TaxTMI 
TaxTMI 
2017 (12) TMI 1074
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....s liable to tax under the Bombay Sales Tax Act, 1959?" The facts in brief leading to the reference are as set out below. 3. The applicant is a Government of India undertaking having branches throughout India. The applicant was duly registered under the Bombay Sales Tax Act 1959 as well as and Central Sales Tax Act, 1956. During the period in question M/s. Rashtriya Chemicals & Fertilizers Ltd. ("RCF") had engaged the applicant apparently for designing, engineering, supplying, erection, installation and Commissioning of the Trombay­V Expansion Project at RCF site for a total price of about Rs. 22 crores under a contract dated 20th October 1978. 4. It is reported that during the period in question from 1st April, 1979 to 31st March, 1980 the contract was performed. The Assistant Commissioner of Sales Tax Assessment treated the transaction as a transaction of sale. The applicant produced the relevant documents and correspondence before the Deputy Commissioner of Sales Tax claiming that the contract was a divisible contract for supply of labour and could not be treated as a contract for sale. It was contended that the property in the case was not simply transferred and del....
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....form of a letter agreement addressed to the applicant at Hyderabad. The contract is issued by the Fertilizer (Planning and Development) India Ltd. (FPDIL) on behalf of RCF Ltd., Trombay V Expansion Project. The contracting parties are therefore FPDIL and the applicant. Reference is made to the minutes of meeting held between 24th March 1977 and 26th March, 1977, a subsequent proposal, related correspondence and discussions. Ms. Badheka submitted that the reading of the contract will reveal that it was for complete Design, Engineering, Manufacture, Testing, supply, transportation to site, storage at site, erection, testing, supply, transportation to site, storage at site, erection and and pre­commissioning of one set each Carbon Dioxide Compressor with Turbine, Air compressor with Turbine along with accessories and spares. She invited our attention to the scope of the contract described in the second schedule of the contract viz. to adopt complete design, manufacture, testing, supply, erection and pre­commissioning of the four compressors of certain specifications. 8. Ms. Badheka submitted that the price payable described in the third schedule of contract also refers to c....
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....divisible works contract", firstly for supply of parts being the main transaction and secondly for erection and commission of equipment. 12. Mr. Sharma had invited our attention to the definition of "equipment" on the site in clause 2.2.1 and 2.9.1. We have since perused the entire contract and found that there is scope of the contract which is restricted to four different processes each of them complete with drive turbine, accessories and spares. The scope of contract also includes provision of certain data sheets. The works contracts requires the contractors i.e. the applicants to furnish all documents drawings, test certificates and manuals as seen from clause 2.5.1. The contractor is also required to furnish the Civil design data to enable FPDIL to design the foundation. Thus it is clear that the foundation is being carried out by FPDIL and not the applicant. He therefore submitted that the question be answered in the affirmative. 13. We have heard counsel at considerable length and with their assistance scrutinised the impugned order and the contractual provisions. At the outset we will deal with the contractual provisions since it these provisions that will determine th....
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....Rs. 1.78 crores nor has the applicant made any attempt to disclose the same. 15. The fourth schedule deals with payment terms which includes reference to preparation of invoices and provision of performance bond. The requirement for preparation of invoices refers to the obligation of the applicant to prepare item wise challan packing­wise. No reference is made to any invoices being required to specify work to be carried out for erection of a plant and in relation to the works contract. The Performance Bond referred to in clause 4.5.0 also holds a contractor fully responsible for proper workmanship and specific performance of the equipment under the contract. No reference is made to the work to be carried out in relation to installation. 16. It is the fifth schedule that refers to the time schedule for erecting the four compressors. As seen earlier, the foundation is to prepared by FPDIL and not the applicant. The applicant is to supply equipment and erect it on the site. Work of erection is not separately valued but is tied with transportation costs and insurance. In any event this is only a fraction of total cost of Rs. 22 crores. In the circumstances, it is difficult to....
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....plicable to other Contractors working at Site. 2.06 To provide Crane facilities, subject to availability, usual hire charges as applicable to other contractors. The following capacity cranes are available. Name of Crane Capacity Boom Capacity (Tonnes) With normal Length Boom length (FT) Capacity Boom Capacity (Tons) With Maximum length Boom length (FT) 1. P & H Crane 80 50 18 120 2. 22 RB 16 30 11/2 70+30 (Jib) 3. Unit Coles fixed boom 6 30 2.07 To make available medical facilities at owner's hospital for the Contractor's staff/labour to the extent available at usual charges. 19. Now coming to the case law cited by Ms. Badheka in Steel Plant Pvt. Ltd.(supra), this Court considered the scope of contract between assessee and the Bombay Municipal Corporation as a contract for work and labour and not a contract for sale. The court had found that the taxing authority had failed to establish that the contract in question involved sales of machinery and equipment and that the mere fact that provision had been made for payment of sales tax on value of machinery cannot convert a works contract into a ....
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....hat fabrication and erection is one indivisible process. In that case the process of assembling and erection was found to require high degree of skill and it was not a contract of sale, since it had involved a three motion electrical overhead traveling crane. The Court found similarity between the decision of Sentinel Rolling Shutters (supra) and the facts in Ramsingh & Sons Engineering Works (supra). It was found that the Indian Standard Institution publication laying down the code of practice for design of overhead traveling Cranes shows that a three motion electrical overhead traveling crane consists of 44 main component parts and it is only when they are put together and assembled at the site they assume the shape of a crane. Hence it was found that the contract was one of indivisible kind. Fabrication and erection involved one indivisible process. 23. In the instant case when we examine the facts and the document on record before the Tribunal we have the benefit of perusing the following invoices which are annexed at Exhibit­J to the Reference: Invoice/Debit Note No. Work Order No. Billing advice No. and date Amount Rs. HY­XX­05­9­2069 ....
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....e of works contracts and is not to be narrowly construed to cover one species of contract to provide for labour and services of work and lastly once the characteristics of work contract are met in a contract entered into between the parties, any additional obligation incorporated in the contract would not change the nature of the contract. 26. In Kone Elevator (supra) the Supreme Court has considered the issue of re­opening of assessment and orders of assessment under challenge before the Court were set aside and assessment which have attained finality were treated as closed. In a dissenting judgment, in the facts of that case, it was found that supply of lift by the assessee satisfies the definition of "Sale" under the Sale of Goods Act and therefore does not question the deemed sale and the entire contract should not be held to be works contract. Even after the Constitutional amendment introducing Article 366(29A)(b), it will have to be duly examined whether a particular contract would fall within the expression "works contract" and only thereafter, the incidence of taxation could be provided in the contract. It was observed that the contract must in no uncertain terms tha....
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....aka the dominant nature of a contract must be examined. The "dominant nature test" can be culled out in what is reproduced below : "Whether the contract involved a dominant intention to transfer the property in goods, in our view, is not at all material. It is not necessary to ascertain what is the dominant intention of the contract. Even if the dominant intention of the contract is not to transfer the property in goods and rather it is the rendering of service or the ultimate transaction is transfer of immovable property, then also t is open to the States to levy sales tax on the materials used in such contract if it otherwise has elements of works contract..." 30. The aforesaid extract read with four concepts that the Supreme Court has identified in paragraph 44 of the Kone Elevator (supra) will help to establish whether the contract in question is a works contract. Applying the aforesaid tests to the facts of the case we have no hesitation in concluding that reading the terms of the contract referred to herein above merely because there are small element of work in the contract, it cannot be concluded that the contract in the present case is a works contract. It is essenti....