COMMISSIONER OF SALES TAX Vs. KAMANI ENGINEERING CORPORATION LIMITED

JUDGEMENT

(1.) In this reference under section 34(1) of the Bombay Sales Tax Act, 1953, we have to consider the true nature of two transactions evidenced by two contracts which came up for construction before the Sales Tax Tribunal.

(2.) The statement of the case shows that the respondents are a public limited company carrying on the business of manufacture and sale of fabricated materials and that they also undertake works contracts and sometimes also labour contracts which do not involve supply of materials. During the assessment period 1st April, 1955, to 31st March, 1956, the respondents entered, inter alia, into two contracts, one with the Trustees of the Bombay Port Trust and the other with Century Rayon of which the Century Spinning and Manufacturing Mills Limited are the proprietors. By his assessment order dated 24th October, 1963, the Sales Tax Officer bifurcated the transaction of the respondents with the Trustees of the Bombay Port Trust holding that the major part of it was a contract for the sale and supply of goods, while the minor part of it was a contract of work and labour. With respect to the respondents' transaction with Century Rayon, the Sales Tax Officer held that it was a contract for the sale and supply of goods. The order of the Sales Tax Officer was confirmed in appeal by the Assistant Commissioner of Sales Tax and in revision by the Deputy Commissioner of Sales Tax. In second revision to the Sales Tax Tribunal, the Tribunal held that the contract with the Trustees of the Bombay Port Trust was a works contract and that the contract with Century Rayon was either a labour contract or a works contract, and in the case of both the contracts the amounts received by the respondents thereunder were not liable to be taxed under the Bombay Sales Tax Act, 1953. Arising out of this judgment and order of the Tribunal, two questions have been referred to us. The first question relates to the transaction between the respondents and the Trustees of the Bombay Port Trust, and the second with the transaction between the respondents and Century Rayon. In the second question we find a typographical error and we are reproducing the said question after correcting this error with the consent of both counsel. The said two questions are :

(3.) It will be convenient to deal with each of these two contracts separately. The contract between the respondents and the Trustees of the Bombay Port Trust is embodied in a formal contract dated 28th March, 1955, entered into between the respondents and the Trustees of the Bombay Port Trust. The Tribunal has meticulously and carefully analysed the said contract and has interpreted the various clauses and parts thereof. The said contract runs into 43 clauses. It also contains two schedules. Schedule A thereto contains the general conditions of the said contract. There are 44 such conditions. Schedule B contains a schedule of quantities and rates. Clause 2 of the said contract describes what was to be done thereunder by the respondents as follows :