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TMI Blog1977 (3) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... see as not being liable to sales tax during the assessment year 1965-66 on the ground that the same represented the proceeds of works contract. The Sales Tax Officer rejected the plea of the assessee and the Assistant Commissioner (Judicial) on appeal also affirmed the order of the Sales Tax Officer. But the plea of the assessee appears to have found favour with the Judge (Revisions), Sales Tax, who decided that the amount was not exigible to sales tax, because the contracts in question were works contracts. Thereafter at the instance of the Commissioner, the revising authority made a reference to the High Court and referred the following question of law for its opinion: "Whether, under the circumstances of the case and under the terms of the contract, the supply of shutters and iron gates worth Rs. 1,08,633.08 was sale or amounted to works contract." The High Court, after hearing the parties and considering the materials on the record, came to the conclusion that the contract entered into by the appellant was not a works contract but a contract for the supply of goods simpliciter and the assessee was, therefore, liable to pay tax. The question referred to the High Court was answ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the same were taken to the site and finally erected and affixed to the site of the building. In order to fix them to the premises certain masonry work had to be done by the owner and that too according to the instructions of the contractor. It was also averred that in erection of the shutters some parts were permanently embedded into the walls and lintels and they become permanent fixtures which are not detachable. The allegations made in annexure C have not been controverted by the State either in this Court or before the High Court. Moreover, the Indian Standard Specification Book for Metal Rolling Shutters and Rolling Grills (sic) the particulars of the fittings of rolling shutters, whose authenticity has not been doubted by counsel for the parties, clearly shows that rolling shutters consist of curtains, lock plates, guide channels, bracket plates, rollers, hood covers, gears, worms, fixing bolts, safety devices, anchoring rods, central hasp and staple. Each guide channel has to be provided with a minimum of three fixing cleats or supports for attachment to the walls or column by means of belts or screws. The guide channels are further attached to the jambs, plumb either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any rule of universal application, but there are some well-recognised tests which are laid down by decided cases of this Court which afford guidelines for determining as to whether a contract in question is a works contract or a contract for supply of goods. One of the important tests is to find out whether the contract is primarily a contract for supply of materials at a price agreed to between the parties for the materials so supplied and the work or service rendered is incidental to the execution of the contract. If so, the contract is one for sale of materials and the sale proceeds would be exigible to sales tax. On the other hand, where the contract is primarily a contract for work and labour and materials are supplied in execution of such contract, there is no contract for sale of materials but it is a works contract. The circumstance that the materials have no separate identity as a commercial article and it is only by bestowing work and labour upon them, as for example, by affixing them to the building in case of window-leaves or wooden doors and windows that they acquire commercial identity, would be prima facie indicative of a works contract. So also where certain materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tandard Book could not be said to be merely incidental to the contract but was a fundamental part of the contract itself. In our opinion, therefore, the decision in Man Industrial Corporation Ltd.'s case [1969] 24 S.T.C. 349 (S.C.)., fully covers the facts of the present case. It was further argued by Mr. Dikshit, the learned counsel appearing for the State, that it will appear from the terms of the contract that the price of the goods had to be paid in advance before delivery of the same to the customer which shows that the title to the shutters passed to the customer as soon as the shutters were packed and despatched to the site and the price paid and, therefore, the contract in the instant case could not be a works contract. It is not possible to accept this contention, because the advance payment of the entire price was a term meant for the convenience of the parties as the contractor did not want to take any risk for delayed payment of goods, but the contract would be completed only after the shutters were finally assembled at the site and fixed according to the specifications which was essentially the responsibility of the contractor. In Richardson and Cruddas Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly distinguishable from the facts and circumstances of the present case. In the first place, the supply of materials and completion of the contract was indisputably in respect of movable property; no immovable property was at all involved at any stage in the process of completion of the contract. The bus body built by the contractor was movable property manufactured by the contractor and had merely to be fitted to the chassis which was also movable property. Secondly, the bodies constructed and fitted to the chassis were easily detachable. In the instant case, the shutters were fabricated and fixed to an immovable property so as to become a permanent fixture and they were also not detachable. The High Court failed to have noticed these important features which distinguish the aforesaid decision from the facts of the present case. We are of the considered opinion that the present case is clearly covered by the two decisions of this Court referred to in Man Industrial Corporation Ltd.'s case' and Nenu Ram's case [1970] 26 S.T.C. 268 (S.C.)., and applying the same we hold that the contract in the present case was a works contract and the transaction was, therefore, not exigible to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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