M/s. T. V. Sundram Iyengar & Sons v. the State of Madras

Judgment

M/s. T.V. SUNDRAM IYENGAR & SONS THE STATE OF MADRAS October 10, 1974 (H. R. KHANNA AND A. C. GUPTA, JJ.) &k8 Tax-Construction of bru bodka and fitting to chMaiJ provided b;y custotMr._Propert.Y in the material ustd by assessee, whethtr ]JQ88td to thtlr customers dwlng the cDurse ~I corutructiorr. 1n Civil Appeais Nos. 22?.9. 2230 and 2231 of 1969. the Appellate Assistant Qnnmissioner 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 bodies constructed and fitted by it to the chassis provided by the customers. No formal agreements were produC'.ed by the assessee and the nature of the transactions relatin1 to the supply of bus bodies has been found on the basis of .. repair orders". These appeals on certificate have been filed against the judgment of the Madras High Court by the eppeUant-as$essee company. Civil Appeals Nos. 290 and 291 of 1970 have been filed on certificate by the Commissioner of Cc mm( rcial Taxes Mysore against the judgment of the Mysore Hi~h Court.

The return ·filed by the assessee-firm for the year 196()..61 showed rece1pt of Rs. 9174,460 on account of the bus bodies constructed under agreement dated January 23, 1959 between the assessee-firm .and the Govemment for the construction of bus bOdies on the chassis D. . supplied by the Govt, The ·conunercial Tax Officer, held that the said amount represented the pri~ 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 Govt. was in the nature of a works contract and as such there was no sale of bus bodies. The Commissioner in exercise of'his revisional power set aside the order of the Deputy Commissioner and restored that of ~he Commercial Tax Officer. In the opinion of the Commi:ssioner, there was a sale of bus bodies by the assessee. In appeal, the Mysore High Court set aside the order of the.

Commissiober and restored that of the Deputy Commissioner. In the opinion of the High Court the agreement between the as!;essee and the Govt. was for. works contract. It was contended for the assc:~s'e that the c,cnstructic n cftbe bus bJ"dies and the supply of the same by the assessees to their customers was in pursuance of a contract for work and labour. HELD: (I) The Madra:s General Sales Tax Act, 1939 and. the Mysore Sales Tax Act, 1957, have been enacted respectively in pursuance of the powers oontained in entl)' 48, List Jl, Schedule Vll of the Government of India Act 1935, and entry sc. List n1 Schedule VII of the Constitution of Indi~ 1950. It is now settled taw that the words "sale of goods!• bave·to be construed not in the popular sense but in their legal sense and should be siven the same meaning which they carry in the Sale of Goods Act, 1930.

The expression '"sale of goods .. is a nomen jlll'ls, its essential ingredients being an agreement to seD movables for a price and property pas.'liog thcreiill pursuant to that agreement; (377 F--Ql · The State of MadriU -v. Gmuwn l>unurley & Co. (1958) 9 S.T.C. 353 followed. (ii) The salient features of the dealings between the two assessees disclose that dle property in the material used by the ~ in oonstructins the bus bodies never passed to their customers durin& the course of construction. Tt was only when the complete bus with the body fitted to c;tassis was delivered to the customer that· the J)lOperty io the bus body passed to the customer. There was nothing to pre\Tcot the assessee from removing a plank, or other materi~ after fixing it to a chassis. and using it for a difl'erent purpose or for a difl'erent bus body.

The PJ'CSCDt is' also aot the case wherein the asses.1ee undertakes to construct some building or set ap D factory wherein the material Used caD be said to become the property of the other party by invoklns the theory of accretion. It is no doubt true that tho bus bodies supplied by the aasee:~CCS were not ready made and bad. it""Cftf"Mry, to be C01HtnJC. ted bit by bit ud pJant by plank, ICCOl'Ctina to sped&atlon. bUc thet &a wc•uld aot mate u:iy material ditt'c{eDOe. [379-H: 310 A-B) T. V, SUNDRAM & SONS v. MADRAs (Khdnno, ]. ) Patrtalk and ComJHmy v. The State of Orl.sstZ, (1965) 16 STC 364, and Melcttuit~ Ltd. v. The State of Mahdraslttra (1965) 16 STC 518 followed, Commi3Siolflr of Sales Tax v. Hazi Abdul Majid, (1963) 14 STC referred to. (I'll)

The use of a different nomenclature in describing the assessee would not affect the basic character of the contract between the parties and justify differen· !Jation if the terms of the contract in other respects are substantially the same. Jt J.S true that in the present cases there was no express mention of a sale of bus bodies in the agreement. But it is not necessary that to constitute a sale, tho word ''sale' has' to be used. [380 D-E] Chandra Bhan Gosoln v. The Sttzte oj Orissa & Ors. (1963) 14 STC 766 refqrecl to. (ill) There is nothing in the agrements between the assessees and their customers in the present appeals which vested the ownership of unfinished bodies in the customers. The State of Gujarat v. Kallash Elflineering Co. (Pvt.) Ltd., (1967) 19 STC 13 distinguished. The Stall of Madra~ v. Riclrordson & Cruddas Ltd., (1968) 21 STC ~S, State of Rajasthan & Anr. v. Man Industrial Corporation Ltd., (1969) 24 STC 349, State of Rajasthan & Ors. v. Nenu Ram (1970)

26 STC 268, State of.Himaclull, Praitesh & Ora. v. Associated Hotels oj India Ltd. (1972) 29 STC 474, Commissioner tl/ Commercial Taxes, Mysore Banga/ore v. Hindustan Aeronautics Ltd. (1972) 29 STC 438 and Anglo Egyptian Nenigation Co. v. Rennie, (1875) LR 10 CP 271 referred to, Bajorla Halwasiya Service Station v. State of Uttar Pradesh&: Anr., 26 STC 108 and Pothular Subba Rao '· Thl State of Andltr11 Pradesh 30 STC 69 approved, C VIL APPELLATE JuJtSDICTION : . Civil Appeal Nos. 2229 to 2231 of 1969 and Civil Appeals Nos. 290·291 of 1970. Appeals from the Judgment & · Order dated the 29th September 1967 of the Madras High Co~rt in Tax Case Nos. 164-166 of 1965. S. Swaminathan and S. Gopalakrishnan, for the appelJants (in C. As. Nos .. 2229-2231 /69.) H. B. Darar and M. Veeroppa, for the appellant "(in C. As. No. 290 of 1970)~- M. VeerappQ, for the appellant in C.A. No 291/70. S. T. Dtsai, 4. V Rangam and A. Subhashini, for ihe respondent in C.As. 2229-2231/69. s. Swaminathan and S. Gopalakrishnan, for the respondents (in C.A. No. 290-291/70).

The Judg~ent of the ·court was delivered by KHANNA, J. Whether the supply for consideration by an assessee of bus bodies constructed and fitted to chassis provided by the custo~ mers amounts to sale chargeable to sates tax is the short question which arises for df.termination in these five civil appeals Nos. 2229. 2230 and 2231 of 1969 and 290 and 291 of 1970. Appeals Nos. 2229. 2230 and 2231 of 1969 have been filed on certificate by T. V. Sundram Iyengar & Sons Pvt. Ltd. Madurai agajp.st the judgment ohbe Madras High Court. The other two apreals have been filed on certificate b.Y the- Comm;ssioner of Commercial Taxes Mysore aga;nst the judgment of tho Mysore High Court. This judgment would dispose of all the five appe~ls. [1975) 2 S.C.R· 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 lia.ble to pay sales tax under the Madras General Sales Tax Act, 1939 in respect of bus bodies constructed and fitted by it to chassis proviued by the customers. On the matter having been taken up in revision by the~ppellant company to the High Court, the High Court referred to the fact that no con- . tracts or agreemt;nts as such were produced by the appellant com· pany. It was observed that the nature of thetransactions relating to the supply of bus bodies had to be d(;termined on the basis of forms of "repair orders" which the appellant company usf~d to get filled in by its customers. On the basis of the material on rf'cord, the High. Court agreed with the conclusion arrived at by the Tribunal. The matter was, however, remanded to the Tribunal to enable the appe· llant ..company to produce the actual agreements., if any, between the appellant company and hs customers.

The High Court in this context observed as under : "As the evjdence stands, we accept the conclusion rightly arrived at by tne Tribunal on this question. It is not clear whether there were actually contracts entered into by thtassessee with tne c:ustomers and. if they wt·re so, why they were not pro~ duced. Any way, in tho interests of justice we are inclined to think that tho question may be r~-oxamined by· the Tribunal if the contracts are filed before it. If none is filed. the \iew that the trat\sactions are sales j~f goods will stand." Mr. Swaminathan who appears fot· the asscssoes in all the fi\e appeals subtnits that after the remand order or the High Court1 no agreements between the appellant company and it!; customers we-re filed by the appellant company beforethe Tribunal and, as such, the Tribunal reiterated the liabilit)· of the apJ)rllant company for the" payment of s~les tax in respect of the above itf'm.

Although revision petition has been filed by the appellant company against the order of the Tribunal afteli thf remand to the High Court, the real gr~evance of the aJ'p<llant company, according to Mr. Swaminathan, is against the judgment of the High Court apt:ealed again~t as the question of the liability of the appellant company to pay sales tax in the ab~ence of a formal agreement has been detcrmin~d by this judgment. We may s.et out the mode of dealings between the appellant company and its cu5torna rs in the three appeals mentioned above. As stated aheady, no formal agreemtrts were produced by the assessee and the. nature of transactions relating to the supply of bus bodies has bel."n fou.nd on the basis of "repair Qrders". The repair order, to take a typical case, lxsidlls containing the name of the appellant company, gives tne date of the order, name and address of the custo- · mer, the make, model and condition of chassis supplied by the custo· mer.

Apart from other de·tails, the repair order contains a columJn, according to which the assessee appellant unbertook "to construct and mount ona semi saloon mofussil type bus bddy, with 7 plywood for the floor, a11y wood for sidrs and frames". in another column 8 T, V. SUNDRAM & SONS V~ MADRAS (KhanY'a, ],) 37 5 dealirg with amount billed to the customer a sum of Rs. 9 000 is men .. tioned. The fo11owing is written und(.r the head "Description" : "Alumi~ium Sheets & Amminium Beadlings for panels, r~bber cush10n for seats, rubber sq. wab for back all covered wrth green leather cloth with seating capac3ty 51 in all 4 seats extra" for all of which a sum of Rs. 450 is charged. Se~eral specific items pr(lvide for windshield glass; rubber squbas; handles for entra.nces; help~r c~nva_ss; elec~ric buzzer.; invoice lamp and roof lamps. Other spectfic Items mentioned are leather cloth; protective flaps for curtains; felt cover for engine and electric wiper. The total bill comes to Rs. 10,171·50.

Signatures of customers were also obtained under the following writing : "I hereby agree and definitely understand that M/s. T. V. Sundram Iyengar & Sons Private ltd. assu·me no responsibility for loss or damage by whatever means to vehicles or sparts placed with· them for storage; sale or repair. The above vehicle/spares. left in your nremises or driven b~ your employees .is entirely at my .employer's! owner's risk as regards accidents; damage by fire or any other causes."

The ·Tribunal on consideration of the material on the record recorded the following finding : · "On an overall consideration of the entire material be-fore us, we are inclined to hold that tho predominating element in the transactions was the sale of built body, that lhe work and labour were only subsidiary, that it was immaterial whether a body was ·prepared in accordance with· the specifications gi\len by the customer, then and there and fitted on the chassis or the body had been already prepared prior to the order and was readiJy fitted witli the chassis, that the sale of the property was the predominating element, that the use of labour and skill was only incidental and that therefore, the element of sales predominated over the element of .contr~ct of work and labour!' The High ·Court in this context observed as under :

"The terms as far as we are able to gather from the limited material before us disclose that the property in the completed bus body passed only at the time of the delive!Y there of•such ~s specific chattel though fitted on to the chassts. There 1s no evidence that the property in the materials passed to the customer as and when they were worked into the chassis in the process of body building. The provision as· to insurance of risk a!so confirms this 'iew. In, some of the appeals, we find that spec11ic articles are mentioned the prices of which ar~ gi~n separa~ely. As the evidence stands, ~e accept the concluston nghtly arr1ved at by the Tribunal· on this question., We may no~ set out the facts giving rise to ci-vil appeals Nos~ 290 and 291 of 1970 which relate to assessment years, 1960-61 and 1961-62· SUPR.BME COUJlf REPORTS (1975]

2 S.C.l· The Store l~rcliase Committee on behalf of tho State of Mysore called for tenders from persons who were willing to construct bus bodies on the chassis supplied by the Government. Condition (8) of the tender was that the rate quoted should be per bus body. Tender of . the assessee-firm; M. G. Brothers Automob'le Dealers Bellary; who along with others submitted tenders,. was accepted. Agreement dated January 23, 1959 was thereafter executed by the assessee arid the State Government. Some of the important ela-pses of the agreement were as under: "(6) Tho contractors shall not. be entitled to claim any sort of concession whatever on account of the rise in prices of raw materials or cost of labour due to whatsoever causes during th(, contract period. (6)

The contractors shall agree to keep up the delivery period strictly otherwise the penal cJause shall be enforced and if there should be undue delay it would be open to the Mysom Government Road 1'ra~port Department to cancel tho order or remaining portion of the order as .a last resort . . (1) The contractors shalt make good to Government . any loss, which may arise from the failure to accompJish the work satisfactorily in time or in accordance with required specifica·· tions as noted in the order or by Government havi g to get the work done from other sources at rates higher than those cort .. ra~ted for due to the rtegligenqe, delay or incomplete workman .. ship on the part of the contractors. (8) Tho contractors shall insure the· chassis at their cost for safe: custody of the same at their premises. (10) The contractors agree to give a warranty of 6 months in respect of each and every bus built by them against all defects in the construction of the body.

If any defects are found or dewlop in tho bus built by the contractors dUrillg the cou~se of the warranty peri~ of 6 months from the date the~· are handed over to our uruts, the contractors hereby agree· to rectify the same by deputing their own representatives with sufli .. cient tools and materials ·as required to the operating centres of the buses, free of cost.. (11)' The contractors shall sepd the bills of cost in lriplicate to the General Manager, Mysore Government RoaEI Trans)X'rt DeJ?artnient, ~angal~re, who will arrange payment of 90% agamst the delivery of complete bus and the balance of 10% after completion of the entire order." 0 The return filed by th.e assessee-firm for the year ·1960-61 showed receipt of Rs. 9,74,460 on account· of the bus bodies constructed un:der tho above agreement.

The Commercial Tax Officer held that the said amount represented the prices of the bus bodies re~ived by the asses· see and included it in the taxable turnover under tho Mysore Sales Tax Act, 1967. On appeal tho Deputy Commissioner of Com.mer· 1. V. SUNDilAM &1:. SONS v. MADW (KhamuJ, /.) cial Taxes held that the agreoment between the assejsce and tho Gov .. ernment 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 tho Commissioner, there was a sale of bus bodies by the assesseo. 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 ot 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 stage hereafter. The question with which we are concerned, as would appear from the resume of facts given above, is whether the constructic.n of the bus bodies and the supply of the same by the asses~ees to their custcmers was in pursuance of a contract of sale as distinguishtd frcm a contract for work and labour. The distjnction between the two contracts is often a fine one. A contract of sale is a contract who$e main object is the transfer of the property in arid 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 qrJa chattel, the contract is one for work and labour.

The test is whether or not the work and labour bestowed end in anything that can properly become the subject of sale, neither .the ownership of the materials. nor the value of the skill and labour as ccmparul with the value of the materials, is conclusive, althou~h 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 Cine for the sale of a chattel (see lfalsbury's Laws of England, Vol. 34, p. 6, Third Edition). The Madras General Sales Tax Act, 1939 (Madras Act 9 of .1939). was enacted in pursuance of the powers contained in entry 48 of List )I of Seventh Schedule of the Government of India Act, 1935 wl ich deals with sale of goods. The corresponding entry. in the Constitution is entry No. 54 :in List n of Seventh Schedule'; ··It was in ezerd&e of the powers under this entry that the Mysore Sales ·Tax Act, 1957 (Mysore Act No. 25 of 1957) was enacted.

It is no~ settled law that · the words .. sale of goods"' have to be construed not in the popular sense but in their legal sense and should be given tke' same· u:.eaning which they carry in the Sale of Goods Act, 1930. The expression "sale o( goods .. is a nomen juris, its essential ingredienJs being .an agreement to sell movables for a price and pr~perty paning tberein pursuant to that agreement (see The State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. (1). This Court in that case was concerned with a building contract which was one and indivisible . . It was held that in the case of such a contract, the property in mate. rials used does not pass to the other party to the contract as movable (1) (19,8)9S.T.C. 3S3. SUPREME COURT REPOl\TS [1975] 2 S.C.R. property. It would so pass if that was the agreement between t:h.e parties.

If there was no such agreement and. the contract ~as only to construct a building, in that case the matel'lals used therem would become the property of the other party only on the theory of accret~on. There are two cases wherein this Court was concerned with the cpnstruction of bus bodies and fitting of the same to the chassis supplied by the customers. The cases were heard by the Constitution Bench and the Court considered the question. whether: the party constructing the bus bodies and fitting the same to the· chassis supplied by the customers did so in pursuance of a co11tract of sale or a works contract. The two cases which were decided on the same day are Patnai'K. a1d Company v. The State of Orissa(l)and McKenzies Ltd. v. The State of Maharashtra.(2) main judgment was given_ in the case of Patnaik and Company by Sikri J. (as he then was) on behalf of the majority.

The appellants in that case entered into an agreement with the State of Orissa for the construction of bus bodies on the chassis supplied by the Governor. The agreement provided, inter alia, that the appellants were responsible for the safe custody of the chassis from the date of their receipt from the Governor till their delivery to the Governor and that they had to insure their premises including the chassis against fire, theft, damage and riot at their own cost. The appellants had to construct the bus bodies in the most substantial and workmanlike manner, 'both fLS regards material and otherwise in every respect in strict accordance with the specifications and were to deliver the bodies to the Governor on or bef9re the dates specified in the agreement. The appellants guaranteed the durability of the body for two years from the date of the delivery.

The agreement also provid£d that the work should throughout the stipulated period of the contract be carried on with all due diligence, that the appellants were liable to pay to the Governor a certain sum as liquidated damages for every day that the work remained unfinished after the date fixed, that all works under the contract should be open to inspection by the Controller or officers authorised by him in that behalf, that the) had the right to stop any work which had been executed badly or with materials of inferior quality and that on receipt of a. written order the appe .. llants had to dismantle or replace such defective work or material ai their own cost. The appellants were entitled to SO per cent of the cost of body-building at the tiJne of delivery and the rest within one month thereafter.

In answering the question whether the agreement wa.os a contract for work or a contract for sale of goods, the majorit) con .. sisting of Gajendragadkar C.J., Hidayatullab, Sikri and Bachawat, JJ. (Shah J. dissenting) held. that the contract ali a whole was a contract for sale of goods and therefore the appellants were liable to sales tax on the amount received from the State of Orissa for the construct•on of the bus bc>dies. In arriving at the above conclusion, Sikri J. speaking for the majority obsrned as under : "~n, looking at the ·contract as a whole, what was the real intention of tho: parties? It wiJI be notiml that the bus · ,(1) (196S) 16 S.T.C. 364, (2) (1~$) 16 S.T.C. 518. .ll T. V. SUNDRAM & SONS ·V. MADRAS (Khanna, /,)

37 9 bodies are throughout the. contract spoken of as a unit or as a composite things to be put on the chassis, and this· composite body consists not only of things actually fixed on the chassis but . movable things like seat cushions, and other things th<iugh fixed but which can be very. easily detachtd, e.g., roof lamps, wind screen wipers, luggage carrier, tool box, box for first aid equipment, etc. · The next point to be noticed is that under the contract the property in the bus body does not pass to the Governme,nt tin the chassis with the bus bcdy is delivered at the destination or destinations. to be namtd by the Controller' except in the case contemp~ated in clause 6 of the agreement.

That clause pro· vides that if some work is not satisfactoriJy done and t~e B.cdy 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 ·eontroller is entitled for this purpose to take delivery of the unfinished bc.dy. But even in this case the property in the unfinished bcdy would not pass to the Government ti11 the unfinished body is seized. Suppose a fire were to take place on the pre·mi~e-s of the· appellant and before delivery the bus bcdies were destroyc.d.or ·Spoilt. On whom would the Joss fall? ·There can only l:e one answer to this question and that is that the loss wculd fall on the appeiJant. Clause I of the agreement provides for ~nsurance of the. chassis but there is no provision reJ,atdin.g ms:urance of bus. bodies.

Therefore, it follows that tdl debvery is made, the bus bodies remain the property of the appe~ · Uant. It could, if-it chose to do so, replace parts or whole of the body at any time before delivery. It seems to us that this is an important indication cf the intention of the parties. If the pro pert) passes at delivery, what does that pa!'s in? Is it movable property or immovable property? It will not l:e denied that the pro pert} passes in movable property. Then was this the very goods contracted for? Here again the answer iS ~Jainly in the .affirmative." The dictum laid down . by this Court in the case of Patnaik and Company (s~pra), 'i.n our opinion, fully applies to the case. of the two assessees With which we are concerned in these five appeals. We agree with the ·High Court in the· case of T.V. Sundram Iyengar & Sons that the property in the completed bus body passed only at the time of the delivery thereof as specific chattels fitted on to ·chassis. _Same is also true, in our opinion, of the bus bodies constructed by M.G. Brothers.

The salient features of t'he dealings between the two assesEees with whom. ~-~r~- con~rncd ·and their custo~ers as the) emerge from .the facts J&ven above .are,that_the pr~perty 10 the material u£ed by the assessees 1n constructmg the b'hs bochcs never passed to their customers SI.T.PRBMB ~T JlBPOI't! [1975]2 S.C.lt· during the course of construction., It was only when tho complete bus with the ·body fitted to the chassis· was delivered to the customer that tho property in the bus body passed to the. customer. -There was nothi~g to pre~nt ~he assessee.s from r~mo.vmg a ~lank, or oth~r matcnal after fiXIng 1t to a chassJs, u.d us1.ng 1t for a different purpo~e, or for a different bus body.

The present 1s also not the case wherem tho aasossec 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 accretion. lt is no doul>t true that the bus bodies supplied by the asscssee.s were not readymadc and had, if necessary; to be constructed bit by b1t and plank by _pla~, ~rding to specifications, but that fact would not. make any ~atenal dift'orence. The o~senaHon of the Allahabad High. Court ·n Com· mlslloner o/$ales Taxv.

Hqji Abdul M_ajid(l) t~atit makes no diff~nc.-e whether an article is readymade artu~le or 1s prepare.d accordmg t~ the CUStomer's specifications as also Wh~ther the assesEeC prepare~ lt separately from the tbir.g and then fixes 1t on o~ does the preparatton and the fixation simultai'eousl) in ant cperat1on ~as express]) ap~ · prom! by this Court in the case of Patnaik ond Comptldy (supra). :In holding that the case was not covered by the dict1,1m lafd down in Patnaik and Compan~' s case, the Mysore High Court referred to tho fact that the assessee was describ~ in the agreement entered into with the Go;ernment as a contractor, while in the case of Patnaik and Company the assessee was described as a body builder. The use of a different noDlenclature ·in descri&Jing the assessee would· not; in our opinion, affect the basic character of the contract between tbe parties and justify differentiation jf the terms of tt-e contract in other res• pects are substantially the same.

Another ground on which the High Court aistingui · hed the ca.c;e of the asses~ee · from Patnaik and Company was that in the case of Patnaik and Company the bus bodies were to be delivered as a unit, while this was not so in the case of the assessee firm. We are unable to agree witb the High· Court in this respect because the terms· of the agreement show that the assessee h~ t.o construct ancl ~uppl} the 'bus body fitted to the chassis provided by the Government. Clause II expressly refers to the dehvery of a complete bus. The prices whtch were ~uoted were also for each bus bod).· It can, therefore. be said that the bus body was delivered as a unit. Th~ High Court has also referred to the fact tbat'tbere was no 'express !llention of 1;he sale of bus bodies in the agreement. This fact by Itself is not of much significance. In the case of Chandra BhiJ!n Gosai~ v. Thf State of. qn"Jsa & 9rs.(2) the -appellant manufactured and supplied .large quant1t1es of bncks to a company under a oontract.

There was a clause in the contract pro'\riding that "lana will be-· given free" by tl!e company. The appellant contenaed that the contract was only for labour or for work .dene and material found. and that there was really no sale of an~ goods on which sales tax could be leviecl. It was bela by this Court that the eP.sence of the contract was the delivery of the bricks and that it was a contract for the transfer of chattels qua chattels. Argument was advanced in that case that the contract (J) (1963) 1~ S.T.C. 435. (l) (1963) 14 S.T.C. 166, 1'. V. SUNpltAM & SONS v. MADRAS (KJumna.J.) . 381 nowhere used the word "sale, in connection with the supply of bricks. Thi~ contention was repelled and it wru: observed that "it is not neces9ar} that to constitute a sale, the word 'sate• hu to be used.

We have said onough to show that under the contract there was a transfer of property in the bricks for consi-· deration and. therefore, a sale notwithstanding thtlt the word 'sate• was not used.'• Mr. Swaminathan on. behalf of the assessees 'has referred to the. case of The State· of Gujarat v. Kailash Engineering Co. (Pvt.) Ltd.(l) The respondent in that case was an engineering roncera. It constructed three coaches over the chassis supplied by the Western Railway A<1ministration and r~ived money therefor. It was provided iJ> the contract between the parties that as soon as the plant and matc;rials were brought on the side where the coaches were to be constructed, the. ownership in t.llem would vest in the Railway. The co.ach bodies were not separately described as units or components to be supplied b} the respondent to the Railway.

The dut} of the respon~ dent was· described throughout the contract to be that of .constructing, erecting and furnishing coach bodies on the underframes sup- _plied . . · At no stage did the contract men6on that ready coach bodies were to be delivered by· the respondent to the Railway. from the earliest stage during the process of construction of the coach bodies. the unfinished bodieS in the process of erection were treated. under . the terms· of ~ contract, as the property "f the Railwa~· . Since those unfinished· bodies were to be in the. charge of the respondeQt during Construction. the respondent was made liable under the contract to reimburse the Railway for los.'! by flre. · It was held t~at as the term, of the contract indicated that the respondent was not to be the. owner of the ready coaches and that the property in those bodie& vested in the Railway even during the pro~ -of construction,.the t~ansacti?n was a works contract and did not 1nvolve any sale.

No assiStance, m our opiniont can be derived by the assessees in these appeals from the case of Kai!tJJh Engineering Co. As has been. pointed out above. the · ownership in the material brought on the site under the terms of the oontract was to vest in the ·Railway in the case of Kailash Engineering Ql. The same cannot be said of the material tised for the construction of. the bus· bodies by the two assessees with whom we· are ~n- . cernod. Unlike the terms of the contract in the case of Kailash Engi· nt.erir,g 9o. th~ was nothing in the ag~ments between the. assess~~: . and thetr customers in. the present appeals .which vested the ownershtp · of 1infiniShed bOdies in the customers. It may be mentioned that the' case of PatncJk qnd. Compt~~ty (supra) was cited· ·before ·this Court in the case .of KDJI~h Engmeering Co.· Shah J. speaking.for the Court poirited out the essential differences between . the two cases.

The · case of the assessees in these appeals, as mentioned earlier, falls squa.. rely within the rule laid down" in 'tho case of Patnafk and Company~ . 1b~ case of K.IIash Engineering Co. -unnot. therefore, be of much· 8SS1Stal1CO tO the 8SSeS$CCS • . (l) (IM7).t9 S.T.C.'l3. Equally of no assistance to the assessees are the four cases, The State of Madrt.s v. Richardson & Crudda..r;; Ltd.(l) State of Rr...jasth(m & / nr. v. Man Ind£!Sirfal CorpJration Ltd.(Z), State of Rajasthan~ Ors. v. M.?nuh. &m(3) and State of Himachal Prade:,h & Ors. v. Assocrated H~te1s oj India Ltd.(4) to which reference has.been made .b) Mr. Swammathan on behalf of the assessee~. The case of Richardson & Cruddas Ltd. -related to a contract for th~: fabrication supply and er~ction of steel structures for a sugar factory. This Court on consideration of the material produced on record held that the contract was for a works ·contra..;t and not one for sale.

The case Man Industrial Corporation Ltd. related to a work for fabricating and fixing certain windows in accordance with specifications designs drawing and inc;tructions. The windows were to be fixed to the building with rawl plugs in cut stone work~. It was held that the window leaves did not pass under the terms of the contract as wjndow leaves and that only on the fixing of the 'Yindows as stipulated could the contract be fully executed. ·The propert} in the windows it was observed passed on the completion of the work and not before. The contract was, therefore, held w be a contract for execution of work and not for sale of goods. Ntnu Ram's case related to a work of supplying and fixing wooden wi11dows and. doors together with frames. The windows had alro thereafter to be painted. It was held that under the contract th-e goods were not sold as movable and that the property therein passed only when tb.e windows and frames were fixed on the site.

The lia·· bility to pay sales tax was consequently not attracted. The question which arose for determination in the case of Associated Hotels ofbrdia Ltd. was whether a hotelier was liable to pay sales tax in respect of meal!= served to the guest comin~ there for stay. It was held that the hotelier served meals a~ part of the amenities incidental t'o the services. The revenue was held not entitled to split up the transaction into two parts, one of service and the other of sale of foodstuff. No liability t0 pay sales tax could consequently be fastened on the hotelier. It is plain that there is no parallel between the facts of the present appeals and those of the above mentioned four cases. The case of Commissioner of Commercial Taxel, Myaore, BanKJ!lore v. }Iindu.stan Aeronautics Ltd.(S) related to the Manufacture and supply of three models of railway coaches to the Railwa} Board.

Advan(:e .. 'on account" payment to the extent of 90 per cent of the material to be used was made to the assessee on production ot the inspection -certificate. The stores were held as tbe ptoperty of the President and in trust for him on account of the advance. The property in tbe materials which were used for the construction of ilie coaches became the property of the President before they were used. The construction was done at a separately located shed and no ·other construction was undertaken therein. Therl~ was no possjbilit) of any material for · which advance was not drawn being used for the construction of the (l) (1968) 21 S.T.C. 24S, (2) (1969) 24 S.T.C. 349. (3) (1970) 26 S.T.C. 268. (4) (1972) 29 S.T.C •. 474. (5) (1972) 29 S.T.C. 431. T. V. SUNDRAM & SONS v. MADRAS (Khanna, 1.) I coaches. It was held that the transaction for the manufacture and supply of the coaches was a pure works contract.

When all the materials ·used in the t9nstruction of a coach belonged to the railways, there could be no sale of the coach itself. The difference between the price of a coach and the cost of material could only be the .cost of the services rendered by the assessee. Bare narration c.f the facts of the above case would show the difference between this case and the cases which are the subject matter of these appeals. Reference has also been made by Mr. Swaminathan to observations on page 167 of Benjamin on Sales (8th Editio~) which were ba5~d on the case of Anglo-Egyptian Navig(4tion CtJ. v. Renni~.(1) Those observations·were also referred to in the ca~e of Patnaik and Company (supra). Sikri J. then dealt ·with the fac~s of the case of A.nglo-Egyp:.. rian Navigation C41, and hel~ that th~t ca~ was not. authority for the proposition th!l~ . whenever a contra~t provides for the fiXing of a chattel to another chattel, there is no' sale Qf goods.

Tl;le learned Judge in this connection gave an illustration of a dealer fitting tyres supplied by him {o the. car of the customer. Could anyone deny that there had been sale of the tyres by the dealer to the customer, even though the fitting of the tyres was not an easy ope-rat~on ar.d n~d.ed an expert. hand 1 It may also be mentione.d that the Allahabad H:gh Ceurt in the case of B~!oria Halwasiya Service Station v. Thtt Stott. of Uttar Pradesh· & Anr.(2) and Andhra Pradesh High Court in the ca~e of Pothultl Subba Rllov. the-State of ~.P.(3) hav~ held that a transaction relating to the. CQnstruction of-the bus bodies by the assessee on chassis supplied b} customers ~nstitutes a contract of. · ale of gooos. As a result of the above, we hold that the. suppl} of the bus bodies. b) the assessees in these. five appe?

Is after fitting them to the chassis. supplied by the customers amounts to sale of goods for whkli the assessees would be liable to pay sales tax. · We accordingly dismiss. · ch·il appeals Nos. 2229,2230 and 2231 of 196~· with costs. We accept civil appeals Nos. 290 and 291 of 1970 with costs. set aside the judg· ment of the High Court and restore that of the Commissioner of Commercial Taxes_ Mysore.. One hea.ri~g iee. V.M·.K. (1) (t8'i5)L~ll, lO C.P. 271. · ·<2> 26 s.T .e. ~tos. (3 )30 S.T.C •. 69. C; As. Nos.· 2229·2231 ·of 1969- dismlssed. (;.As. Nos. 290·291 oi 1970 atlowtd~