By C. B. Thakar, Advocate
G. G. Goyal, Janak Vaghani, Chartered Accountants
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Sales Tax – Sale – Spectacles Made to Prescription for Customer – Not a Works Contract but a Sale Of Goods, Manufacture-Second Sale – Sale of Lens Along with Frames – Resale of Frames and First Sale of Lens – S/s. 3B(2), 12(3)(B) and Entry 54 of Part C of Schedule I Of The Tamilnadu General Sales Tax Act, 1959
Facts:
The respondent/assessee is a dealer in opticals, and sold frames after having purchased frames as such without fitting them into spectacles, while the assessing authority has given categorical finding that the frames had not been sold as such without fitting them in spectacles to its customers as a product through separate bills for (i) frame and (ii) lens.
Before the Tribunal, the respondent/assessee contended that the manufacture of spectacles based on a specific description issued by the Doctors and choosing the lens pertaining to the power prescribed, the same is handed over to the skilled labourers for processing and sizing the lens such as grinding the shape of the lens, etc., before fitting the same into frames. It was therefore contended that such a process of manufacture according to the specific requirement is based on prescription issued by the Doctor, which would fall within the concept of “works contract” falling u/s. 3B of the Tamil Nadu General Sales Tax Act and as such eligible for claim of second sale not liable to tax. The Tribunal allowed the appeal filed by the assesse and set aside the order of assessment and first appeal. The Department filed Revision Petition before the Madras High Court challenging the order of the Sales Tax Appellate Tribunal, for the period 1994-95.
Held:
In the first place, what is sold by the respondent/ assessee to their customers is the spectacle. The spectacle is manufactured to the requirement of each of the customers based on a prescription of an ophthalmologist. What is being carried out by the respondent/assessee falls within the expression “manufacture”, i.e., manufacture of spectacle based on the orders placed by the customers. Even such manufacturing activity is carried on by the respondent/assessee in their workshop. Therefore, in every respect, the necessary ingredients of works contract are absent. The contract is of sale and not a works contract.
The spectacle manufactured by the respondent/ assessee which contains a frame and lens and certain other parts, can be independently analysed in order to find out whether any tax is leviable on such different parts contained in the spectacles. Therefore, the action of the respondent/assesse in having raised two separate bills, one for the frame and the other for the lens and thereby, there would be collection of tax on sale of lens alone and not on the frame was permissible and cannot be questioned.
Accordingly, the HC dismissed the revision petition filed by the Department and answered the question of law in favour of the respondent/assessee.
