JUDGMENT Rajes Kumar, J.
1. Present eight revisions under Section 11 of UP. Trade Tax Act (hereinafter referred to as "Ac") are directed against the orders of Tribunal relating to the assessment years, 1975-76, 1976-77, 1977-78, 1978-79, 1979-80, 1980-81, 1981 -82 and 1982-83.
2. In all the revisions, the only question raised by the learned Standing Counsel during the course of the argument relates to the taxability of the parts used in the repairs of the transformers.
3. The facts of the case stated in the order of the Tribunal are that the dealer/opposite party (hereinafter referred to as "dealer") entered into an agreement with the electricity boards of the various States for the repairing of their transformers. It was claimed that under he agreement, the contract was for repairing and testing of damaged distribution transformers, under which the dealer was required to open the transformers, remove the damaged parts and replacement, supply of parts, fitting, fixing and connection and completion in all respect etc. The price was stipulated as per Annexure 1, of the schedule of the price. The dealer claimed that the parts, which were replaced in the repairing of transformers, was tailor made i.e. as per requirement. It was claimed that one consolidated price for value of the parts, fitting, fixing, connection, etc was charged. In the circumstances, it was claimed that there was no sale of part and the nature of the work was works contract in which parts were used in the execution of the works contract. Assessing authority had not accepted the plea of the dealer and levied the tax on the value of the parts. First appellate authority has affirmed the view of the assessing authority. However, in second appeal, Tribunal accepted the claim of the dealer. Tribunal held that the contract was for the repair of the transformers and tailor made parts were used in the repairing and passed on not as a result of sale. It has been held that the nature of the work was works contract and not contract for sale.
4. Heard learned Counsel for the parties.
5. Learned Standing Counsel filed the copy of the contract with the U.P. State Electricity Board, Lucknow dated 30.12.1974. He submitted that the contract was not the composite contract for the supply of parts and labour. He submitted that for each work, separate price was stipulated as per Annexure-1 of the contract. He further submitted that the dealer had raised the bills separately for the value of the parts and the labour charges and received Form 3-D from the Electricity Boards and claimed the benefit of the concessional rate of tax. He submitted that since the contract was a devisible contract in which separate price was stipulated for the value of the goods and labour charges and separate bills for the value of the goods was raised, the contract was for sale of parts and not the works contract. Learned counsel for the dealer submitted that Annexure-1 is the schedule of the price, which contemplates price for various nature of the works. He submitted that item No. 1 was relating to the labour work only and item No. 2 relates to the removal of the damaged parts required for replacement, supply of parts, fixing, fitting and connection which was a composite work in the nature of works contract. According to him, the price mentioned in the schedule was not relating to the individual part but includes the fitting of the parts as well as labour charges relating to the removal, fitting, fixing and connection. He submitted that the tax has been charged to safeguard the future interest inasmuch as it was not clear whether the claim would be accepted or not. In support of his contention, he relied upon the decision of this Court in the case of Heera Electrodes, Rampur v. Commissioner of Sales Tax reported in 2003 UPTC 832, Sentinel Rolling Shutters & Engineering Co. (P) Ltd. v. CST reported in 1979 UPTC 872.
6. I have perused the order of the Tribunal and the authorities below and also the copy of the contract, which is filed in TTR No. 287 of 1996 along with the supplementary affidavit, which is a contract order of the U.P. State Electricity Board. Lucknow dated 30.12.1974. The relevant part of the contract reads as follows;
7. With reference to your tender No. S-3/4184-A dated 4.7.74 and subsequent correspondence against specn. No. CEH-745/74, I have to inform you that your offer has been accepted for a rate contract for repair and testing of initially 215 Nos. copper wound damaged distribution transformers lying in the Electy. Maint. & Rural Electrification Circle. Meerut, Bulandshahr & Roorkee on the rates as per annexure 1 enclosed and terms and conditions mentioned hereinafter:-
Sales Tax:
8. Sales Tax shall be paid extra at actuals as legally applicable only on the spare parts under item II of the price schedule (Annexure-I).
Terms of Payment:
9. Payment shall be made in accordance with Clause 25 of the General conditions of form A subject to the following modification:
90% payment of the over all cost of repair and testing along with 100% Sales tax as legally applicable, shall be made by the consignees on receiving back the transformers after satisfactory repairs and testing asfar as possible within 30 days after the presentation of bills along with test certificates. The bill shall, however, be got verified from the engineer officer of the Board deputed for joint inspection, before sending to the executive engineer of the concerned division for payment.
(I) Overall cost of repair & testing of the individual transfer shall have to be reduced by the contractor by and amount of cost of the damaged/burnt lar coils which are to be reted by him at the rates given at item V above.
(II) Sales Tax shall be charged extra as applicable only on replaced partsier item. II.
Prices.
10. The prices and rates mentioned are: -
11. Excise duty: Exclusive of excise duty and any other Govt. levy on finished material/equipmeznt only, which if legally applicable, shall be paid extra at actuals on production of necessary documents (Excise Gate pass in case of Excise duty) in proof of having paid the said amount.
12. Sales Tax: Exclusive of sales Tax which shall be paid extra at actuals, as legally applicable. Single sales tax declaration Form C, if required will be issued by the office.
Payments:
13. Payments shall be made asper Clause No. 25 of the General Conditions of Contract Form A appended hereto.
Responsibility of contractor & completeness:
14. The contractor shall be entirely responsible for the execution of this rate contract in accordance with the terms of special conditions, the general conditions of form A specifications and schedules etc. General conditions of supply:
15. The order shall further be governed by the general conditions of contract form A of the U.P. State Electricity Board (enclosed).
Repair work:
16. The repair work shall involve, opening of transformer cover, draining of oil, detanking core and coil assembly, cleaning washing of dust anddirt from all parts including tank and cooling tubes, retanking after reassembly of all pails after replacement of parts as required, filling fresh oil, oil filteration and painting etc. Replacment of parts:
17. This will involve removal of damaged parts requiring replacement, supply of parts such as H.V/ L.V leg coils, bushing, gaskets, breather, oil level, gauge, tapping switch, oil drain and filter valve, cover bolts plugs, caps, screws, transformer oil etc, fitting, fixing and making connections complete in all respects.
18. To adjudicate the issue involved in the present case on the facts stated in the Tribunal order, it is necessary to consider various decision of Apex Court, in which the difference between the contract for work and a contract for sale of goods has been considered. In the case of Commissioner of Sales Tax, Madhya Pradesh v. Purshottam Premji 26 S.T.C. 38 (SC) it has been held:
The primary difference between a contract for 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.
19. Aforesaid test was applied by Apex Court in the State of Rajasthan v. Man Industrial Corporation 24 S.T.C. 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 contract as window-leaves. Only on the fixing of the windows as stipulated, the contract could be fully executed and the property in the windows passed on the completion of the work and not before.' The contract was not for the transfer of property in the window leave as window leaves. It was a contract for providing and fixing windows and windows could come into existence only when the window-leaves were fixed to the building by bestowing labour and skill, and it was for this reason that it was held to be a works contract.
20. The same test was applied by the Hon'ble Supreme Court in Sentinel Rolling Shutters and engineering Co. (P) Ltd. v. Commissioner of Sales Tax, Maharashtra, reported in 1979 U.P.T.C. 872 There the question was whether a contract for fabrication supply and erection of certain types of Rolling Shutters was a contract of sale or a contract for work and labour. The Apex Court analysed the nature of the contract and pointed out that 'not only are the Rolling Shutters to be manufactured according to the specifications, designs, drawings and instructions provided in the contract, but they are also to be erected and installed at the premises of the company. The price stipulated in the contract is inclusive of erection and installation charges and the contract does not recognize any dichotomy between fabrication and supply of the Rolling Shutters and their erection and installation so far as the price is concerned. The erection and installation of the Rolling Shutters in as much as essential part of the contract as the fabrication and supply and it is only on the erection and installation of the Rolling Shutters that the contract would be fully executed.' This Court then proceeded to examine what is a Rolling Shutter and how it is erected and installed in the premises and observed that a Rolling Shutter consists of several component parts and "the component parts do not constitute a Rolling Shutter until they are fixed on the premises and fitted into one another that the constitute a Rolling Shutter as a commercial article and till then they are merely component parts and cannot be said to constitute a Rolling Shutter. The erection and installation of the Rolling Shuter cannot, therefore, be said to be incidental to its manufacture and supply. It is a fundamental 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 becomes 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 Shutter was, on this reasoning, held by the Court to be all contract for work and labour and not contract for sale.
21. In the case of Ram Singh and Sons Engineering Works v. Commissioner of Sales Tax, U.P., reported in 1979 U.P.T.C. 548. The Apex Court observed as follows:
The primary test is whether the contract is one whose main object is transfer of property in a chattel as a chattel to the buyer, though some work may be required to be done under the contract as ancillary or incidental to the sale or it is carrying out of work by bestowal of labour and service and materials are Used in execution of such work.
22. In the case of Ram Singh and Sons Engineering Works (Supra), the Court was considering as to whether the contract for supply and erection, a three motions electrical overhead traveling crane at the premises of the Contractee was the works contract or the contract for sale. Hon'ble Supreme Court has held the contract as works contract and for which given following reasoning:
The lubrication and erection is one singly indivisible process and a 3 motion electrical overhead traveling crane conies into existence only when the erection is complete. The erection is thus a; fundamental and integral part of the contract, because without it the 3 motion electrical overhead traveling crane does not come into being. The manufacturer would undoubtedly be the owner of the component parts when he fabricated them but at no stage does he become the owner of the 3 motion electrical overhead traveling crane as a unit so as to transfer the property in into the customer. The 3 motion electrical overhead traveling crane comes into existence as a unit only when the component parts are fixed in position and erected at the site, but at that stage it becomes the property of the customer because it is permanently embedded in the land belonging to the customer. The result is that as soon as 3 motion electrical overhead traveling crane comes into being, it is the property of the customer and there is, therefore, no transfer of property in it by the manufacturer to the customer as a chattel. It is essentially a transaction for; fabricating component parts and putting them together and erecting them at the site so as to constitute a 3 motion electrical overhead traveling crane. The transaction is no different than one for fabrication and erection of an open god own or shed with asbestos of in sheets fixed on columns. There can, therefore, be no doubt that, the contract in the present case was a contract for work and labour and not a contract for sale. This view which we are taking is completely supported by the decision of this Court in the Sentinel Rolling Shutters and Engineering Co. (P) Ltd v. Commissioner of Sales Tax, Maharashtra (Supra).
23. Let us now examine the nature of contract in the present case, copy of contract has been filed by the learned Standing Counsel alongwith the Supplementary affidavit the extract of which, has been referred hereinabove. Perusal of contract shows that it was for repair and testing of Copper wound damaged distribution of transformers at the rate as per the Annexure-1. Anliexure-1 referred hereinabove, shows that the different prices were stipulated for the different work. Item No. I is the labour work only. Item No. II is the work, which appears to be in dispute, which involved "removal of damaged parts requiring replacement, supply of parts, fittings, fixing and connection and completion in respect thereof." Below the aforesaid heading, the prices per Unit with reference to the various parts are mentioned. The prices mentioned with reference to the various parts was not exclusively for the value of parts, but it included labour charges involved in the removal of damaged parts, fittings, fixing, connection etc. Thus, a composite price for parts required to be replaced and labour charges for removal of damaged parts, fittings, fixing and connection etc. was provided.
24. Looking to the fact that the contract was for repair of transformers and the price stipulated included the value of parts and labour charges for removal of damaged parts, fittings, fixing and connection The replaced parts were therefore, passed on to the Electricity Board only when the damaged parts were removed and the new parts were fitted, fixed and connected in a transformer. Thus, in my opinion, in view of the principle laid down by the Apex Court in the case of State of Rajasthan v. Industrial Corporation (supra) and in the case of Sentinel Rolling Shutters and Engineering Co. (P) Ltd. v. Commissioner of Sales Tax, Maharashtra (supra), the repairing of transformers, which invoked removal of damaged parts, replacement of parts, its fittings, fixing and connection, amounts to works contract and not the contract for sale. It may be mentioned here that the charging of tax in the bill and receiving Form 3-D would not decide the nature of transactions, if the contract is a works contract in law. it will remain works contract and will not become contract of sale, merely because, tax is charged and Form 3-D have been received. However, it may be mentioned here that if the tax had been charged on the works contract, the same may be dealt with in accordance to the provisions of Section 29-A.
25. In the result, all the aforesaid revisions fail, and are accordingly, dismissed.