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TMI Blog1976 (3) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... Port Trust holding that the major part of it was a contract for the sale and supply of goods, while the minor part of it was a contract of work and labour. With respect to the respondents' transaction with Century Rayon, the Sales Tax Officer held that it was a contract for the sale and supply of goods. The order of the Sales Tax Officer was confirmed in appeal by the Assistant Commissioner of Sales Tax and in revision by the Deputy Commissioner of Sales Tax. In second revision to the Sales Tax Tribunal, the Tribunal held that the contract with the Trustees of the Bombay Port Trust was a works contract and that the contract with Century Rayon was either a labour contract or a works contract, and in the case of both the contracts the amounts received by the respondents thereunder were not liable to be taxed under the Bombay Sales Tax Act, 1953. Arising out of this judgment and order of the Tribunal, two questions have been referred to us. The first question relates to the transaction between the respondents and the Trustees of the Bombay Port Trust, and the second with the transaction between the respondents and Century Rayon. In the second question we find a typographical error an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ork the respondents were to submit to the Chief Engineer of the Bombay Port Trust the necessary detailed working drawings, and the Chief Engineer was given the right to make additions, alterations and amendments thereto as may appear to him to be desirable or necessary. The respondents were to supply to the Chief Engineer "carefully finished hand-made tracings on cloth of each of the final drawings for works as executed" containing "the whole of the information required". Clause 4 was the payment clause and under it the respondents were to receive a lump sum of Rs. 12,41,169-1-6 "in respect of the works mentioned in clause 2 above", subject to additions or deductions at the rates mentioned in Schedule B in respect of any additional work ordered to be carried out or to be omitted by the Chief Engineer, and subject further to additions or deductions in accordance with clause 6 of the contract on account of variations in the basic prices of steel, rivets, bolts and nuts. Clause 5 provided that the lump sum price mentioned in clause 4 and the rates mentioned in Schedule B were inclusive of sales tax calculated at the rate of three pies per rupee and octroi or any other duty which would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structural steel. The respondents were to submit a statement showing the details of steel required by them. Such steel was to be supplied by the Trustees at the Bombay Port Trust Stockyard, and the respondents were to make arrangements to handle and transport the same from the stockyard at their own cost. The said clause further provided, "the steel supplied by the Trustees will be charged for at the rates mentioned in clause 6". The respondents were to pay a sum equivalent to 5 per cent of the value of the materials supplied in advance to the Trustees and the balance was to be deducted from time to time from the progress bills submitted by the respondents to the Trustees. So far as the other steel materials were concerned, the Chief Engineer was to issue quota certificates, if necessary, and the respondents were to procure such materials at their own cost. Sub-clause (iii) of clause 18 provided as follows: "The contractor (that is, the respondents) shall supply rivets, bolts, holding-down bolts, washers, weldmesh, expanded metal, Hatfield hangers for sliding doors, window-frames, rainwater pipes and accessories, cast-iron gutters with C.I. straps and fittings, wire and plain sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract". The first item was of fabrication charges, and it showed a sum of Rs. 10,89,776 as being "supply value as per statement". From it was deducted a sum of Rs. 29,722-1-0 as "rebate as per statement", and a further sum of Rs. 6,89,532-5-0 described as "value of steel supplied by them", that is, the said Trustees, leaving under this item a sum of Rs. 3,70,521-10-0 as being payable by the said Trustees to the respondents. The Tribunal has pointed out in its judgment that in the said bill the lump sum amount of Rs. 12,41,169-1-6, mentioned in clause 4 of the said contract, was reduced to Rs. 10,89,776 on account of the change in the prices of raw materials. The second item was of erection charges in the sum of Rs. 99,108. Against the total of the balance under the heading of fabrication charges and of the said erection charges, credit was given for a sum of Rs. 4,55,116-1-0 received by the respondents, leaving a balance of Rs. 14,513-9-0 due to the respondents. The Sales Tax Officer in his assessment order took a sum of Rs. 10,60,054 made up of the said sum of Rs. 10,89,776 less the rebate of Rs. 29,722-1-0 as being the price of goods sold and delivered by the respondents to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the site and not used in the execution of the work were to be removed from the site by the respondents, which would normally not have been the case had it been a contract for the sale of goods coupled with a separate contract for work and labour embodied in the same document as contended for by the department. We are, therefore, in agreement with the finding of the Tribunal that this was an indivisible contract of work and labour. So far as the transaction between the respondents and Century Rayon is concerned, the contract is to be spelt out from the correspondence. The correspondence shows that there was first an oral discussion about fabrication and supply of structural steelwork for a sub-station at the rayon plant of Century Rayon between the representatives of the respondents and Century Rayon. Following thereupon the respondents along with their letter dated 21st June, 1955, submitted a formal quotation. The said letter, inter alia, mentioned that during the course of the said discussion, it had been mentioned that it might be possible for Century Rayon to supply to the respondents structural steel at the sub-station and that, in such event, the respondents would give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s supplied to them by the Government. They contended that the fact that they had to fit the motor bodies which they had to manufacture out of their own materials to the chassis supplied by the Government made this contract a contract of work and labour. This contention was rightly rejected by the court. The position before us is wholly different. The work that was carried out by the respondents was not with their own materials but with the principal materials wholly supplied by Century Rayon. The next authority relied upon by Mr. Cooper was a decision of the Andhra Pradesh High Court in Hyderabad Chemicals and Fertilizers Ltd. v. Deputy Commissioner, Commercial Taxes (Appeals), Kurnool[1962] 13 S.T.C. 812. This case again is clearly distinguishable on facts. In that case, the assessees agreed to supply to a sugar factory 1,300 tons of sugarcane fertilizer mixture consisting of certain chemicals and groundnut oilcake. It was further agreed that the sugar factory would supply to the assessees 1,000 tons of groundnut oilcake to be used in the mixture and that the assessees should purchase the other ingredients at prices subject to confirmation by the sugar factory. The court held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following proposition appearing at page 37, paragraph 38, of Benjamin's "Sale of Goods" in the Common Law Library Series: "If the employer supplies the principal materials, the contract must be one for work and labour; but it should be observed that the converse does not hold, for even in the case where all the materials are supplied by the worker, the contract is not necessarily a sale." The position has been thus elucidated in the Supreme Court by Shah, J., who spoke for the majority, in Government of Andhra Pradesh v. Guntur Tobaccos Ltd.[1965] 16 S.T.C. 240 at 255 (S.C.).: "The fact that in the execution of a contract for work some materials are used and property in the goods so used passes to the other party, the contractor undertaking to do the work will not necessarily be deemed on that account to sell the materials. A contract 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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