Kerala High Court: Bus-body on customer's chassis taxable as commodity, labor charges not exempt

The High Court of Kerala upheld the Tribunal's decision to assess a bus-body constructed by the petitioner on a customer-supplied chassis as a commodity taxable under the relevant entry in the Schedule, rejecting the petitioner's claim for exemption on labor charges. The Court emphasized that the bus-body, although part of a works contract, qualified as "goods" and was subject to tax at the Schedule rate. The judgment reaffirmed the Supreme Court's precedent that property in the material used for constructing bus bodies does not pass to the customer until the complete bus is delivered, maintaining the nature of the levy unchanged.

---

---

Issues:
1. Whether a bus-body built on a chassis supplied by the customer is taxable as a commodity or as a works contract entitling exemption on labor charges.

Analysis:
The High Court of Kerala addressed the issue of whether a bus-body constructed by the petitioner on a customer-supplied chassis should be considered a commodity taxable as such or a works contract exempt from labor charges. The Tribunal rejected the petitioner's claim based on the Supreme Court's decision in T.V. Sundram Iyengar Sons v. State of Madras [1975] 35 STC 24. The Supreme Court in that case highlighted that the property in the material used for constructing bus bodies did not pass to the customer until the complete bus was delivered. The Court emphasized that the bus bodies were not ready-made and had to be constructed according to specifications. The Court also noted that the introduction of works contract tax did not change the nature of the levy as long as the product sold by the petitioner qualified as "goods." Therefore, the High Court upheld the Tribunal's decision to assess the bus-body under the relevant entry in the Schedule, concluding that the tax revision case lacked merit and was dismissed.

In conclusion, the judgment clarified that a bus-body fabricated by the petitioner on a customer-supplied chassis is considered an independent commodity under the relevant tax laws. The Court emphasized that even under works contract arrangements, tax at the Schedule rate applies when custom-made articles are sold based on a contract between parties. The Court highlighted that the nature of the levy remains unchanged even when a bus-body is fixed on a chassis under a contract. The decision reaffirmed the applicability of the Supreme Court's ruling and upheld the assessment of the bus-body under the specified entry in the Schedule.

---