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TMI Blog1983 (12) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... es Tax (Orissa) Rules, 1957, making demands of Rs. 1,21,38,586.00 for the year 1974-75, Rs. 1,29,64,637.00 for the year 1975-76 and Rs. 1,37,72,652.00 for the year 1976-77. The appellant is a dealer registered under section 7(1) of the Central Sales Tax Act, 1956, under Koraput I Circle in the State of Orissa. M/s. Hindustan Aeronautics Limited (hereinafter referred to as "H.A.L.") of which appellant is a division was established on 1st October, 1964. The objective of formation of the H.A.L. was to carry on in India and elsewhere, the business, inter alia, in aeroplanes including manufacture, assembling, buying and selling, etc., of the same. In its division at Sunabeda, manufacture of MIG engines for MIG aircrafts required for defence and overhauling of aero engines of Indian Air Force were undertaken. Some of the MIG engines manufactured by it were sent to Nasik Division of H.A.L. and some to Indian Air Force as per instructions from the Ministry of Defence. The appellant received payments from the Government of India or Indian Air Force for the manufacturing programme. In respect of payments so received, the Sales Tax Officer, Koraput I Circle, levied Central sales tax on the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the said agreement to the Government of the Union of Soviet Socialist Republics shall be made by Hindustan Aeronautics Limited, Bangalore, on behalf of the Government. 4.. This entrustment shall remain in force till it is revoked or altered by the President of India. 5.. The Government of the Union of Soviet Socialist Republics is being informed of this entrustment and they are being requested to co-operate and deal directly with Hindustan Aeronautics Limited, and do all things necessary for the effective operation of the said Agreement according to the terms thereof." There was another letter regarding the determination of premium under Emergency Risks (Goods) Insurance Act, 1962. The said letter on behalf of the Government of India stated, inter alia, as follows: "That the materials imported by H.A.L. for manufacture/assembly of aircraft/engines/helicopter/other equipment and also goods, stocks and stores, works-in-progress, etc., for which 'on account' payments have been made and are being made by DCDA(AF) are the property of I.A.F. and that the items manufactured out of the categories of materials stated above are to be supplied only to the Indian Air Force or as aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Aeronautics Limited and the Indian Air Force, going to the same supplier abroad for the same items", the letter dated 20th December, 1971, from the Under Secretary to the Government of India, Raksha Mantralaya, Raksha Utpadan Vibhag, written to the General Manager of the Nasik Division of the appellant, the letter of 28th April, 1969, on the subject of "'on account' payments to H.A.L. for I.A.F. manufacturing programmes of H.A.L., Nasik, Koraput and Hyderabad", letter dated 8th December, 1972, from the Under Secretary to the Government of India, Ministry of Defence, on "pricing of H.A.L. manufactured aircraft and margin profit, etc." and the invoice dated 19th March, 1976. Reliance was also placed on behalf of the revenue before us, on the order of the Assistant Commissioner of Sales Tax for the assessment years 1974-75 and 1975-76, wherein he had referred to a statement furnished with a copy of the claim against price proposal for 6 F2S details engines as accepted by the Govern- ment by their letter dated 4th June, 1976. That claim is against price proposal for 6 F2S details engines accepted by the Government. Their break-up is as follows: "Imported materials Rs. 48,39,454.08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came to Rs. 68,58,724.36. The further break-up of the total cost of Rs. 68,58,724.36 was imported materials, indigenous material and MCH freight, etc., labour cost and sundry direct charges. Apparently the cost of the material both imported as well as procured locally had been charged in the bill. According to the Assistant Commissioner, further profit of 15 per cent had been charged on H.A.L.'s effort which included freight, material overhead, indigenous material, labour cost, training cost and other expenses, tooling expenditure, last test expenses, insurance and freight. The total cost of these items as per the bill stood at Rs. 16,52,096.71. 15 per cent of this had been charged towards the profit. The Assistant Commissioner had further observed that profit was charged as in a commercial transaction in case of sale. Commission was allowed in case of agency transaction between the principal and the agent. But in the supply of MIG engines, a profit had been charged. The Assistant Commissioner concluded that this gave a clear indication that this was a case of transaction of sale and not of agency. We are unable to accept this reasoning of the Assistant Commissioner. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivil Appeal Nos. 1386-91 (NT) of 1977 of this Court. Since reported at page 314 supra. As emphasised by this Court, there is no rigid or inflexible rule applicable alike to all transactions which can indicate distinction between a contract for sale and a contract for work and labour. But the tests indicated in the several decisions of the court merely focused on one or the other aspect of the transaction and afforded some guidance in determining the question, but basically and primarily, whether a particular contract was one of sale or for work and labour depended upon the main object of the parties in the circumstances of the transactions. In a contract for sale, the main object of the parties is to transfer property in and delivery of possession of a chattel as a chattel to the buyer. It has to be emphasised, taking into consideration the correspondence and circumstances under which this entrustment had to be understood that at no point of time before the delivery of MIG engines, H.A.L. was the owner of the property either in the equipment or in the spares or in the aircrafts and as such there could not have been transfer of any property from H.A.L. to the Government of India. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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