Works contract treatment of maintenance contracts with spare parts applies prospectively from statutory entry date.

An annual maintenance contract for fax and copier machines that includes supply or replacement of spare parts is treated as a works contract involving transfer of property in goods, so it falls within the sales tax net only when the statute specifically covers such contracts. The court held that liability arose prospectively from the insertion of Entry 36 in Schedule VI with effect from 1 May 1997, and assessment notices for periods before that date were invalid. It also held that seized books of account could not be retained beyond 120 days without further authorisation, so the authorities were directed to return them forthwith.

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Issues: (i) Whether an annual maintenance contract for fax and copier machines, involving supply or replacement of spare parts, amounts to a works contract with transfer of property in goods and is taxable under the Assam General Sales Tax Act, 1993, and from which date; (ii) whether the retention of seized books of account beyond 120 days was permissible.

Issue (i): Whether an annual maintenance contract for fax and copier machines, involving supply or replacement of spare parts, amounts to a works contract with transfer of property in goods and is taxable under the Assam General Sales Tax Act, 1993, and from which date.

Analysis: The definition of works contract under section 2(38) of the Act covers repair and related operations and includes supply of goods in connection with those operations. The contract here was not treated as a mere labour-only arrangement: where spare parts are supplied or replaced in the course of maintenance, there is transfer of property in goods to the customer. The Court distinguished the case from the principle in Rainbow Colour Lab and treated the supply of spare parts as not being merely incidental where the statutory entry brought such contracts within tax net. Since Schedule VI, as amended by Assam Act VI of 1997, added Entry 36 covering other works contracts not covered by serial numbers 1 to 35, the tax liability arose only from the commencement of that entry on 1 May 1997.

Conclusion: The contract was taxable as a works contract only from 1 May 1997, and the notices for assessment years prior to that date were quashed.

Issue (ii): Whether the retention of seized books of account beyond 120 days was permissible.

Analysis: Section 44(3) of the Act required return of the books after 120 days in the absence of authorisation for further detention. As no such order was shown, continued retention was not justified.

Conclusion: The authorities were directed to return the books of account forthwith.

Final Conclusion: The petitioner succeeded in part: pre-1 May 1997 tax demands were invalid, liability was sustained only prospectively from the amendment date, and the seized books had to be returned.

Ratio Decidendi: Where a maintenance contract includes supply or replacement of spare parts, it constitutes a works contract involving transfer of property in goods, but tax liability can arise only from the date on which the statute specifically brings such contracts within the taxable schedule.

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