TMI Blog1978 (12) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------- The judgment of the Court was delivered by BHAGWATI, J.- The short question that arises for determination in this appeal by special leave is whether a contract for fabrication and erection of a 3-motion electrical overhead travelling crane is a contract of sale or a contract for work and labour. The question is fortunately not beset with much difficulty since there is a recent decision of this Court in Sentinel Rolling Shutters Engineering Co. (P) Ltd. v. Commissioner of Sales Tax, Maharashtra C.A. No. 1001 of 1977 decided on 12th September, 1978; since reported at [1978] 42 S.T.C. 409 (S.C.).,which affords considerable guidance and almost concludes the determination of the question in favour of the assessee. The assessee, who is the appellant before us, is a partnership firm carrying on the business, inter alia, of manufacturing and erection of cranes. During the assessment year 1965-66, the assessee entered into two contracts for supply and erection of 3-motion electrical overhead travelling cranes, one with M/s. Kamlapat Moti Lal Sugar Mills and the other with M/s. Upper Doab Sugar Mills Ltd. The contract with M/s. Kamlapat Moti Lal Sugar Mills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heavy duty. (ii) Driver's cabin: The driver's cabin will be of weather-proof outdoor construction. It will be with material in a position that the operator's view is not obstructed during the load handling and will travel along with the crane crab. (iii) Electrical equipment for driver's cabin: The driver's cabin will be provided with the following electrical equipment and other necessary fittings: 1.. One protective panel for electrical equipment. 2. Drum controllers for all the motors. 3. Plug and sockets for hand lamp. 4. One electric light point. 5. One alarm bell and all other necessary fittings. Steps/ladders will be provided from the crane bridge for easy access to the cabins. (iv) Wiring: Wiring with V.I.R. wire in steel conduit pipes will be provided between individual motors and controllers, current collectors and resistances in the cabin. For connection of current to the trolley, a set of bare copper conductors complete with insulators and strainers mounted on the bridge will be provided. A set of current collectors will be mounted on the trolley, containing renewable graphitic carbon collectors. Price: That for two complete cranes of the above-mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sales tax for the assessment year 1965-66 whether the amount of Rs. 1,34,500 received by the assessee under the contract with M/s. Kamlapat Moti Lal Sugar Mills and the amount of Rs. 2,38,000 received under the contract with M/s. Upper Doab Sugar Mills Ltd. formed part of the turnover of the assessee liable to sales tax. The answer to this question depended upon whether the contracts with M/s. Kamlapat Moti Lal Sugar Mills and M/s. Upper Doab Sugar Mills Ltd. were contracts of sale or contracts for work and labour. If they were contracts of sale, the amounts of Rs. 1,34,500 and Rs. 2,38,000 would b.- taxable as sale price forming part of the turnover, but not so, if they were contracts for work and labour. The Sales Tax Officer took the view that the contracts were essentially contracts of sale of ready-made cranes and the erection of the cranes at the factory site was merely incidental to the sale and the amounts of Rs. 1,34,500 and Rs. 2,38,000 received under the contracts were, therefore, taxable. This view was upheld by the Assistant Commissioner in appeal, but on an application for revision being filed by the assessee, the Additional Judge (Revisions) held that each of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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." The primary test is whether the contract is one whose main object is transfer of property in a chattel as a chattel to the buyer, though some work may be required to be done under the contract as ancillary or incidental to the sale or it is carrying out of work by bestowal of labour and service and materials are used in execution of such work. This test has been recognised and approved in a number of decisions of this Court and it may now be regarded as beyond controversy, but the real difficulty arises in its application as there are a large number of cases which are on the border-line and fall within what may be called grey area. To resolve this difficulty, the courts have evolved some subsidiary tests and one of such tests is that formulated by this Court in Commissioner of Sales Tax, Madhya Pradesh v. Purshottam Premji [1970] 26 S.T.C. 38 (S.C.)., where it has been said: "The primary difference between a contract for work or service and a contract for sale of goods is that in the former the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n so far as the price is concerned. The erection and installation of the rolling shutters is as much an essential part of the contract as the fabrication and supply and it is only on the erection and installation of the rolling shutters that the contract would be fully executed". This Court then proceeded to examine what is a rolling shutter and how it is erected and installed in the premises and observed that a rolling shutter consists of several component parts and "the component parts do not constitute a rolling shutter until they are fixed and erected on the premises. It is only when the component parts are fixed on the premises and fitted into one another that they constitute a rolling shutter as a commercial article and till then they are merely component parts and cannot be said to constitute a rolling shutter. The erection and installation of the rolling shutter cannot, therefore, be said to be incidental to its manufacture and supply. It is a fundamental and integral part of the contract, because without it the rolling shutter does not come into being. The manufacturer would undoubtedly be the owner of the component parts when he fabricates them, but at no stage does he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong with four supporting columns. Each column has to be placed on a grouted foundation which is 7 feet deep and is securely bolted with foundation bolts, 5 on each side, which are grouted so as to be able to support the weight of the columns. The columns thus become permanent fixtures on the land of the customer and they constitute a permanent foundation for the 3-motion electrical overhead travelling crane. The detailed specifications of the foundation bolts and the columns are given in the publication of the Indian Standards Institution. It may be noted that even so far as the columns are concerned, they are not fabricated by the manufacturer in his factory and then taken to the site. Each column has a height of about 40 feet and it is made in three or four pieces and these pieces are joined together with bolts and welded at the time of erection at the site. Thereafter a 120 feet long gantry is assembled by the manufacturer in eight pieces and each piece is placed on two columns and the erection of the gantry on both sides is completed after bolting and welding the gantry with the columns. Then about 60 pieces are fixed on to the gantry on both sides to form a platform to facil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at the site, but at that stage it becomes the property of the customer because it is permanently embedded in the land belonging to the customer. The result is that as soon as 3-motion electrical overhead travelling crane comes into being, it is the property of the customer and there is, therefore, no transfer of property in it by the manufacturer to the customer as a chattel. It is essentially a transaction for fabricating component parts and putting them together and erecting them at the site so as to constitute a 3-motion electrical overhead travelling crane. The transaction is no different than one for fabrication and erection of an open godown or shed with asbestos or tin sheets fixed on columns. There can, therefore, be no doubt that the contract in the present case was a contract for work and labour and not a contract for sale. This view which we are taking is completely supported by the decision of this Court in Sentinel Rolling Shutters Engineering Co. (P.) Ltd. v. Commissioner of Sales Tax, Maharashtra C.A. No. 1001 of 1977 decided on 12th September, 1978; since reported in [1978] 42 S.T.C. 409 (S.C.). We accordingly allow the appeal, set aside the judgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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