Case: Vanguard Rolling Shuttersand Steel Works Ltd Vs. Commissioner Of Sales Tax, U.P

fixing the shutters at the site was not an integral part of the contract but was only incidental to the supply of materials and, therefore, the contract was not a work contract. We are, however, unable to agree with this contention, because as discussed above, the materials were sent with various component parts which had to be taken at the site, fitted into one another and then finally fixed into a frame so that the fixture became permanent and a part of the premises. The operation to be done at the site as required by the instructions in the Standard Book could not be said to be merely incidental to the contract but was a fundamental part of the contract itself. In our opinion, therefore, the decision in Man Industrial Corporation Ltd. s case (AIR 1969 SC 1245 ) (supra) fully covers the facts of the present case. ( 5 ) IT was further argued by Mr. Dikshit learned counsel appearing for the State that it will appear from the terms of the contract that the price of the goods had to be paid in advance before delivery of the same to the customer which shows that the title to the shutters passed to the customer as soon as the shutters were packed and dispatched to the site and the price paid and therefore the contract in the instant case could not be a work contract. It is not possible to accept his contention, because the advance payment of the entire price was a term meant for the convenience of the parties as the contractor did not want to take any risk for delayed payment of goods, but the contract would be completed only after the shutters were finally assembled at the site and fixed according to the specifications which was essentially the responsibility of the contractor. In Richardson and Cruddas Ltd. v. State of Madras, (1965) 16 STC 827 (Mad) there was a similar recital in the contract for full price to be paid in advance and still the Madras High Court held that the contract was a work contract. The decision of the Madras High Court was approved by this Court in Man Industrial Corporation Ltd. s case (AIR 1969 SC 1245 ) and affirmed by this Court in State of Madras v. Richardson and Cruddas Ltd. , (1968) 21 STC 245 (SC ). For these reasons the contention put forward by Mr. Dikshit on this score is overruled. ( 6 ) IN a later case of this Court in State of Rajasthan v. Nanu Ram, (1970) 26 STC 268 (SC) tenders were invited by the Chief Engineer from the contractors for supplying and fixing of wooden door as windows, sashes together with frames and painting them in the police lines building and for supplying and fixing the wooden chowkhats and this was held to be a work contract. The decision in Man Industrial Corporation Ltd. s case (AIR 1969 SC 1245 ) (supra) was followed by this court in that case. Again in Commr. of Sales Tax, H. P, v. Purshottam Premji, (1970) 26 STC 38 (SC) this Court indicated the essential difference between a contract of work and services and a contract for sale of goods and observed as follows :"the primary difference between a contract for work or service and a contract for sale of goods, is that in the former there is in the person performing work of 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 sale 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. " ( 7 ) THE High Court placed great reliance on the decision in M/s. T. V. Sundram Iyengar and Sons v. State of Madras, 35 STC 24 : (1975) 2 SCR 372 : (AIR 1974 SC 2309 ). In that case what had happened was that the contractor built bus bodies and fitted the same to the chassis provided by the customers and charged the price for building the body and fitting the same to the chassis. It was held by this Court that the contract was completed only when the complete bus with the body fitted to the chassis was delivered to the customer and, therefore, the supply of body being one single unit constituted a sale of goods. That case is clearly distinguishable from the facts and circumstances of the present case. In the first place, the supply of materials and completion of the contract was indisputably in respect of moveable property no immovable property was at all involved at any stage in the process of completion of the contract. The bus-body built by the contractor was moveable property manufactured by the contractor and had merely to be fitted to the chassis which also was moveable property. Secondly, the bodies constructed and fitted to the chassis were easily detachable. In the instant case, the shutters were fabricated and fixed to an immovable property so as to become a permanent fixture and they were also not detachable. The High Court failed to have noticed these important features which distinguish the aforesaid decision from the facts of the present case. ( 8 ) WE are of the considered opinion that the present case is clearly convered by the tow decisions of this Court referred to in Man Industrial Corporation Ltd. s case (AIR 1969 SC 1245 ) and Nanu Rams case (1970) 26 STC 268 (SC), (supra) and applying the same we hold that the contract in the present case was a work contract and the transaction was, therefore, not exigible to tax. The High Court was in error in holding that the assessee was liable to pay tax on the sale proceeds of the contract. (

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]It is, therefore, clear that in the facts and circumstances of the present case, the transaction is a composite consolidated contract which is one and indivisible comprising labour and services executed for a lump sum. It is also clear that the materials are not merely supplied to the owner so as to pass as chattel simpliciter, but are actually fixed to an immovable property and after the same are fixed and erected they become a permanent fixture so as to become an accretion to the immovable property. In these circumstances, the conclusion is inescapable that the present contract cannot be said to be a pure and simple sale of goods or materials as chattels but is a work contact. It is well settled that a work contract is a contract for construction of bridges, buildings etc. , and includes contracts which combine labour, skill and materials executed for a lump sum. The question as to under what circumstances a contract can be said to be a work contact is not free from difficulty and has to depend on the facts of each case. It is difficult to lay down any rule of universal application, but there are some well recongized tests which are laid down by decided cases of this Court which afford guidelines for determining as to whether a contract in question is a work contract or a contract for supply of goods. One of the important tests is to find out whether the contract is primarily a contract for supply of materials at a price agreed to between the parties for the materials so supplied and the work or service rendered is incidental to the execution of the contract. If so, the contract is one for sale of materials and the sale proceeds would be exigible to sales tax. On the other hand where the contract is primarily a contact for work and labour and materials are supplied in execution of such contract, there is no contract for sale of materials but it is a work contract. The circumstance that the materials have no separate identity as a commercial article and it is only by bestowing work and labour upon them, as for example, by affixing them to the building in case of window-leaves or wooden doors and windows that they acquire commercial identity, would be prima facie indicative of a work contract. So also where certain materials are not merely supplied but fixed to an immovable property so as to become a permanent fixture and an accretion to the said property, the contract prima facie would be a work contract. This is exactly what has happened in the present caseWe are, however, unable to agree with this contention, because as discussed above, the materials were sent with various component parts which had to be taken at the site, fitted into one another and then finally fixed into a frame so that the fixture became permanent and a part of the premises. The operation to be done at the site as required by the instructions in the Standard Book could not be said to be merely incidental to the contract but was a fundamental part of the contract itself. In our opinion, therefore, the decision in Man Industrial Corporation Ltd. s case (AIR 1969 SC 1245  ) (supra) fully covers the facts of the present caseIt is not possible to accept his contention, because the advance payment of the entire price was a term meant for the convenience of the parties as the contractor did not want to take any risk for delayed payment of goods, but the contract would be completed only after the shutters were finally assembled at the site and fixed according to the specifications which was essentially the responsibility of the contractorThat case is clearly distinguishable from the facts and circumstances of the present case. In the first place, the supply of materials and completion of the contract was indisputably in respect of moveable property no immovable property was at all involved at any stage in the process of completion of the contract. The bus-body built by the contractor was moveable property manufactured by the contractor and had merely to be fitted to the chassis which also was moveable property. Secondly, the bodies constructed and fitted to the chassis were easily detachable. In the instant case, the shutters were fabricated and fixed to an immovable property so as to become a permanent fixture and they were also not detachable. The High Court failed to have noticed these important features which distinguish the aforesaid decision from the facts of the present case( 8 ) WE are of the considered opinion that the present case is clearly convered by the tow decisions of this Court referred to in Man Industrial Corporation Ltd. s case (AIR 1969 SC 1245  ) and Nanu Rams case (1970) 26 STC 268 (SC), (supra) and applying the same we hold that the contract in the present case was a work contract and the transaction was, therefore, not exigible to tax. The High Court was in error in holding that the assessee was liable to pay tax on the sale proceeds of the