Decided on March 02,1970



RAMAPRASADA RAO, J. - (1.) MESSRS Indian Refrigeration Industries Private Ltd., are the assessees-respondents in this tax case. For the year 1962-63, they were assessed on a taxable turnover of Rs. 3, 49, 943.13. The respondents claimed an exemption, inter alia, on a turnover of Rs. 2, 74, 083.38 on the ground that such turnover related to work and labour involved in the dealings between them and their customer and that therefore there was no element of sale involved in the transaction. The revenue negatived the exemption claimed. But, on second appeal, the Sales Tax Appellate Tribunal came to the conclusion that no element of sale was involved and the exemption claimed was sustainable. It is as against this that the State has preferred the present tax case.
(2.) THE dealings in so far as the assessable turnover in question is concerned, can be summarised thus : The respondents were contractors of repute and were technically qualified as Engineers to fabricate and install a humidifying plant and other accessories with air-doubts, embedded into the building of their customer. In effect, they were qualified to install the plant alongside the construction of the building of their customer which was by then contemporaneously in progress. As a matter of fact, it is not in dispute that the concerned work had necessarily to go hand in hand with the building itself, with the assessee rendering technical assistance to the architects and other construction contractors during the course of the erection of the building. The Tribunal secured an affidavit from one of the officers of the assessee-company setting forth the nature and details of the work involved. The said affidavit states that the work concerned was mainly relatable to the installation of the humidifying plant and the necessary equipment connected thereto and for the construction of such of those units in the main building itself to enable them to link up their machinery and material with the structure of the building so that in the ultimate analysis the machinery to be supplied and the material annexed thereto got embedded in the main building. This was the nature and scope of the contract undertaken by the assessee. Each contract was a lump sum contract with a specific amount. The Tribunal made a local inspection and found that the installation was in the manner referred to by the manager of the assessee-company and all the component parts supplied by the assessee to its customer became part and parcel of the walls and floors of the main structure.
(3.) IT is on such a set of admitted facts that the Tribunal came to the conclusion that the property in the materials which were the subject-matter of the assessable turnover in question passed only after the erection work was over and not before. Ultimately the Tribunal was of the view that the contracts were indivisible composite contracts of work and labour for supply and installation of the humidifying plant and therefore the turnover was not assessable to tax.The learned Assistant Government Pleader arguing for the State, who are the appellants in the case, contends that the nature of the work undertaken by the assesses cannot be said to be, as described by the Tribunal. He would state that predominantly an element of sale is involved in the contracts in question and such element is divisible from the totality of the dealings between the assessee and its customer and this separate turnover sought to be brought into the net of taxation of the revenue has to be assessed as attempted and the order of the Tribunal has to be set aside. Learned counsel for the respondents argues to the contrary and he has brought to our notice decisions of the Supreme Court and of our High Court which had occasion to notice similar contracts and which upheld a similar contention of the assessee therein that the contracts involved were in the nature of works contract and no element of sale was involved therein.;

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