The Judgment of the Court was delivered by

V. Ramaswami, J.:— In these tax revision cases relating to the assessment years 1969-70, 1970-71 and 1971-72, the liability to tax of the turnover representing what is stated as rubberisation of steel wheels and top rollers, arises for consideration.

2. The assessee is a public limited company manufacturing and dealing in tyres. They have entered into a contract with the Government of India for rubberising the wheels and top rollers and the consideration to be paid is described at a particular rate for each unit. The contract entered into was in a standard form used for supply of goods for sale. The wheels and top rollers are manufactured and supplied by Messrs. Wheels India Limited to the Heavy Vehicles Factory at Avadi and the Central Vehicle Depot, Avadi, which are Government of India concerns. These wheels are intended for use in the construction of tanks for defence purposes. The wheels are delivered to the assessee for the purpose of rubberisation. The processes involved in rubberisation as given by the assessee are as follows:

“The metal wheels are stacked in rows of fours outside in open and sprayed with salt water and allowed to weather. The weathered wheels are then put in a degreasing plant to remove oil and other extraneous substances. The degreased wheels are grit-blasted on the rubberising surfaces. The rubberising surfaces are then coated with special solutions of metal-to-rubber-adhesives using hand brushes. A thin uncured compound (also called tie strip) is fitted on the wheel manually. Over this, a rubber based solution is applied and the solvent allowed to evaporate. Then a thick sheet of calendered uncured rubber compound is applied to the wheel and consolidated by hammering. The whole unit is then put inside a mould and put in an autoclave and steamed for a specified period to effect vulcanisation. Then the vulcanised wheel is removed from the mould, excess rubber, spews trimmed, and inspected and bare metal portions painted with primer coat.”

3. The rubberised wheels thus made ready for delivery have been delivered to the Heavy Vehicles, Factory or such other party as the Government of India directs. It is also in evidence that once the wheel is rubberised, the rubberised portion cannot be dismantled or detached excepting through the process of destruction of the rubberised portion. That portion which is scraped and removed cannot also be again fitted on the wheel. The contract entered into, however, described the contract as one for supply of specific articles ordered. There was also a clause for payment of sales tax on the amount to be paid for each unit supplied. In all these assessment years, factually, the assessee raised invoices, claimed sales tax and recovered the same. The invoices specifically refer as sale of rubber. A certificate also was given by the assessee with reference to the amounts claimed as sales tax in the invoices to the effect that “the goods on which sales tax has been charged have not been exempted under the C.S.T Act or the State Sales Tax Act or the Rules made thereunder and the amounts charged on account of sales tax on these goods are not more than what is payable under the provisions of the relevant Act or the Rules made thereunder and certified further that, We, Dunlop India Limited, 5, Pattullos Road, Madras-2, are registered dealers in the State of Madras under local registration No. TNGST. 43809 and Central registration No. 5222/64-65 (Central) for purposes of sales tax.”

4. The assessee contended that the turnover relating to rubberisation of wheels and top rollers related to works contract. The assessing authority as well as the Appellate Assistant Commissioner rejected this contention and held that the turnover related to sale proceeds and not receipts in execution of works contract. The Tribunal held that the preparation of the surface, the putting of adhesive on the surface and the putting over it of the rubber compound and then vulcanising were all complicated technical processes and that it cannot be construed as a sale of chattel. The Tribunal was of the view that the process involved in rubberising is something akin to retreading of old motor tyres and that therefore the principle of the decision in Stanes Motors (South India) Ltd., Coimbatore v. State of Madras [1959] 10 S.T.C 154. would apply and the contract shall have to be held to be a works contract and not a sale of chattel.

5. The facts as found by the Tribunal itself show that the contract was for fitting or fixing a rubber compound over the wheels. The consideration to be paid is described as a price per unit and there is no separate rate prescribed for the uncured rubber compound used and for the labour or vulcanising separately. The price fixed is a composite price for the entire process as a whole. Neither the rubber compound nor any of the chemicals or adhesive or other articles used in the process of rubberising belonged to the Government of India. The property in the rubber portion or any of its components did not pass till the rubberised wheel as such is delivered to the Heavy Vehicles Factory. The wheel on which the rubber compound is settled or rubberisation is effected, belonged to the Government of India and the assessee had no right, title or interest in it. The entire risk until the goods are delivered to the Government of India or the Heavy Vehicles Factory or the Government of India's nominee is on the assessee. The form of contract is the one that is normally used for sale and purchase of the specified articles and it required the Government to pay sales tax. The property in the rubber compound portion in the wheel that passed on delivery, was not immovable property, but it was movable property affixed to the wheel.

6. The main grounds on which the Tribunal held that it was a works contract were as follows: It is not possible to remove the rubberised portion without damage to the same. The rubberisation is not mere fitting, but it is in the nature of accretion to the wheel. The process of such accretion was highly technical. In that view it was held that there has been no sale of any chattel by the assessee to the Government.

7. In T.V Sundram Iyengar & Sons v. State of Madras the question for consideration was whether the supply for consideration by an assessee of the bus bodies constructed and fitted to the chassis provided by the customers amounted to a sale of goods chargeable to sales tax. It was held that it was a contract for sale of goods. In coming to this conclusion, the Supreme Court pointed out that the salient features of the dealings between the assessees and their customers 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. It cannot also be equated to a case where an 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. The Supreme Court also pointed out that it makes no difference whether an article is ready-made article or is prepared according to the customer's specifications as also whether the assessee prepares it separately from the thing and then fixes it on or does the preparation and the fixation simultaneously in one operation.

8. If we apply the tests laid down in this judgment, we are of the view that it is not possible to hold that there was any works contract involved in this case. As already stated, the entirety of the materials used in rubberising the wheels belongs to the assessee. Neither the rubber compound nor any of the chemicals or other articles used ever belonged to the Government and the property in the rubber portion did not pass during the process of fixation or vulcanisation. It is in the nature of preparation and fixing simultaneously in one operation, which was held by the Supreme Court as making no difference from an article made separately and supplied. The abovesaid decision was sought to be distinguished by the Tribunal on the ground that in a bus body-building case it was possible for an assessee to dismantle any of the portions and use the same in any other body-building work during the process of work and that makes a difference. The Tribunal then states:

“When there is a process of irreversible integration, as in the appellant's case, over the property which belongs to the contractees all along, we are of the view that the inspection clause is not overriding and we are also not satisfied that the property in the case of rubberised portion alone remained that of the appellant. Since dismantling could not be done, the wheel along with rubberised portion had to remain the property of the appellant or the contractees. Since the wheels undisputably belong to the contractees, we are unable to say that the process of rubberisation transfers the property to the appellant only on delivery. Hence, we have no doubt whatsoever that the bus body-building cases are of no assistance whatsoever to the learned State representative.”

9. We are unable to agree with this reasoning of the Tribunal to distinguish the decision of the Supreme Court in T.V Sundram Iyengar & Sons v. State of Madras. In fact in one portion of the judgment, the Supreme Court pointed out with reference to the body after it was fitted to the chassis, as under:

“If the property passes at delivery, what does that pass in? Is it movable property or immovable property? It will not be denied that the property passes in movable property. Then was this the very goods contracted for? Here again the answer is plainly in the affirmative.”

10. This passage clearly shows that the learned Judges also treated the body built on the chassis as an accretion to the chassis. On the ground that it cannot be considered to be an immovable property, it was held to be movable. By reason of accretion of the rubberised portion, it cannot be held that the wheel belonged to the assessee. Nor can it be said that as soon as the accretion is completed, the property in the rubberised portion passed to the Government. It is only when the rubberised wheel as such is delivered to the Government, the property in the rubber portion passes to the purchaser-Government. This was because the contract was for delivery of the rubber portion as fitted to the wheel and the Government never intended to pass the title in the wheel to the assessee at any time.

11. There are number of other decisions which have followed the principle in T.V Sundram Iyengar & Sons v. State of Madras; as for instance, Union of India v. Central India Machinery Manufacturing Co. Ltd.,2 and Ram Singh & Sons Engineering Works v. Commissioner of Sales Tax [1979] 43 S.T.C 195 S.C.. It is not necessary to refer to those judgments in detail as the main principle is laid down in T.V Sundram Iyengar & Sons v. State of Madras.

12. It only remains to consider the decision in Stanes Motors (South India) Ltd., Coimbatore v. State of Madras [1959] 10 S.T.C 154. relating to retreading. There was no reasoning in this decision for holding that in retreading of old tyres there is no element of sale. The learned Judge held that the decision in Sundram Motors (Private) Ltd. v. State of Madras [1958] 9 S.T.C 687. was applicable. The decision in Sundaram Motors (Private) Ltd. v. State of Madras, related to levy of sales tax on materials used during the course of repair to a motor vehicle. While holding that where a new part is supplied and fixed, the value of the turnover relating to the supply of new part is liable to sales tax, the Bench held that in case where there is a fabrication of a part and that is fitted, those cases will have to be considered as works contract. The decision therefore depended on the facts in that particular case. Though there are certain observations which might be construed as helping the assessee, in view of the later categoric pronouncement made by the Supreme Court in T.V Sundram Iyengar & Sons v. State of Madras and other cases it is not possible to accept the contention that merely because some work or labour is involved in fixing the materials to be supplied to some article of the purchaser it becomes a works contract by itself. On the facts of the present case, the decisions in Sundaram Motors (Private) Ltd. v. State of Madras and in Stanes Motors (South India) Ltd., Coimbatore v. State of Madras have no application.

13. Further, as we have noticed already, the parties themselves at the time of entering’ into the contract contemplated the supply as a contract for sale and purchase of so many units of tyres and there was a provision for payment of sales tax as well. The assessee charged sales tax on the turnover relating to this rubberisation of the wheels and it also gave the certificates as stated earlier. We may safely, therefore, presume that the parties also intended the transaction to be a sale and not a works contract.

14. For the foregoing reasons we are of the view that the entire turnover in dispute is liable for sales tax.

15. T.C No. 266 of 1976 related to additional tax which is consequential on our holding that the turnover is liable to sales tax. Accordingly, all the four revision petitions are allowed and the order of the Tribunal is set aside. The assessee has not appeared either in person or through a counsel and therefore we did not have the assistance of the arguments of the respondent. We consider however that this is a fit case where we have to direct payment of costs to the petitioner. Accordingly we direct the respondent to pay the costs of the petitioner. Counsel's fee Rs. 500 (one set).

16. Petitions allowed.