Heard Sri Shubham Agrawal learned counsel for the assessee and the learned standing counsel.
This revision has been filed by the assessee against an order passed by the tribunal dated 5.5.2011 by which the tribunal has rejected the application of the assessee for composition and application for tax deduction at a lower rate under section 34 (5) of the Act.
The questions of law referred are as under:
"(i)Whether the tribunal was justified in allowing the appeal of the department without considering all the reasoning's given by the first appellate authority in allowing the benefit of composition scheme to the applicant?
(ii)Whether the tribunal was justified in holding the civil works contract carried on by the applicant of laying, curing and concerting the slab of building to be merely a supply of concrete just because no steel is used in the contract, which is in teeth of the judgments of this Hon'ble Court and the Apex Court?
(iii)Whether the justified in passing the impugned order, without properly considering the similar contract of the applicant with M/s Supertech Ltd., wherein the benefit of composition has been granted?
(iv)Whether the tribunal was justified in holding the work contract of the applicant to be merely the contract of supply, though the cement is being provided free of cost by the contractee and hence the main object of the contract is not transfer of property but is of transfer of work and labour, wherein the goods passed on to the contractee by the theory of accretion?"
The facts of the case are that the assessee entered into a contract with M/s. Gardenia Builders and Developers Ltd. for construction of civil structure and description of the job work was required to be done i.e. "providing, laying and curing of concrete in beam, slab and raft".
It was also provided in the contract that cement and water would be provided free of cost in doing the work and cement is the main raw material, which was required for the making of the Ready Mix Concrete.
According to the assessee, the nature of work given to the assessee was to complete civil work of specified design, specification and strength and therefore it was a contract for civil work and labour and not one of the sale.
Thus when on 8.6.2009 a composite scheme for civil work contract was issued, the assessee also made an application for grant of benefits under the composition scheme. The application of the assessee was however rejected by the assessing authority on 10.11.2010.
The assessee therefore filed an appeal under section 9 which was allowed by the first appellate authority on 20.12.2010 and a direction was given that the assessee be granted the benefits of the composition scheme.
The first appellate authority came to the conclusion that the contract of the assessee was of civil work and it was confined merely to supply of Ready Mix Concrete and thereby allowed the composition scheme of the assessee.
Against this order, the department filed an appeal before the tribunal, the tribunal has reversed the decision of the first appellate authority and has come to the conclusion that since the assessee has not been able to explain the use of the steel in his contract, it is not works contract but a contract for the supply of goods and therefore assessee was not entitled for the benefit of the composition scheme.
Learned counsel for the assessee has argued at length to establish on merits and on the law that the contract made by the assessee was not one of the supply but it was works contract because the pre-dominant nature of the contract was that of erection of civil work at fixed price. Therefore main raw material i.e. cement had already been supplied to the assessee along with the labour force which was to be used in the civil work, there was no supply of goods rather it was the works contract.
In order to substantiate and distinguish as to what is the works contract, learned counsel for the assessee has relied on several decisions of Hon'ble Apex Court in the cases of Hindustan Shipyard Ltd. versus State of Andhra Pradesh, reported in (2000) 119 STC 533 and Hindustan Aeronautics Ltd., versus State of Karnataka reported in (1984) 55 314 and Vanguard Rolling Shutters & Steel Works versus Commissioner of Sales Tax reported in (1977) 39 STC 372.
Lately he relied on Apex Court judgment in the case of State of Rajasthan and another versus Man Industrial Corporation Ltd. reported in (1969) 24 STC 349 (SC).
In all these cases, the Hon'ble Apex Court has come to the conclusion that where the main object of the work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one for works and labour i.e. to say that where the passing of the property is merely ancillary to the contract for the performance of work, such a contract is not a contract of sale but one of works.
Learned counsel also drew the attention of this Court to fact that the order produced by him before the tribunal of contract of an identical nature which had been made between the assessee and one Super Tech that some items/job work which were to be performed and in that case, the assessing authority allowed the application for compounding.
Learned standing counsel in answer to all these arguments has supported the decision of the tribunal by saying that there was no explanation given by the assessee for the use of steel.
Having heard learned counsel for both sides and having perused the material on record, I am of the opinion that the assessee has been able to make out a clear case for the grant of the application for compounding because upon examination of the contract itself and upon reading of the order of the first appellate authority, it is clear that the nature of the contract that was entered between the assessee and the party was pre-dominantly for the purpose of work entrusted under the contract i.e. civil construction and this has also been explained by the tribunal in his order. In the case of Super Tech. such items mentioned in the contract of Super Tech are identical as mentioned to the contract for works relating to Gardenia Builders and Developers Ltd. which is subject matter of this case.
The distinction drawn by the tribunal in the penultimate part of the order is unsustainable. It is set aside. The order of the first appellate autority is upheld and that of the tribunal is rejected.
The revision is allowed as above. No costs.
Order Date :- 6.9.2012 rk