Case: State Of Rajasthan Vs. Man Industrial Corporation Ltd

case is of the second variety.11. Counsel relied upon Patnaik and Co. v. State of Orissa, 1965-16 STC 364 = (AIR 1965 SC 1655 ) and Mckenzies Ltd. v. State of Maharashtra, 1965-16 STC 518 (SC). But in both these cases the Court held on a consideration of the terms of the contract and the circumstances that the assessees had agreed to and did supply "motor-bus bodies" and the contract being one for sale of chattels, they were liable to pay sales-tax.12. Our attention was also invited to Commissioner of Sales Tax, Maharashtra State, Bombay v. Arun Electrics, 1965-16 STC 385 (Bom). In that case a firm of electrical contractors undertook the job of installing electrical fittings in the houses of their customers, which involved the supply and fixing of goods such as wire, brass clips, wall brackets and tube lights with accessories. The assessees charged their customers consolidated rates for the materials consumed and labour involved in carrying out the contracts. The Sales Tax Officer charged to tax under the Bombay Sales Tax Act, 1959, the value of materials supplied in carrying out the contracts. It was held by the High Court of Bombay that the transaction of the assessees with their customers was not a pure works contract, but a combination of two distinct and separate contracts, one for the supply or the sale of goods for consideration, and the other for the supply of work and labour, and only that part of the contract, which consisted of supply of goods for consideration, was liable to tax under the Sales Tax Act. That case was brought in appeal to this Court at the instance of the assessees. This Court in Arun Electrics, Bombay v. Commissioner of Sales Tax, Maharashtra State, 1966-17 STC no (SC) discharged the answer recorded by the High Court, holding that the conclusions recorded by the Deputy Commissioner and the Tribunal were based on no evidence, and the High Court could not record, on the facts found, an answer to the question referred. The Deputy Commissioner had proceeded only upon the terms of the invoice in which a charge was made for supplying and "fixing" the materials and providing light points complete with 1/8 CTS wire, brass clips, tapes and all approved accessories. The conclusion of the departmental authorities was not based on any intention of the parties as disclosed by the evidence, but plainly on the terms of the invoice which was ambiguous.13. In State of Madras v. Richardson and Gurudas Ltd., 1968- 21 STC 245 (SC) the assessees without a formal contract agreed to supply, fabricate and erect steel structures for a sugar factory. The assessees completed the contract. A bill was submitted by the assessees for charges for fabrication, supply and erection of steel structures at certain rates. The High Court of Madras on a consideration of the evidence held that there was a stipulation for a consolidated lump-sum payment of Rs. 1,160 per ton for fabricating, supplying and erecting at site all steel work etc.; there was no stipulation for passing of property in the goods to the factory before actual completion of the erection work; there the contract did not contemplate dissecting the value of the goods supplied and the value of work and labour bestowed in the execution of the work; and the predominant idea underlying the contract was the bestowing of special skill and labour by the experienced engineers and mechanics of the assessees. This Court agreed with the High Court and held that the contract was a works contract and not a contract for sale.14. Our attention was invited to a judgment of the Court of Appeal in Love v. Norman Wright (Builders) Ltd., 1944-l KB 484. In that case the respondents contracted with the Secretary of State for War to do the work and supply the materials mentioned in the Schedules to the contract, including the supply of blackout curtains, curtain rails and battens and their erection at a number of police stations. It was held by the Court of Appeal that the respondents were liable to pay purchase-tax. Reliance was placed upon the observations made by Goddard, L. J. at p. 484:"If one orders another to make and fix curtains at his house the contract is one of sale though work and labour are involved in the making and fixing, nor does it matter that ultimately the property was to pass to the War Office under the head contract. As between the plaintiff and the defendants the former passed the property in the goods to the defendants who passed it on to the War Office."We do not think that these observations furnish a universal test that whenever there is a contract to "fix" certain articles made by a manufacturer the contract must be deemed one for sale and not of service. The test in each case is whether the object of the party sought to be taxed is that the chattel as chattel passes to the other party and the services rendered in connection with installation are under a separate contract or are incidental to the execution of the contract of sale.15. In the present case, the specifications of the windows were set out in the contract. The primary undertaking of the respondent was not merely to supply the windows but to "fix" the windows.This service is not rendered under a separate contract, nor is the service shown to be rendered customarily or normally as incidental to the sale by the person who supplies window-leaves. The "fixing" of windows in the manners stipulated required special technical skill. If the windows were not properly "fixed", the contract would not be complete, and the respondent could not claim the amount agreed to be paid to it. We agree with the High Court that it was only upon the "fixing" of the window-leaves and when the window-leaves had become a part of the building construction that the property in the goods passed under the terms of the contract.

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

Explanation:
0[ds]8. The contract undertaken by the respondent was to prepare the windowleaves according to the specifications and to fix them to the building. There were not twoof sale and another of service. "Fixing" the windows to the building was also not incidental or subsidiary to the sale, but was an essential term of the contract. The windowleaves did not pass to the Union of India under the terms of the contract asOnly on the fixing of the windows as stipulated, the contract could be fully executed and the property in the windows passed on the completion of the work and not before.9. It was said by this Court in State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd.,STC 353=(AlR 1958 SC 560)   that in a building contract which is one, entire and indivisible, there is no sale of goods. In the case of a building contract the property in materials used does not pass to the other party to the contract as movable property. In the absence of an agreement to the contrary, the materials in the construction of a building become the property of the other party to the contract only on the theory of accretion.10. In Government of Andhra Pradesh v. Guntur Tobaccos Ltd.,STC 240 = (AIR 1965 SC 1396  ) this Court pointed out (at p. 255 (of STC)) = (at p.1404 ofcontract for work in the execution of which goods are used may take one of three forms. The contract may be for work to be done for remuneration and for supply of materials used in the execution of the works for a price; it may be a contract for work in which the use of materials is accessory or incidental to the execution of the work; or it may be a contract for work and use or supply of materials though not accessory to the execution of the contract is voluntary or gratuitous. In the last class there is no sale because though property passes it does not pass for a price. Whether a contract is of the first or the second class must depend upon the circumstances; if it is of the first, it is a composite contract for work and sale of goods; where it is of the second category, it is a contract for execution of work not involving sale ofcontract in question in this case is of the second variety.11. Counsel relied upon Patnaik and Co. v. State of Orissa,STC 364 = (AIR 1965 SC 1655  ) and Mckenzies Ltd. v. State of Maharashtra,STC 518 (SC). But in both these cases the Court held on a consideration of the terms of the contract and the circumstances that the assessees had agreed to and did supplyOur attention was also invited to Commissioner of Sales Tax, Maharashtra State, Bombay v. Arun Electrics,STC 385 (Bom). In that case a firm of electrical contractors undertook the job of installing electrical fittings in the houses of their customers, which involved the supply and fixing of goods such as wire, brass clips, wall brackets and tube lights with accessories. The assessees charged their customers consolidated rates for the materials consumed and labour involved in carrying out the contracts. The Sales Tax Officer charged to tax under the Bombay Sales Tax Act, 1959, the value of materials supplied in carrying out the contracts. It was held by the High Court of Bombay that the transaction of the assessees with their customers was not a pure works contract, but a combination of two distinct and separate contracts, one for the supply or the sale of goods for consideration, and the other for the supply of work and labour, and only that part of the contract, which consisted of supply of goods for consideration, was liable to tax under the Sales Tax Act. That case was brought in appeal to this Court at the instance of the assessees. This Court in Arun Electrics, Bombay v. Commissioner of Sales Tax, Maharashtra State,STC no (SC) discharged the answer recorded by the High Court, holding that the conclusions recorded by the Deputy Commissioner and the Tribunal were based on no evidence, and the High Court could not record, on the facts found, an answer to the question referred. The Deputy Commissioner had proceeded only upon the terms of the invoice in which a charge was made for supplying and "fixing" the materials and providing light points complete with 1/8 CTS wire, brass clips, tapes and all approved accessories. The conclusion of the departmental authorities was not based on any intention of the parties as disclosed by the evidence, but plainly on the terms of the invoice which was ambiguous.13. In State of Madras v. Richardson and Gurudas Ltd., 196821 STC 245   (SC) the assessees without a formal contract agreed to supply, fabricate and erect steel structures for a sugar factory. The assessees completed the contract. A bill was submitted by the assessees for charges for fabrication, supply and erection of steel structures at certain rates. The High Court of Madras on a consideration of the evidence held that there was a stipulation for a consolidatedpayment of Rs. 1,160 per ton for fabricating, supplying and erecting at site all steel work etc.; there was no stipulation for passing of property in the goods to the factory before actual completion of the erection work; there the contract did not contemplate dissecting the value of the goods supplied and the value of work and labour bestowed in the execution of the work; and the predominant idea underlying the contract was the bestowing of special skill and labour by the experienced engineers and mechanics of the assessees. This Court agreed with the High Court and held that the contract was a works contract and not a contract for sale.14. Our attention was invited to a judgment of theCourt of Appeal in Love v. Norman Wright (Builders) Ltd.,In that case the respondents contracted with the Secretary of State for War to do the work and supply the materials mentioned in the Schedules to the contract, including the supply of blackout curtains, curtain rails and battens and their erection at a number of police stations. It was held by the Court of Appeal that the respondents were liable to payReliance was placed upon the observations made by Goddard, L. J. at p.one orders another to make and fix curtains at his house the contract is one of sale though work and labour are involved in the making and fixing, nor does it matter that ultimately the property was to pass to the War Office under the head contract. As between the plaintiff and the defendants the former passed the property in the goods to the defendants who passed it on to the Wardo not think that these observations furnish a universal test that whenever there is a contract to "fix" certain articles made by a manufacturer the contract must be deemed one for sale and not of service. The test in each case is whether the object of the party sought to be taxed is that the chattel as chattel passes to the other party and the services rendered in connection with installation are under a separate contract or are incidental to the execution of the contract of sale.15. In the present case, the specifications of the windows were set out in the contract. The primary undertaking of the respondent was not merely to supply the windows but to "fix" the windows.This service is not rendered under a separate contract, nor is the service shown to be rendered customarily or normally as incidental to the sale by the person who suppliesThe "fixing" of windows in the manners stipulated required special technical skill. If the windows were not properly "fixed", the contract would not be complete, and the respondent could not claim the amount agreed to be paid to it. We agree with the High Court that it was only upon the "fixing" of theand when thehad become a part of the building construction that the property in the goods passed under the terms of the contract.