TMI Blog1963 (5) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... by the customers. In the assessment years 1952-53 and 1953-54, the Assessing Authority held the firm liable to sales tax on the sale of such "bodies" fitted on the chassis and did not allow any deductions for labour charges, including them in the sale of the "bodies", on the ground that the dealer had sold complete "bodies" in a finished state and not the material thereof. In these circumstances the Assessing Authority did not allow any deduction on account of labour charges at the rate of 60 per cent. as claimed by the petitioner-firm and as had been allowed to other similar manufacturers before by the department. Aggrieved by the order of the Assessing Authority, the petitioner-firm went up in appeal before the Deputy Excise and Taxation Commissioner on the ground that the buses, trucks or chassis were not owned by the petitioner-firm but all that was done was that bodies were fitted thereon. These appeals were dismissed. Revision petitions were filed before the Excise and Taxation Commissioner, who made an order on 6th March, 1958. According to his order, the petitioner-firm built complete bodies, which are fitted on the chassis of the vehicles belonging to the customers and ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larly the size of the body would vary according to the size of the chassis. A good deal of emphasis has been laid by him on the fact that the chassis is supplied by the customer whereas when the body is built and fitted on it, the finished vehicle turns out to be a bus or a truck. Therefore, the contract essentially is one for work and labour, although the materials are also to be supplied by the petitioner-firm. The contention canvassed on behalf of the respondents is that the sale necessarily is of goods, namely, bodies which are manufactured on a large scale by the petitioner-firm and which are of varying sizes and specifications according to the standard size of the chassis and according to the requirements of the customer, namely, for transportation of passengers or goods etc. A price is agreed upon for the sale of the body which is only then to be fitted on the chassis and even if any work of building or fitting is involved, that will not detract from the real nature of the contract which is one of sale. It will be presently examined which contention should prevail on the facts of the present cases. In Gannon Dunkerley and Co. (Madras) Ltd. v. State of Madras [1954] 5 S.T.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sults by the erection of the superstructure, the materials also pass to the owner of the land." It was finally held that as no element of sale was to be found in the contract, the impugned amendments were bad as the Provincial Legislature had no power to tax transaction which were not sales of goods. In Jubilee Engineering Co. Ltd. v. Sales Tax Officer[1956] 7 S.T.C. 423., the Andhra Court followed the above view holding that where under a works contract a person undertakes to build a particular building or to make a particular thing, the materials involved in the building or making of the finished product, are not the subject-matter of sale because there is no agreement to sell the materials nor is the price of the goods fixed nor is there a passing of the title in these goods as such, except as part of the building or the thing in which they are embedded. The building contractor in such a case cannot be said to have sold any goods or materials used in the building. In the appeal which was taken to the Supreme Court in Gannon Dunkerley and Company's case(1), their Lordships approved of the view expressed by the Andhra Court. At page 389 the point for decision was stated: "The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss as movables. According to Mr. Sastri the agreement between the parties in the present cases was not for the sale of the very goods in which eventually the property passed, e.g., the bodies. He also says that the agreement and the sale did not relate to the same subject-matter. If the view which has been taken by the departmental authorities on the facts is to be accepted as correct, it is difficult to see how the agreement and the sale in the present cases did not relate to the same subject-matter. If the agreement was for the sale of the body when ready and complete and duly fitted on the chassis, then property passed eventually in that very goods, with the result that it would be a transaction of sale according to what has been laid down by their Lordships. It would, therefore, essentially depend on the facts of each case what the true nature of the transaction is. Mr. Sastri then relies on the passage at page 424 from the judgment of Blackburn, J., in Appleby v. Myres (1867) L.R. 2 C.P. 651 at pp. 659-660. : "It is quite true that materials worked by one into the property of another become part of that property. This is equally true, whether it be fixed or movable property. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompleted articles. The question was whether the applicants were dealers and liable to sales tax. The learned Bombay Judges applied the test whether or not the work and labour bestowed end in anything that can properly become the subject of sale. According to them, 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 the chattel. The number of bodies ordered was stated to be 218 in the contract and the price was stated to be Rs. 1,730 per body Ex-Works Bombay. It was held on reading the terms of the contract that what was intended between the parties was that the applicants should manufacture and sell to the Government of India 218 motor bodies fitted on to the chassis, which were supplied to them by the Government. It was found that the work and labour was to end in the finished article, viz., the completed body, which was to be delivered as an article under the contract for the price to be paid for it. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bus body fixed to his chassis. It was observed: "In the circumstances the conclusion is inescapable that there takes place a transfer of the property in the bus body built by the assessee and it would be difficult to hold that the transaction so made is not a contract of sale of the bus body, but is a contract for work and labour." The Bombay case was relied on as also certain other English and Indian cases which were referred to, including the Gannon Dunkerley and Company's case[1958] 9 S.T.C. 353. Desai, C.J., in the concluding portion of his judgment held: "In the instant case what the customer wanted was the construction of bodies on the chassis of his buses. The assessee could have prepared the bodies first and then fixed them on to the chassis or could have started the construction of the bodies by putting one plank after another on the chassis themselves. All the materials were to be supplied by the assessee. The element of sale predominated over the element of contract of work." We would respectfully adopt these observations for the purposes of answering the first question. On the facts stated in the reference the conclusion is inescapable that the transactions wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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