C.C. Sebastian vs State of Kerala

C.N. Ramachandran Nair, J.—The question raised in this tax revision case is whether bus-body built by the petitioner on the chassis supplied by the customer is a commodity taxable as such, or whether it is a works contract entitling exemption to the petitioner on labour charges. It is seen from the Tribunal''s order that they rejected the petitioner''s claim following the decision of the Supreme Court in the case of T.V. Sundram Iyengar & Sons v. State of Madras [1975] 35 S.T.C. 24 ker, wherein the Supreme Court held as follows (page 32):

The salient features of the dealings between the two assessees with whom we are concerned and their customers as they emerge from the facts given above are that the property in the material used by the assessees in constructing the bus bodies never passed to their customers during the course of construction. It was only when the complete bus with the body fitted to the chassis was delivered to the customer that the property in the bus body passed to the customer. There was nothing to prevent the assessees from removing a plank, or other material after fixing it to a chassis, and using it for a different purpose or for a different bus body. The present is also not the case wherein the assessee undertakes to construct some building or set up a factory plant wherein the material used can be said to become the property of the other party by invoking the theory of accretion. It is no doubt true that the bus bodies supplied by the assessees were not ready-made and had, if necessary, to be constructed bit by bit and plank by plank, according to specifications, but that fact would not make any material difference.

Even though after the decision of the Supreme Court, by the 46th Amendment to the Constitution, Clause (29A) was introduced to Article 366 bringing works contract also within the scope of sale, we feel, the decision still applies to the facts of this case. This is because when an item is made under orders of the customer which are generally called custom-made articles and sold as such, the same amounts to sale of a chattel as a chattel. However, if materials are supplied by the customer, the position may be different. A bus-body fabricated and supplied by the petitioner is an independent commodity under entry 94 of the First Schedule to the Kerala General Sales Tax Act, 1963 and can in fact be made and sold as such. In fact, standard forms of bus bodies can be fabricated and kept ready for sale and any customer bringing chassis can purchase it, fix the same on the chassis in a ready-made condition. There is provision in the Entry Tax Act to levy tax on bus-body treating it as a distinct product. Even under works contract, tax at the Schedule rate applies, when custom-made articles are made and sold based on contract between parties. In such circumstances, we do not think the introduction of tax on works contract makes any difference so long as the product sold by the petitioner answers the description of "goods" which are made and sold by the petitioner. The fixing of bus-body on the chassis under the contract does not alter the nature of levy, is what is held by the Supreme Court. We, therefore, sustain the order of the Tribunal justifying the assessment of bus-body under the entry provided in the Schedule.

The tax revision case lacks merit and it is dismissed.