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TMI Blog1975 (4) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... matter was taken in appeal. The assessee thereupon filed three second appeals before the Kerala Sales Tax Appellate Tribunal. Those appeals were dismissed by the Tribunal by a common order dated 25th July, 1973. On a consideration of the terms of the agreement entered into between the petitioner and the Board, the Tribunal came to the conclusion that the contract, in essence, involved the transfer by the petitioner of the concrete poles manufactured by it to the Board for valuable consideration in the course of trade and that hence the turnover was taxable. The legality and correctness of the said finding entered by the Tribunal has been challenged by the assessee in these tax revision cases. The question of law arising for determination is whether the turnover in dispute relates to a transaction of sale or to a contract for work and labour. 2.. For determining whether a contract was for sale of goods or for labour supplied and materials found one has to look into the essence of the arrangement and find out whether it was the intention of the parties in making the contract that a chattel should be produced and transferred as a chattel for consideration, or whether, on the other h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tle to some goods as ancillary to the performance of work or service. These principles are now well-settled by the pronouncements of the Supreme Court: see Government of Andhra Pradesh v. Guntur Tobaccos Ltd.[1965] 16 S.T.C. 240 (S.C.)., State of Madras v. Richardson Cruddas Ltd.[1968] 21 S.T.C. 245 (S.C.)., Commissioner of Sales Tax, M.P. v. Purshottam Premji[1970] 26 S.T.C. 38 (S.C.)., State of Himachal Pradesh v. Associated Hotels of India Ltd.[1972] 29 S.T.C. 474 (S.C.). and Sales Tax Officer, PaIghat v. I.V. Somasundaran[1974] 33 S.T.C. 68; 1973 K.L.T. 814 3.. Having noticed the legal principles to be applied let us now proceed to examine the facts of this case. The material terms of the agreement entered into between the assessee and the Kerala State Electricity Board have been set out in paragraphs 6 and 7 of the Tribunal's order. A full copy of the agreement, which was in the assessment file, was made available for our perusal by the learned Government Pleader appearing in the case. The agreement begins with the following preliminary description: "Agreement made this third day of January one thousand nine hundred and sixty-nine between the Superintending Engineer, E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out on the basis of departmental schedule of rates, without profit. For the purpose of this clause an extra item will be considered to have an allied item in the tender if there is no alteration in the nature and position of the work and the change consists merely in difference in proportion of ingredients. 10.. When there is no allied item to extra item, these extra will be paid for on the basis of departmental schedule of rates (without contractor's profit) decreased by the same proportion as existing between the amount of contract according to the accepted tender and the total of the estimate for the items tendered as a whole in case where the contract amount is less than the estimate amount. In other cases the rates will be on the basis of departmental rates (without contractor's profit). * * * * 12.. Empty cement bags if cement is supplied departmentally may be returned in good condition to stores by the contractor. Cost of unreturned and damaged bags will be recovered at the ruling rates per bag. 13.. The materials supplied and used by the contractor for the work shall be subject to the approval of the Executive Engineer, or any other officer authorised by him." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en after they were issued to the contractor. As cement and M. S. rods were supplied by the Board the only other items of raw material that the contractor had to find on his own for utilisation in the work were sand and granite, which were comparatively of much lesser value. Going by the terms of the agreement it cannot be said that the title to the concrete poles was vested in the contractor at any time before their delivery to the Board and that there was a transfer of such title by him in favour of the Board for consideration in pursuance of the agreement. On the other hand, the position in this case is that the poles, when manufactured, automatically became the property of the Board on whose behalf the work of manufacture was carried out by the assessee in execution of the contract and no element of sale of specific chattel was involved in the transaction. The consideration stipulated to be paid to the contractor was for the work which he had undertaken to perform and not by way of sale price of the poles to be produced and delivered by him. 4.. In the light of the foregoing discussion we have no hesitation to hold that the assessee's turnover relating to the execution of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conclusion that the arrangement was only a works contract. It is made specifically clear by a clause in the agreement in this case that the cement issued to the contractor continued to be the propety of the Board even after such issue. That clause reads: "The recovery rate of cement would be as given in the schedule. Cement is issued only for bona fide use in the work (including auxiliary works) and should not be misused in any manner............In addition, this will render the contractor liable to such other penalties as are ordered by the Board whose orders shall be final and binding on the contractor. The cement supplied for use on departmental works shall be stored suitably at the work spots or in stores approved by the department. Accounts of receipt and issues should be maintained in the stores and all facilities shall be afforded by the contractor to the departmental officers to check the stock at any time. If any shortage is noticed, penal value at the rate fixed above will be recovered. In addition, the contract is liable to be cancelled and the contractor concerned is liable to be black-listed and proceeded against under the law for misuse of property of the Board an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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