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TMI Blog1993 (3) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... cement and steel supplied by the Gujarat Electricity Board?" 2.. These questions arise in the background of the following facts: (i) The applicant, M/s. Steel Pipes Fabrication Works, is a dealer registered under the Act, manufacturing and selling articles of cement, mainly pre-stressed concrete cement poles. It entered into a written contract with the Gujarat Electricity Board (hereinafter referred to as "GEB" for short) under which by the GEB. The contract appears to have been contained in a booklet issued by GEB on "Tender and contract for works" as well as the works order dated July 1, 1977, placed by GEB along with Schedules A and B thereto. The booklet containing the tender form submitted by the applicant is not on the record of this reference. The applicant had to purchase minor materials like sand, grit, kapachi and to supply labour, machinery, tools, equipment, etc., for manufacturing and supplying cement poles as per specifications. (ii) While assessing the applicant for the years 1977-78, 1978-79 and 1979-80, the Sales Tax Officer, held that the supply of cement poles to GEB was not sale but a works contract and, therefore, the materials supplied was not liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . G.I. wire for earthing was of course to be supplied free of cost. It was clarified by the applicant at the time of hearing before the Tribunal that the value of such wire was hardly Rs. 4 in the price of pole costing more than Rs. 100 per unit. (d) Other materials like sand, grit, kapachi, machinery, tools, equipment and labour, etc., were to be supplied by the contractor. (c) The contractor was obliged to utilise cement and steel received by him from GEB in the manufacture of only those poles, to be supplied by him to GEB alone. In so far as surplus material, if any, is concerned, contractor is obliged to return it to GEB only if the Board so chooses but not otherwise. Similarly, contractor shall have to pay for the cement and steel used by him even in the manufacture of damaged or rejected poles which GEB might refuse to accept, in accordance with the terms of the contract. It would be pertinent to note that even for G.I. wire used in broken/rejected poles, cost would be charged at market rate plus 15 per cent supervision charges. (f) Under various terms and conditions of contract, GEB has been empowered to exercise control and supervision over the manufacture of pole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o supply the required number of poles in case the consumption of steel or cement was likely to exceed the specified limits due to rejection or breakage and there was also a provision of replacement of defective poles. (ix) The treatment of supply of cement and steel being not a purchase did not alter the situation. The property in the materials could get transferred from the GEB to the contractor even otherwise than by way of sale and purchase. This was a case of transfer of property in and delivery of the possession of chattel as a chattel to the buyer and neither the ownership of the material nor the value of the skill and labour as compared to the value of the material was conclusive Therefore, the intention must be taken as transfer of property in the poles. (x) Sales tax was stipulated to be paid discloses the intention of a sale. (xi) The rulings of the Supreme Court regarding Hindustan Aeronautics Ltd. [19841 55 STC 314 and [1984] 55 STC 327, Variety Body Builders [1976] 38 STC 176 and of the Bombay High Court in Kamani Engineering [1976] 38 STC 503, were not relevant and applicable." 5.. These conclusions were challenged by Mr. R.D. Pathak, learned advocate, appeari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied by the contractor. Mr. Y.F. Mehta, learned A.G.P. appearing for the State on the other hand made the following submissions: The material term of the contract between the parties expressed an intention to enter into the sale of electric poles to be manufactured by the contractor out of the materials supplied by the GEB as well as the other materials brought by the contractor himself. The price agreed upon between the parties was fixed with reference to not only the manufacture, but also for supply of the poles and at the time of delivery of the poles the contract of sale of the poles was concluded. The prices were exclusive of sales tax or any other taxes on finished poles, and no sales tax was payable against issue of H form by the GEB. The other conditions of the contract regarding establishing pole factory in the vicinity using minor materials of constructional tools and plants by the contractor were neutral facts which were agreed upon by the parties in order that the poles of satisfactory quality were supplied to the GEB. The GEB was also described as "purchaser" reserving the right to get supply of satisfactory poles if the defective poles were not replaced within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the Ministry of Defence regarding which the appellant received payment from the Indian Air Force, did not involve sale of such engines. 7.. In Commissioner of Sales Tax v. Sabarmati Reti Udyog Sahakari Mandali Ltd. [1976] 38 STC 203, the Supreme Court was concerned with the question whether the manufacture and supply of kiln-burnt bricks to the Public Works Department of the Government of Gujarat, was a contract of sale or a works contract. The nature of the work was described as "manufacturing and supplying kiln-burnt bricks for construction". The following terms of the contract, inter alia, were taken into consideration. The assessee was bound to complete the work and supply the materials at the rates mentioned in the contract. All rates quoted by the assessee were inclusive of sales tax and the assessee was liable to pay the same himself. All the necessary arrangement of raw materials, equipment, water, coal, labour, etc., needed for supply and manufacture of bricks was required to be made by the assessee at his own cost. The Government was expected to give land for excavating soil free of rent, and the land was to be handed over back to the Government after manufacturing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, grit, kapachi were to be supplied by the contractor who was also expected to employ its own machinery, tools, equipment and labour. So far as the cement and steel received by the contractor from the GEB for manufacturing the poles was concerned, the contractor was obliged to use the same only for manufacturing such poles to be supplied to GEB and not to any other party, and in so far as the surplus material was concerned, the contractor was under an obligation to return it to GEB and he was liable to pay for the cement and steel used by him in the manufacture of damaged or rejected poles, which the GEB might refuse to accept. In the final bills, the contractor has treated the net realisation after deducting the value of cement and steel received from GEB from the gross amount for the supply of poles, as the sale price of poles and has collected sales tax also on that basis. Regarding sales tax there was a clear stipulation in the following terms: "The prices are exclusive of sales tax or any other tax on finished poles............No sales tax is payable against issue of H form by the Board." There is, therefore, a specific condition that the prices to be quoted by the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their identity, and the new product of concrete poles become the property of the contractor to be sold to GEB at the prescribed rate. Thus, the essence of the contract was to deliver ready-made poles to GEB at the prescribed rate. The Tribunal, therefore, rightly held that the contract of manufacture and supply of concrete poles to GEB was a contract of sale and not a works contract. 10.. Mr. R.D. Pathak, however, relied on the Supreme Court judgment in State of Gujarat v. Variety Body Builders [1976] 38 STC 176. The respondentcontractor in that case had entered into three contracts with the Western Railway for construction of railway coaches on underframes supplied by railway. The contractor had to supply constructional material and fittings, and also carpentry labour for equipping coaches with electric lights, fans, switches and regulators. The contractor was to provide all essential equipment, tools and plants, for satisfactory execution of the work, and to deliver a minimum number of two coaches per month. A question arose whether the contracts entered into by the respondent with the railway were contracts for sale of goods or a works contract. The Gujarat High Court held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oles were to be supplied by the Board and unused materials and empty cement bags were to be returned to the Board by the contractor. On consideration of these terms, the Kerala High Court held that the title to the concrete poles did not vest in the applicant-contractor at any time before the delivery, and that the poles when manufactured automatically become the property of the Board on whose behalf the work of manufacture was carried out by the applicant. The Kerala High Court, therefore, held that the price stipulated to be paid to the petitioner was for the work that the petitioner had undertaken to perform and not by way of sale price of the poles to be produced and delivered by the petitioner. Exactly this very result is lacking in the instant case. The poles when manufactured do not automatically become the property of GEB. The poles have to be supplied to GEB at a price and at the rate stipulated in the contract. The facts are, therefore, different in the present case and the result envisaged by the Kerala High Court would not be the result in the instant case. 12.. The question No. 1 will, therefore, have to be answered in the negative. So far as question No. 2 is concer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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