TaxTMI 
TaxTMI 
2003 (3) TMI 699
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....dingly levied tax on the amount of Rs. 5,15,000. Aggrieved by the order of assessing authority, applicant filed appeal before the Assistant Commissioner (Judicial), Sales Tax, Moradabad, which was rejected. Claim of the dealer of works contract was also rejected by Tribunal. Being aggrieved by the order of Tribunal, the present revision has been filed. 3.. The only question for consideration in the present revision is that whether the agreement dated February 28, 1984 between the applicant and M/s. Gunkar Electrodes Private Limited, Rampur, was in the nature of works contract or contract for sale. A copy of the agreement is annexure 2 to the present revision. It has also been referred in the order of Tribunal. The agreement reads as follows: AGREEMENT This agreement is made at Rampur on this 28th day of February, 1984. M/s. Heera Electrodes, Rampur, having its office near Kosi River Bridge, Rampur, represented by Sri Pradeep Kumar Jain, its partner, hereinafter referred to as the first party. AND M/s. Gunkar Electrodes Private Ltd., Rampur, having its registered office at Jwalanagar, Rampur, and being represented by Shri R.B. Jain, managing director of the company, h....
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....ation with the second party for technical improvement without affecting the guaranteed performance of the plant. 9.. That the first party hereby guarantees that the designs are its own and that the plant and machinery to be designed and supplied by it does not infringe any existing patent or trade mark and agrees to indemnify against the latter for any such infringement. 10.. That in case any dispute or difference arises at any time between the parties to this agreement during the period of fabrication and supply of the plant or during the performance guarantee period thereof, or on account of any misinterpretation of this agreement, such dispute or difference shall be referred to an arbitration. Each of the two parties will appoint one arbitrator under the provisions of Indian Arbitration Act, 1940 or any statutory modification or reenactment thereof, for the time being in force. All proceedings in such arbitration will be held at a place or places as may be determined by the arbitrators. In case of any dispute in-between arbitrators, one independent umpire will be appointed, whose decision will be final. In witnessth we have put our signatures on this 28th day of ....
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.... 1 Kit. Total Rs. 5,15,000 Note: One automatic wire straightening and cutting machine, eccentricity tester and 10 Nos. of frames will be supplied after running: S/d-For Heera Electrodes Accountant manager. 4.. The claim of the applicant was that the contract was for supply, fabrication and installation of complete machinery and equipment of electrodes plant installation for composite price at Rs. 5,15,000 and the contract being a composite indivisible contract for design, manufacture, fabrication and installation, it was in the nature of works contract. The assessing authority had rejected the claim merely on the ground that the job-work was only incidental and the agreement was mainly for supply. For rejection of claim of works contract, Tribunal had given the following reasons: "From the reading of this agreement as a whole, it transpires that the assesse....
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....d. In the case of Commissioner of Sales Tax, Madhya Pradesh v. Purshottam Premji [1970] 26 STC 38 (SC), it has been held:- "The primary difference between a contract for work or service and a contract for sale of goods is that in the former there is in the person performing work or rendering service no property in the thing produced as a whole ........... In the case of a contract for sale, the thing produced as a whole has individual existence as the sole property of the party who produced it, at some time before delivery, and the property therein passes only under the contract relating thereto to the other party for price." 6.. This was the test applied by apex Court in State of Rajasthan v. Man Industrial Corporation Ltd. [1969] 24 STC 349 (SC) for holding that a contract for providing and fixing four different types of windows of certain sizes according to "specifications, designs, drawings and instructions" set out in the contract was a contract for work and labour and not a contract for sale. Shah, J., speaking on behalf of the court, analysed the nature of the contract and pointed out that "the window-leaves did not pass to the Union of India under the terms of the con....
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....ental and integral part of the contract, because without it the rolling shutter does not come into being. The manufacturer would undoubtedly be the owner of the component parts when he fabricates them, but at no stage does he become the owner of the rolling shutter as a unit so as to transfer the property in it to the customer. The rolling shutter comes into existence as a unit when the component parts are fixed in position on the premises and it, therefore, becomes the property of the customer as soon as it comes into being. There is no transfer of property in the rolling shutter by the manufacturer to the customer as a chattel. It is essentially a transaction for fabricating component parts and fixing them on the premises so as to constitute a rolling shutter". The contract for fabrication, supply and erection of the rolling shutters was, on this reasoning, held by the court to be a contract for work and labour and not a contract for sale. 8.. In the case of Ram Singh & Sons Engineering Works v. Commissioner of Sales Tax, U.P. reported in [1979] 43 STC 195 (SC); 1979 UPTC 548 the apex Court observed as follows: "The primary test is whether the contract is one whose main obj....
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....ngineering Company Pvt. Ltd. v. Commissioner of Sales Tax, Maharashtra [1978] 42 STC 409." 10.. In the contract which was under consideration, there was a clause of mode of payment and replacement of defective items at the cost of contractor. The relevant part of the contract are:- The mode of payment was 30 per cent with the order, 20 per cent after two months of the actual consignment of works, 25 per cent after completion of erection of column and bridge, 15 per cent after completion and giving satisfactory trial and 10 per cent after one month satisfactory works. That all such items which are considered defective by the company will be replaced at the contractor's cost within the above specified date to the company's entire satisfaction so that regular working of the cranes is ensured. 11. In the present case, in my opinion, in view of the law laid down by the apex Court, the view taken by the Tribunal is not correct. The mode of payment is wholly irrelevant. Various clauses referred by the Tribunal for coming to the conclusion that the contract was one of the primary for supply of material at the price agreed between the parties for materia....