Predominant intention test treated vehicle repair arrangements as work and labour, not taxable sales of spare parts.

A mixed repair arrangement was characterised as a contract for work and labour, not an independent sale of spare parts, because customers and Government departments entrusted vehicle repairs with instructions that any required parts be purchased on their behalf and supported by original bills. On the factual record, there was no satisfactory proof of a separate taxable sale of goods by the appellant. Applying the predominant intention test to the substance of the transaction, the tribunal treated the arrangement as non-sale work and held that sales tax assessment on alleged spare parts sales was not warranted.

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Issues: Whether the appellant was engaged only in works contracts and not in sales of spare parts, so as to escape assessment to sales tax.

Analysis: The appellant was shown in the assessment records as a motor mechanic undertaking repairs and improvements to automobiles. The findings of the assessing authority and the appellate authority themselves indicated that the customers and Government departments entrusted repair work with instructions that spare parts, if required, should be purchased on their behalf and the original purchase bills should be handed over to them along with labour charges. On that factual basis, there was no satisfactory proof that the appellant effected any independent sale of spare parts. Applying the principle that a mixed contract must be characterised according to its predominant intention, the substance of the arrangement was a contract for work and labour rather than a taxable sale of goods.

Conclusion: The appellant was not liable to assessment on the alleged sale of spare parts, and the issue was decided in favour of the appellant.

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