TMI Blog1955 (12) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeal, holding that passenger lifts were covered by the said entry. On an application in revision made to the Additional Collector, it was contended that the word "domestic " had a particular relation to dwelling places only, whereas passenger lifts were largely supplied to industrial houses or factories, but the Additional Collector held that the expression "domestic" should be broadly interpreted and that a lift was a domestic electrical appliance. Shri Patel who appeared for the applicants also contended that the installation of a lift did not amount to a sale, and that, therefore, his clients were not liable to any sales tax at all. He relied in support of this contention on the case of Gannon Dunkerley Co. v. The State of Madras(1). This contention was rejected on the ground that that case, which had to do with the passing of property in materials used in constructing buildings, bridges, etc., had no direct bearing on the facts of this case. The Additional Collector observed, "In a sense the lift may be said to be a finished article only requiring to be installed at a particular place. Some of the bills issued by the applicant produced to me also show that the sales (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "sale price" included the amount payable to a dealer as valuable considera- tion "for the carrying out of any contract, less such portion as may be prescribed, of such amount representing the usual proportion of the cost of labour to the cost of materials used in carrying out such con- tract"; and the definition of " turnover " included the following words at the end: "or carrying out of any contract, effected or made (1) [1954] 5 S.T.C. 216. during a given period." These parts of the several definitions were deleted as stated above by the Bombay Act, XXV of 1947. The deletion of these passages from the definitions concerned, according to Shri Patel, was based on the view that the carrying out a contract for the construction, fitting out, improvement or repair of any building, road, bridge or other immovable property did not contain any element of the sale of goods, thus giving effect to the principle embodied in the decision of the Madras High Court in Gannon Dunkerley's case(1), which of course was decided later on the 5th April, 1954. That was a case of certain building contracts entered into by the assessees with the State Government and other parties for the execution of ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich alone it would be possible for the assessees to give delivery to their employers. Shri Patel has particularly relied on two cases referred to in Gannon Dunkerley's case(1), viz., Appleby v. Myers(2) and Clark v. Bulmer(3). The plaintiff in the first case contracted to erect machinery on the defendants' premises at specific prices for particular portions and to keep it in repair for two years the price to be paid upon the completion of the whole. After some portions of the work had been finished and others were in the course of completion, the premises with all the machinery and materials thereon were destroyed by an accidental fire. The learned judges had to consider the question whether the property in the materials had passed to the owner of the premises. Blackburn, J., observed: "Though this is the prima facie contract between those who enter into contracts for doing work and supplying materials, there is nothing to render it either illegal or absurd in the workman to agree to complete the whole, and be paid when the whole is complete, and not till then; and we think that the plaintiffs in the present case had entered into such a contract". In Clark v. Bulmer(3), the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to include a transfer of property in goods made in the course of the execution of a contract; "sale price" was defined as including the amount payable to a dealer as valuable consideration for the carrying out of any contract less such portion, representing the proportion of the cost of labour to the cost of materials used in carrying out such contract, as may be prescribed; and "turnover" was defined so as to include the aggregate of the amounts of sale prices and parts of sale prices received or receivable by a dealer in respect of the supply of goods or in respect of the supply of goods in the carrying out of any contract effected or made during the prescribed period excluding inter alia such sales as may be prescribed. Their Lordships held these provisions to be intra vires, and further held that building materials were goods of which there could be a sale or supply subject to the sales tax. Their Lordships observed: "That building contracts are entire, that property in the building materials passes when they are part of immovable property and that payment is in a lump sum and not separately for the materials may be matters of consequence in some contexts. But there is always a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the premises of Messrs. Jayant Jain Housing Co. Ltd., enclosing the necessary information in the specified form. On 12th September, 1950, Shri K.J. Khatre requested the applicants to start work of erection of the lifts. The Electrical Engineer to Government, P.W.D., Bombay, wrote to the housing company on 31st October, 1950, granting permis- sion for the erection of two lifts in their premises under section 4 of the Bombay Lifts Act, 1939, subject to the condition that the permission would be valid for a period of 6 months. On 4th November, 1950, the applicants informed Shri Khatre that his clients would be charged extra Rs. 200 per cage for each lift. On 18th November, 1950, the appli- cants complained to Shri Khatre of the theft of certain wiring materials, the machine room having been broken open, and added, "Kindly therefore see that proper arrangement is made for the safeguard of our materials in the premises to avoid recurrence of similar nature and oblige". On 12th December, 1950, the applicants wrote to the Bombay Electric Supply and Transport Undertaking with a request for an appoint- ment for the electrical connexion of the lifts. On 22nd December, 1950, the applicants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sub-contract for the fixing of cur- tains in certain premises. Goddard, L.J., observed: "The first point taken by Mr. O'Sullivan for the defendants was that the sub-contract was not for a sale of goods, but was a contract for work and labour and the supply of material in connexion therewith. On this point we agree with the learned judge who has held that as the contract involved trans- ferring to the defendants for a price chattels, namely, curtains, in which they had no previous property, it was a sale of goods. If one orders (1) [1954] 5 S.T.C. 216. (3) [1944] K.B. 484. (2) (1886) 6 W.R. 228. another to make and fix curtains at his house the contract is one of sale, though work and labour are involved in the making and fixing; nor does it matter that ultimately the property was to pass to the War Office under the head contract. As between the plaintiff and the defend- ants, the former passed the property in the goods to the defendants who passed it on to the War Office" (P. 487). In Benjamin on Sale (Eighth Edition, 1950), it is pointed out that there has been diversity and even conflict of opinion, in relation to the proper principle by which to test whether certain contracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following two propositions to be found at pages 344 and 346 would appear to be relevant, viz., (1) "When the seller is to manufacture the goods for the buyer the rule is that Prima facie the property will not pass till the goods are completely made and are appropriated with mutual assent"; and (2) "The general rule being then as above stated, that the property in an article to be made does not pass until it be completed and appropriated with mutual assent on completion, it is nevertheless competent to the parties to agree that the articles may be so appropriated and the property pass before completion". In support of the second proposition the cases of Woods v. Russell(1) and Clerk v. Spence(2) and other cases have been considered by the learned author. Both those cases related to contracts for the building of ships. In the second of these cases certain passage cited from Woods v. Russell(1) was stated to be "founded on the notion that provision for the payment regulated by particular stages of the work is made in the contract with a view to give the purchaser the security of certain portions of the work for the money he is to pay, and is equivalent to an express provision that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was made by the applicants to the Inspector of Lifts, P.W.D., as late as 28th August, 1950, for permission to erect lifts, the earlier stage of delivery having been completed. The permission was granted on 31st October, 1950. Before this date, on 8th May, 1950, the applicants wrote to Shri K.J. Khatre, "We beg to inform you that lift materials for your above clients have duly arrived, and as we intend to forward these materials at site, we would like to know to whom we should deliver there". This question was repeated in a postscript to a letter dated 9th June, 1950, addressed to the Jayant Jain Housing Co., Ltd. The applicants on the 5th November, 1949, wrote to Shri Khatre that they had sold four lifts since the offer made to him and inquired whether they should reserve the lifts required. A question was raised during the correspondence as to whether the price of Rs. 20,550 included collapsible gates, machine beams, etc., and on 4th November, 1950, the applicants informed Shri Khatre that the clients should be charged Rs. 200 extra for each cage for a lift. It seems to us clear from the correspondence that the contract was definitely for a transfer of property on the site befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. The word 'supply' used in the definitions has not any sinister purpose and, read in the context of other definitions, is apt to describe the sale of building materials not directly but as part of a building contract". Although certain parts of the original definitions of goods, sale, sale price and turnover in the Act of 1946 have been omitted by the amending Act XXV of 1947, the words "or supply" occur after the word "sale" in the definitions of "sale price" and "turnover". The authorities below have deducted 20 per cent from the amount which the applicants have charged as representing the labour charges incurred, the rest being taken to be the price of the materials used in installing the lifts. Shri R. V. Patel stated that he had no objection to this apportionment. We find that one of the items mentioned in the Indian Customs Tariff, 40th Issue (in operation from 1st September, 1955) is "passenger lifts and component parts and accessories thereof" [item 72(4)]. It is quite clear that the Customs Authorities do not have to deal with the passenger (1) [1955] 6 S.T.C. 93. lifts as finally installed or erected, but with the parts of lifts that are imported into the country. It s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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