of bodies on public carriers' chassis constituted a sale, ... - Issues:Interpretation of a transaction as a sale or a works contract under the Gujarat Sales Tax Act, 1969.Detailed Analysis:The High Court of Gujarat was tasked with determining whether a transaction, evidenced by a specific bill issued in favor of a purchaser, constituted a sale liable for taxation under the Gujarat Sales Tax Act, 1969. The assessee, engaged in fabricating and mounting bodies on public carriers' chassis, sought clarification on the nature of this transaction. The Deputy Commissioner initially concluded that it was a sale, not a works contract, based on the utilization of goods purchased by the assessee to build the body. The Gujarat Sales Tax Tribunal upheld this decision, leading to the reference to the High Court for further adjudication.The authorities considered precedents such as T.V. Sundram Iyengar & Sons v. State of Madras and Commissioner of Commercial Taxes, Mysore, Bangalore v. M.G. Brothers, along with Variety Body Builders. These cases influenced the conclusion that the transaction in question was indeed a sale, not a works contract. The assessee's counsel argued for the works contract interpretation, while the revenue's counsel contended it was a pure sale.The assessee's counsel referred to the Mysore High Court decision in Shankar Vittal Motor Co. Ltd. v. State of Mysore to support the works contract argument. However, the High Court highlighted the Supreme Court's ruling in T.V. Sundram Iyengar & Sons v. State of Madras, which established that property in materials used for construction did not pass to the customer until the completed product was delivered. This precedent clarified that the supply of bodies constituted a sale, making the assessee liable for sales tax.Examining the specific facts of the case, including quotations indicating charges for labor and materials, the High Court aligned the situation with the Supreme Court's decision. The documents on record confirmed that the transaction involved both labor and materials, culminating in the delivery of a fully constructed vehicle to the purchaser. Consequently, the High Court affirmed the Tribunal's decision that the transaction was subject to taxation under the Gujarat Sales Tax Act, 1969.In conclusion, the High Court upheld the authorities' interpretation that the transaction in question was a sale, as per the Supreme Court's precedent, and affirmed the liability for sales tax. The reference was answered in the affirmative, favoring the revenue and rejecting the assessee's claim.