Case: M/s. T.V. Sundram Iyengar &amp; Sons &amp; Another Vs. The State of Madras &amp; Another

2. The matter relates in the three appeals against the judgment of the Madras High Court to assessment years 1955-56, 1956-57 and 1957-58. The Appellate Assistant Commissioner and the Appellate Tribunal held that the appellant company was liable to pay sales tax under the madras General Sales Tax Act, 1939 in respect of bus bodies constructed and fitted by it to chassis provided by the customers. On the matter having been taken up in revision by the appellant company to the High Court, the High Court referred to the fact that no contracts or agreements as such were produced by the appellant company. It was observed that the nature of the transactions relating to the supply of bus bodies had to be determined on the basis of forms of "repair orders" which the appellant company used to get filled in by its customers. On the basis of the material on record, the High Court agreed with the conclusion arrived at by the Tribunal. The matter was, however, remanded to the Tribunal to enable the appellant company to produce the actual agreements, if any, between the appellant company and its customers. the High Court in this context observed as underthe evidence stands, we accept the conclusion rightly arrived at by the Tribunal on this question. It is not clear whether there were actually contracts entered into by the assessee with the customers and if they were so, why they were not produced. Anyway, in the interests of justice we are inclined to think that the question may be re-examined by the Tribunal if the contracts are filed before it. If none is filed, the view that the transactions are sales of goods will stand."

Reasoning:
6. The return filed by the assessee-firm for the year 1960-61 showed receipt of Rs. 9,74, 460 on account of the bus bodies constructed under the above agreement. The Commercial Tax Officer held that the said amount represented the prices of the bus bodies received by the assessee and included it in the taxable turnover under the Mysore Sales Tax Act, 1957. On appeal the Deputy Commissioner of Commercial Taxes held that the agreement between the assessee and the Government was in the nature of a works contract and as such there was no sale of the bus bodies. The Commissioner in exercise of his revisional power set aside the order of the Deputy Commissioner and restored that of the Commercial Tax Officer. In the opinion of the Commissioner, there was a sale of bus bodies by the assessee. The matter was then taken up by the assessee in appeal to the Mysore High Court. The High Court set aside the order of the Commissioner and restored that of the Deputy Commissioner. In the opinion of the High Court, the agreement between the assessee and the Government was for works contract. The High Court in this context gave certain reasons to which reference would be made at the appropriate stagedistinction between the two contracts is often a fine one. A contract of sale is a contract whose main object is the transfer of the property in, and the delivery of the possession of a chattel as a chattel to the buyer. Where the main object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one for work and labour. The test is whether or not the work and labour bestowed and in anything that can properly become the subject of sale; neither the ownership of the materials, nor the value of the skill labour as compared with the value of the materials, is conclusive, although such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract is in substance one for work and labour or one for the sale of anext point to be noticed is that under the contract the property in the bus body does not pass to the Government till the chassis with the bus body in delivered at te destination or destinations to be named by the Controller except in the case contemplated in clause 6 of the agreement. That clause provides that if some work is not satisfactorily done and the Body Builder on receipt of a written order does not dismantle or replace such defective work or material at his own cost within seven days, the Controller would be entitled to get the balance of the work done by another agency and recover the difference in cost from the Body Builder. The Controller is entitled for this purpose to take delivery of the unfinished body. But even in this case the property in the unfinished body would not pass to the Government till the unfinished body is seized.The sailent 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 chasssis 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 ascretion. It is no doubt true that the bus bodies supplied by the assessees were not readymade and had, if necessary to be constructed bit by bit and plank by plank, according to specifications but that fact would not make any amterial difference.