TMI Blog1977 (4) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... Mehta and Girish Chandra, Advocates, for the appellant. S.T. Desai, Senior Advocate (G.A. Shah and S.K. Dholakia, Advocates, with him), for respondent No. 1. Dr. L.M. Singhvi, Senior Advocate (S.M. Jain and Indra Mapwana, Advocates, with him), for the respondents Nos. 2-3. Mrs. Leila Seth, Senior Advocate (G.S. Chatterjee, Advocate, with her), for the intervener -------------------------------------------------- The judgment of the Division Bench of the Rajasthan High Court consisting of V. P. TYAGI and C. M. LODHA, JJ., in D. B. Civil Writ No. 733 of 1968 delivered on January 31, 1969, runs as follows: The judgment of the Court was delivered by TYAGI, J.- This writ application has been filed by the Central India Machinery Manufacturing Co. Ltd. (Wagon Structural Division), Bharatpur (hereinafter referred to as the company), under article 226 of the Constitution praying that it may be determined whether the contract of the company with the Union of India for the supply of wagons is in the nature of contract for sale of goods or a works contract and if it is found to be a contract for sale, then the Union of India may, by issuing an appropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The company after obtaining legal advice from eminent lawyers informed the Railway Board that the terms and conditions of the contract between the parties was obviously a contract for sale and not a works contract but the Railway Board did not feel convinced on the representations made by the company. On the other hand, the company, to save itself from heavy liabilities of the sales tax, represented to the Commissioner of Sales Tax, Rajasthan, and requested that the contract of supply of wagons to the Railway Board was in the nature of a works contract and, therefore, it should not be subjected to sales tax but instead of giving any relief to the company the sales tax department informed the petitioner that it should stop purchasing material on the strength of form C issued under the Central Sales Tax Act, which, according to the company, would have saddled the company with a further liability to pay tax at the enhanced rate on the purchase of the material used for the manufacture of wagons. The Commercial Taxes Officer, Special Circle II, Jaipur, provisionally assessed the petitioner-company for sales tax on the sale of wagons by the petitioner-company to the Railway Board under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of any tax on sales of railway wagons. In its reply, it was also mentioned that writ was not a proper remedy to get the relief. The State of Rajasthan and the Commercial Taxes Officer have jointly filed the reply in which it has been contended that the contract in question is definitely a contract for sale of wagons and the pronouncement of the Mysore High Court has no bearing on the terms of the present contract. A plea was also raised in their reply that there is no lis between the petitioner and the sales tax department as the petitioner itself thinks that the contract is a contract for sale and, therefore, the company cannot file a writ application under article 226 as the extraordinary jurisdiction under this article cannot be invoked to get such a declaration about the nature of the contract in dispute. Mr. Narsa Raju, appearing on behalf of the Union of India, at the very outset requested the court that the Union of India would very much like the dispute to be resolved by this court by exercising its extraordinary jurisdiction under article 226 of the Constitution. Mr. M. M. Vyas, appearing on behalf of the State of Rajasthan, also ultimately conceded that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctioning under a federal structure. Such a construction defeats the purpose of the article itself. To say this is not to say that the High Courts can function arbitrarily under this article. Some limitations are implicit in the article and others may be evolved to direct the article through defined channels." In another case, Sales Tax Officer, Jodhpur v. Shiv Ratan G. Mohatta [1965] 16 S.T.C. 599 (S.C.); A.I.R. 1966 S.C. 142., Sikri, J., speaking on behalf of the court, observed as follows: "To warrant the entertainment of a petition under article 226, there must be something more in a case, something going to the root of the jurisdiction of the Sales Tax Officer, something which would show that it would be a case of palpable injustice to the assessee to force him to adopt the remedies provided by the Act." The pronouncements of the Supreme Court throw sufficient light on the wide powers conferred on the High Courts by the founding fathers by framing article 226 in a comprehensive phraseology and it has been the consistent view of the courts in India that if the petitioner is subjected to palpable injustice for which the remedies provided by the ordinary law are not efficac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India, it will be necessary to mention certain relevant terms of the contract itself. The Railway Board by its letters dated 23rd December, 1967, and 15th June, 1968 (annexures 9 and 10), conveyed its acceptance to the company for the supply of wagons at the basic price per wagon mentioned against the different types of wagons at items Nos. 1 and 2 of para 1 of annexure 10. It was also mentioned in the said letter in para 2, which relates to the terms and conditions, that the contract shall be governed by the General Conditions and stipulations contained in the Indian Railways Standard Conditions of Contract A5-51 (revised), in so far as these are not inconsistent with the Special Conditions of Contract attached as per annexure A to annexure 10 and those given in paras 3 to 7 below. Para 3 deals with the delivery of the wagons and mentions "that the delivery of the stock free on rail your (company's) works siding is required to be completed by 30th June, 1969". Para 4 relates to the packing of axle-boxes and, according to this para, packing of axle-boxes wherever necessary will be done by the Western Railway. No packing charges on account of the same will be received from you (co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been received in complete condition and in good working order, provided that the payments so made shall be provisional and subject to adjustment and finalisation by deduction of rebate in accordance with provision of clause 1.4. Payments in (a), (b) and (c) above shall be further subject to the deduction of any amount for which the contractor is liable under this contract or any other contract in respect of which the President of India is the purchaser. 5.. Use of raw materials secured with the Government assistance. -Where any raw materials for the execution of the contract are procured with the assistance of Government either by issue from Government stock or purchase under arrangements made or permit(s) or licence(s) issued by Government, the contractor shall hold the said materials as trustee for Government and use such materials economically and solely for the purpose of the contract against which they are issued and not dispose of them, without the permission of the Government and return, if required by the purchaser, all surplus or unserviceable materials that may be left with him after the completion of the contract or at its termination for any reason whatsoever on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age: "The contractor shall deliver the vehicles free on rails at the place or places detailed in the schedule not later than the date or dates specified therein." Then we come to condition No. 15, which relates to the system of payment. This condition reads like this: "Payments for completed vehicles delivered by the contractor shall be made in two instalments, viz., 90 per cent on completion and 10 per cent as provided in paragraph (2) of this clause. The procedure for such payments will be as follows: (1) The contractor on receipt of a certificate signed by the Inspecting Officer (whose decision shall be final) to the effect that one or more vehicles have been completed, will submit to the purchaser 'on account' bill for 90 per cent of the value of vehicles in question, together with the completion certificate. Within 14 days of receipt of this bill and certificate, the purchaser will pay the 90 per cent bill, and on payment of this bill the vehicles in question will become the property of the purchaser. (2) The balance of 10 per cent shall be treated as security for the due fulfilment of the contract and the contractor shall be entitled to receive payment of the balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticles and materials shall at all times be open to inspection of any officer authorised by the Railways." Mr. Raju, appearing on behalf of the Union of India, urged that the real test to ascertain whether the given contract is for work or for sale of goods is to find out from the language of the contract itself whether the article purchased was the sole property of the party who produced it at the time of delivery of that article or the property therein passed under the terms of the contract prior to the delivery of the finished article to the other party for a price. He further urged that if the raw material used in the construction of the wagons under the terms of the contract belonged to the railways and the wagon produced by the company had no individual existence as the sole property of the company then, according to the learned counsel, such a contract cannot be construed as a contract for sale but it will always be taken as a contract for works or a contract for service. In support of this contention that the raw material used by the company for the manufacture of the railway wagons belonged to the railways, he drew our attention to Special Condition No. 4, which provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance to the company. Mr. Raju further built his arguments by submitting that if once the property in the material which was purchased by the petitioner for constructing the railway wagon passed to the Union of India, then there was nothing left for the petitioner to transfer the ownership in the wagons when they were completed as they have been manufactured with the aid of the material which already belonged to the Railway Board. It was also urged that no doubt the contract shall be governed by the general conditions and stipulations contained in the Indian Railways Standard Conditions of Contract, but these General Conditions are subject to the Special Conditions of Contract contained in annexure A appended to document annexure 10, and since clause 4 of the Special Conditions, which deals with "on account" payment is a very material condition which goes to transfer the ownership of the material to the Railway Board, the General Conditions cannot be resorted to ascertain as to at what stage the ownership in the wagon passes to the purchaser. It was further argued that other conditions regarding wage escalation and de-escalation of the price contained in para 1 of the Special Condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contractor shall be responsible for the safe custody and protection of the said stores and articles against all risks till they are duly delivered to the railways or as they may direct, does not in any manner change the nature of the contract because, according to him, in a contract for sale the parties can agree that the stores purchased against "on account" payment or procured with the assistance of the Railway Board shall be returned to the Railway Board if left unused on the completion of the contract. This condition, in the opinion of Mr. Chitaley, does not go to transfer the property in the material purchased by one of the parties to the contract to the other party unless there was a specific condition attached to that effect. Mr. Vyas, appearing on behalf of the State of Rajasthan, supported the contentions of Mr. Chitaley and urged that looking as a whole to the terms and conditions of the contract, it is difficult to say that as soon as advance payment is made by the railways to the contractor under clause 4 of the Special Conditions of Contract, the property in the goods purchased by the contractor passed to the Railway Board. In the light of these contentions, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In such circumstances, it is difficult to accept the contention of Mr. Narsa Raju that the material as soon as 90 per cent of its price is advanced by the railways to the petitioner-company becomes the property of the railways. Moreover, the note under this clause clarifies that the company is entitled to use certain material purchased by it for the construction of the wagons even though under this term of the Special Conditions the company is not entitled to demand any advance payment against the purchase of that material. In the absence of any condition In the contract that the material purchased by the company after getting "on account" payment to the extent of 90 per cent of the price of the material will become the property of the railways it is difficult to accept the argument that the property in the material passes to the railways as soon as "on account" payment Is made to the company. Mr. Narsa Raju could not, however, point out as to when the ownership in the material against which no advance payment is received by the company under this clause and used by it in the construction of the wagons shall pass to the railways. We do not feel that "on account" payment to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract, could the Railway Board say that the property in the material had passed to the Railway Board because under the terms and conditions of the contract the company was duty bound to use that material only for the construction of wagons and, after the completion of the contract, the remaining material was to be delivered to the Railway Board on payment of the price thereof as fixed by the Railway Board. The answer to this question is obviously "no". It so appears that the words "of the railways" have been used in the indemnity bond because under clause 5 of the Special Conditions the unused material procured by the company with the assistance of the railways was to be returned to the railways after its price was paid by the railways to the company. But it does not mean that the material procured under clause 5 would become the property of the railways even though the company has paid for it. This condition in the indemnity bond refers to only that material which was left unused after the completion of the contract and which has to be returned to the railways on the payment of price. In this background, if the company inadvertently described the stores and the articles as that of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the company and the railways shall pay sales tax to the company only if the company is required to pay such a tax on the sale of the wagons to the Railway Board under the State law. If under the Special Conditions, the material against which an advance payment is made under clause 4 was to become the property of the railways itself, then the question of the payment of sales tax on the completed wagon does not arise and the parties would not have come to this term that the State and inter-State sales tax on the stock on order shall be reimbursed by the Railway Board because in that event the delivery of the completed wagons to the Railway Board could not be considered as sale of the wagons and the question of the payment of sales tax on the supply of wagons by the company and its reimbursement by the Railway Board could never have arisen when this term was agreed upon by the parties. The existence of this term in the Special Conditions throws light about the mind of the contracting parties as to how they treated the "on account" payment. The next contention of Mr. Narsa Raju is that under clause 5 of the Special Conditions of Contract the contractor (the company) is required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the present case. In that case, it was provided in the contract that as soon as the plant and materials for constructing the coach bodies were brought on the site where the coaches were to be constructed the ownership in them would vest in the railways. This term of the contract in that case made a lot of difference because when the materials purchased and used by the contractor for the manufacture of the coaches as soon as they were brought to the site became the property of the railways, then there was nothing left for the contractor to transfer in the ownership of the coaches. It may also be mentioned that in that contract the coach bodies were not separately described as units or the components to be supplied by the respondents to the railways. In fact, even from the earliest stage during the process of the construction of coach bodies, the unfinished bodies in the process of erection were treated under the terms of the contract as the property of the railways. In these circumstances, their Lordships of the Supreme Court held that as the terms of the contract indicated that the respondent was not to be the owner of the ready coaches and that the property in those bodies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l passes to the railways on furnishing a bill after the wagons were completed and 90 per cent of the bill was paid by the railways to the contract. Up to that stage, the property in the wagon vests in the contractor. In our opinion, no assistance can be drawn by the railways from the principles laid down by the Supreme Court in Gannon Dunkerley's case [1958] 9 S.T.C. 353 (S.C.). The Supreme Court had the occasion to scrutinise similar contentions in the case of Patnaik and Company v. State of Orissa [1965] 16 S.T.C. 364 (S.C.). In that case, the appellants had entered into an agreement with the State of Orissa for the construction of the 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 the appellants had to construct the bus bodies in strict accordance with the specifications on those chassis and deliver the bodies to the Governor on or before the dates specified in the agreement. There was also a condition for the payment of liquidated damages If the appellants failed to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ownership in the finished goods in the form of the wagon to the railways. The contract that was considered by their Lordships of the Mysore High Court in that case has not been placed before us by the counsel for the railways for the purposes of comparison with the contract in the present case and, therefore, it is difficult to accept the contention of the railways that the dispute in the present case has been set at rest by the Mysore High Court. The question whether a particular contract is a contract for sale of goods or a works contract depends upon the terms of the contract itself, and sometimes one term may change the complexion of the entire contract. In the absence of the contract on which the Mysore High Court decided the case of Hindustan Aeronautics Ltd., it is not possible for us to hold that that decision resolved the controversy raised before us. At least one thing is apparent that no such term of that contract has been referred by their Lordships of the Mysore High Court in their judgment as is incorporated in clause 15 of the General Conditions and, therefore, we can safely presume that no such condition was present in the contract. The absence of such a condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Under a similar past contract, the appellant reimbursed the company the amount of sales tax for the wagons supplied by it to the appellant in the months of March and April, 1967. In March, 1967, the High Court of Mysore in the case of Hindustan Aeronautics Ltd., Bangalore Division v. Commissioner of Commercial Taxes, Mysore Sales Tax Appeal No. 8 of 1966 decided on March 1, 1967 (Mysore High Court); Affirmed by the Supreme Court in [1972] 29 S.T.C. 438 (S.C.)., held that the contract for the supply of wagons to the Railway Board by HAL was in the nature of a works contract and therefore sales tax was not payable on such supplies. In view of this decision, the Railway Board by its letter dated June 7, 1968, informed the company that the money paid by it to the company, which was not deposited with the sales tax department, should be refunded because the real nature of the transaction was that of a works contract and not a sale or purchase and, therefore, the Railway Board was not liable to reimburse the company for the amount of sales tax, if any, paid by the company to the State of Rajasthan. While in reply to the Railway Board, the company contended that the contract was for sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion was a contract for works and not a contract of sale. The State of Rajasthan and the Commercial Taxes Officer in their joint reply contended that the contract was one for sale of wagons. At the final hearing before the High Court all the parties requested the court to resolve the dispute in the exercise of its extraordinary jurisdiction under article 226 of the Constitution, notwithstanding the availability of an alternative remedy. The court, in consequence, proceeded to decide the dispute on merits. After examining in detail the terms and conditions of the contract as disclosed by the relevant documents on the record, the High Court took the view that the contract in question was a contract for the manufacture and sale of wagons to the Union of India by the company and, as such, sales tax was payable on these transactions. It thus decided the main issue against the Union of India and allowed the writ petition. Hence this appeal by the Union of India. The question, whether a contract is one for sale of goods or for executing works or rendering services, is largely one of fact, depending upon the terms of the contract, including the nature of the obligations to be disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of payment.- Payments for completed vehicles delivered by the contractor shall be made in two instalments, viz., 90 per cent on completion and 10 per cent as provided in paragraph (2) of this clause. The procedure for such payments will be as follows: (1) The contractor on receipt of a certificate signed by the Inspecting Officer (whose decision shall be final) to the effect that one or more vehicles have been completed will submit to the purchaser 'on account' bill for 90 per cent of the value of vehicles in question, together with the completion certificate, (sic) the purchaser will pay the 90 per cent bill, and on payment of this bill the vehicles in question will become the property of the purchaser. (underlining ours.) (2) The balance of 10 per cent shall be treated as security for the due fulfilment of the contract and the contractor shall be entitled to receive payment of the balance of 10 per cent on vehicles as completed on his receiving a certificate from the purchaser to the effect that the actual delivery of the vehicles in question has been taken, that the delivery was made in due time and that the contract has been duly fulfilled in every respect in so far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessary indemnity bond to the paying authority. Note: ' On account' payment will be permissible only on steel procured according to Joint Director (Iron Steel), Calcutta's planning after taking into consideration any steel offered from the floating stock held by the railways. If such offers are refused and steel of similar quality is obtained from other sources such quantities will be excluded from 'on account' payment. The claim for 'on account' payment will be accompanied by a further certificate that similar steel has not been offered from the floating stock held by the Railways and refused by the wagon builders. (b) Payment of 90 per cent of the full contract price less 'on account' payment already made vide (a) above will be made on production of inspection certificate for each completed wagon. (c) Payment of the balance 10 per cent of the contract price will be made on the certification by the consignee-Railways that wagons have been received in complete condition and in good working order, provided that the payments so made shall be provisional and subject to adjustment and finalisation by deduction of rebate in accordance with provision of clause 1A." (underlining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be such as are required for the execution of the above contract and the advance made to him by the Railways is without prejudice to the provision of the contract and is subject to inspection and rejection of the stores and any advance made against stores and articles rejected or found unsatisfactory on inspection shall be refunded immediately to the Railways. That the contractor shall be solely responsible for the safe custody and protection of the said stores and articles against all risks till they are duly delivered to the Railways or as they may direct. The said articles and materials shall at all times be open to inspection of any officer authorised by the Railways. (underlining Here italicised.ours.) Now these presents witnesseth that the contractor hereby undertakes to indemnify the Railways, should any loss or damage or deterioration occur in respect of the said stores and articles while in his possession or in the possession of his sub-contractors or if any refund becomes due to the Railways without prejudice to any other remedies available, the Railways may also deduct such amount from any sums due, or any sum which at any time hereinafter may become due to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "A contract of sale of goods must be distinguished from a contract for work and labour. The distinction is often a fine one. A contract of sale is a contract whose main object is the transfer of the property, in and 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 qua 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 compared with the value of the materials is conclusive, although 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 one for the sale of a chattel. " Let us now apply the above criteria to the contract in question. The contract is expressly one for the manufacture and supply of wagons for a price. Price has been fixed taking the wagon as a unit. Payment of the price is made for each vehicle on its completion and delivery by the contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offer to procure it from that source is refused. Counsel has also referred to Special Condition 5 which obligates the contractor to hold "as trustee for Government" any raw materials for the execution of the contract procured with the assistance of Government either by issue from Government stock or purchase under arrangements made or permit(s) or licence(s) and to "use such materials economically and solely for the purpose of the contract against which they are issued and not dispose of them, without the permission of the Government". Mr. Mehta further pointed out that under Special Condition 6, other essential components, viz., wheelsets for all the stock (and roller bearing axle-boxes and C. B. couplers wherever applicable) are supplied to the contractor free of cost f.o.r. against a proper undertaking for their safe custody. Counsel further took us through the contents of the indemnity bond and placed special emphasis on its clause: "That the contractor shall hold at his works at Bharatpur and/or at the works of his sub-contractors the stores and articles of the Railways in respect which advance may be made to him against the said order." From a conjoint reading of Special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27., were substantially the same, and there it was held that the contract was one for work and not of sale of vehicles. On the other hand, Dr. L. M. Singhvi, the learned Advocate-General appearing for the State of Rajasthan, and Shri S. T. Desai, the learned counsel appearing for the company, have pointed out that there is nothing in the Special Conditions which militates against or is inconsistent with Standard Condition 15; that the Special Conditions, read as a whole, show beyond all doubt that the raw materials purchased by the company against 90 per cent advance payment do not become the property of the Railway Board or the Union of India, because under the express terms of the contract, such advance payment is made towards the "contract price" of the wagons and not towards the price of the materials purchased by the company, although to safeguard the interests of the Railway Board some restrictions have been placed with regard to the use and disposal of those materials on the company who had become owner thereof by purchase for a price. In refutation of the stand taken by the appellant, it is asserted that under the terms and conditions of the contract, it is not obligatory f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... converges on category 2. Does such material procured by the company, against 90 per cent advance, become the property of the railways before its use in the manufacture of the wagons. Should the "on account" payment received from the railways by the company under Special Condition 4, on 90 per cent of the value of the materials, be taken as payment towards the price of the materials. Or, should it be taken as payment towards the price of the wagons. Answers to these questions turn on a construction of the terms and conditions of the contract. A correct construction, in turn, depends on a reading of the Standard and Special Conditions as a whole. It would not be proper to cull out a sentence here or a sub-clause there and read the same in isolation. Again what is required is not a fragmentary examination in parts but an overall view and understanding of the whole. Again, it is the substance of the documents constituting the contract, and not merely the form which has to be looked into. The real intention of the contracting parties is primarily to be sought within the four corners of the documents containing the Standard and Special Conditions of Contract. If such intention is cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the railways. (v) Standard Condition 16 provides that if within twelve months after delivery, any "defect arises from inferiority of material or workmanship" the company shall be liable to remedy the defect, and to deduction of money due to it. This condition also presupposes that the inferior material used was not the property of the railways but of the company. (vi) The stipulation in the indemnity bond making the company responsible for safe custody and protection of the "stores and articles" against all risks till they are duly delivered to the railways, or as they may direct, nor the use of the words "of the railways", therein, in our opinion, in the face of clear conditions of the contract, is a ground to hold that the materials purchased by the company for construction of the wagons would become the property of the railways immediately on advance of an amount equal to 90 per cent of their value under Special Condition 4. As rightly pointed out by the High Court the word "of" in the expression "of the railways" used in the indemnity bond in the context of "stores and articles" appears to have been loosely used. Moreover these "stores and articles" might include the whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, the company will get it examined by the Inspecting Officer and submit to the purchaser an "on account" bill for 90 per cent of the value of the vehicle and within 14 days of the receipt of such bill together with a certificate of the Inspecting Officer, the purchaser will pay 90 per cent bill and on such payment, the vehicle in question will become the property of the purchaser. There could be no clearer expression of the intention of the contracting parties than this clause that the contract was, in substance, one for the sale of manufactured wagons by the company for a stipulated price. We would therefore affirm the finding of the High Court on this point. The ratio of Hindustan Aeronautics [1972] 29 S.T.C. 438 (S.C.); [1972] 2 S.C.R. 927., is not applicable. The present case has some special features which did not figure in Hindustan Aeronautics [1972] 29 S.T.C. 438 (S.C.); [1972] 2 S.C.R. 927. In that case, from the terms and conditions of the contract then under consideration and the report of the Commercial Tax Officer, these facts appear to be well-established: (i) The material used in the construction of coaches before its use was the property of the railways. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of the body for two years from the date of delivery. It was also provided that all works under the contract should be open to inspection by the Controller or officers authorised by him and such officers had the right to stop any work which had been executed badly or with materials of inferior quality, and on receipt of a written order the appellants had to dismantle or replace such defective work or material at their own cost. The builders were entitled to 50 per cent of the cost of the body building at the time of delivery and the rest one month thereafter. The question before the Constitution Bench of this Court was whether, on these facts, the contract was one for work or a contract for sale of goods. This Court held (by majority) that the contract as a whole was a contract for sale of goods and, therefore, the appellants were liable to sales tax on the amounts received from the State of Orissa for the construction of the bus bodies. In reaching at this conclusion the Court paid due regard to the fact that under that contract the property in the bus body did not pass to the Government till the chassis with the bus body was delivered at the destination to be named by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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