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Judgment
R. Jayasimha Babu
The State has come up in revision against the order of the Tribunal which has held that the contract entered into by the assessee for the supply of
titanium anodes is a works contract. We have gone through the order of the Tribunal as also the terms of the contract between the parties. The
Tribunal has completely misread the contract and has reached a conclusion which is not supportable by what has been set out in the contract.
The contract was to design, engineer, manufacture and supply of titanium anodes (TSIA). The supplier was also required to supervise
installation in commissioning. It also was required to undertake recoating maintenance for a period of 11 1/2 years. The price for the TSIA was
fixed at Rs. 50 lakhs. Sub-clause (c) of the terms relates to price and specifically provides that excise duty is payable extra at the ruling rate which
is recently 8 per cent, and that Central sales tax is payable at the ruling rate which is currently 4 per cent against production of ""C"" forms. Other
statutory levies becoming payable at the time of supply were also to be to the account of the buyer.
For the work of supervision of the installation and commissioning, a separate charge was payable by the buyer. Rs. 400 per day per engineer as
also the traveling and lodging costs of the engineer were to be paid by the buyer. The supplier was not required to carry out the installation, but,
merely to supervise the same. For maintaining anodes, a recoating maintenance charge of Rs. 800 per sale per month was payable for a period of
ten years from the date of production is achieved from each TSIA.
There can be no doubt whatsoever that this contract is clearly a divisible contract, one for the supply of the TSIAs and another for supervision
and installation and undertaking recoating maintenance. The price payable for the supply of the material was distinct from the consideration payable
for the supervision of installation and commissioning and for recoating maintenance.
The parties themselves had no doubt to the nature of the arrangement they had entered into and have specifically provided for the payment of
the excise duty, sales tax and all other statutory levies by the buyer.
It is unfortunate that the Tribunal, instead of examining the contract with reference to the various clauses therein has thoroughly mislead itself into
embarking on discussion of the law relating to works contract without first making sure that this is a contract which can come within the category of
works contract. The Tribunal has completely overlooked the clauses providing for the maintenance charge irrespective of the period for which the
TSIA were to be maintained as also to the charges payable for the supervising engineer. It is clear from a reading of this contract that the parties
intended to sell the goods, viz., titanium anodes had also entered into another arrangement for the supervision of the erection and installation of the
anodes, as also the maintenance for which separate charges were payable.
The impugned order is unsustainable and is, therefore, set aside. The tax revision petition is allowed with costs of Rs. 2,500.
Petition allowed.