2015 (2) TMI 52 - HC - VAT and Sales Tax

Concrete supply contract deemed works contract under tax law, setting aside tribunal decision

Thirumalai Ready Mix Concrete Versus State of Puducherry

The High Court held that the transaction involving the supply, laying, and spreading of ready mix concrete qualified as a works contract under the ... Works contract - supply, laying and spreading of ready mix concrete - Exemption under Notification G. O. Ms. No. 50/90/F6 dated December 10, 1990 - Non production of invoice copy showing price of the material and labour charges separately - Whether, in the facts and circumstances of the case, and in law, a the Appellate Tribunal was right in law in holding that the supply, laying and spreading of ready mix concrete at the customers' site is an outright sale of ready mix - Held that:- On the narration regarding the nature of the activity of the asses-see, it is clear that the Tribunal totally misdirected itself in its understanding of the principle of works contract. As is evidenced from the reading of terms of the agreement referred to in the order of the Tribunal, it is clear that the nature of works entrusted to the assessee is not supplying ready mix concrete mixture simpliciter; on the other hand, the assessee was to provide men and materials in laying concrete mixture on the area specified by the purchaser. The supply had to be done through its staff and that the assessee was responsible for quality of the concrete and the laying also Further in the event of any leakage arising therefrom in future, the responsibility was cast upon the assessee to compensate the same. When that being the case, we do not find any justifiable ground in the Tribunal's view that on the mere absence of the word 'works contract' in the agreement, the transactions have to be treated as sale. Thus, on going through the nature of the work executed and the agreement and the responsibility cast upon the assessee on the quality, we have no hesitation in accepting the plea of the assessee that the transaction is one of works contract and that the assessee is entitled to have the benefit of exemption as had been pointed out in Government order referred to in circular dated April 29, 2004, viz., G. O. Ms. No. 50/90/F6 dated December 10, 1990. - we set aside the order of the Tribunal, holding that the transaction is a composite works contract involving men and labour - Decided in favour of assessee. Issues:Assessment under Puducherry General Sales Tax Act for the year 2003-04 - Whether supply, laying, and spreading of ready mix concrete constitutes an outright sale of ready mixRs.Analysis:The petitioner, a manufacturer of ready mix cement concrete, claimed exemption under the works contract scheme for the assessment year in question. The assessing officer, however, revised the assessment, stating that the supply and pumping of ready mix concrete did not fall under works contract, leading to the entire turnover being taxed at three percent. The petitioner's objection was based on the process of supplying and laying the concrete mixture, supported by agreements between the dealer and purchaser detailing the transportation and laying process. The assessing officer rejected the contention due to the absence of separate invoicing for material and labor charges. The appeal to the Assistant Commissioner and subsequent appeal to the Sales Tax Appellate Tribunal were also dismissed.The Tribunal held that the petitioner engaged in the sale of cement concrete mixture, evident from the separate invoicing for material, labor, and transport charges. The agreement terms indicated the responsibility of the petitioner in providing the concrete, measuring the area, and laying it with technical assistance. The Tribunal concluded that the main activity was the supply of concrete, with laying being incidental, citing relevant court decisions. Dissatisfied, the petitioner filed a revision.The High Court found the Tribunal's interpretation flawed, as the petitioner's obligations extended beyond mere supply to include laying the concrete with quality assurance and compensation for future leakages. Despite the absence of the term 'works contract' in the agreement, the Court held that the nature of the transaction qualified as a works contract. Referring to the government order of exemption, the Court allowed the revision, setting aside the Tribunal's decision and recognizing the transaction as a composite works contract involving both material and labor.