TMI Blog1962 (12) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... ied is Rs. 1,22,035. Subsequently the applicant-company wrote to the Additional Collector of Sales Tax requesting him under section 27 of the Bombay Sales Tax Act, 1953, to hold that the materials and labour which the applicant used for the construction of the coaches when delivered to the Railway did not fall within the definitions of sale and turnover and that they were not liable to sales tax under the Bombay Sales Tax Act, 1953. The learned Additional Collector treated this application as an application for determination of the questions under section 27(a) and 27(b) of the Act and framed the following questions for determination: (i) Whether the transactions covered by the bill dated 4th October, 1958, is a sale [to be determined under section 27(b)]. (ii) If it is a sale, whether any tax is payable in respect of the same [to be determined under section 27(a)]. By his order dated 29th June, 1959, the learned Additional Collector answered both the questions in the affirmative. The applicant preferred an appeal to this Tribunal against the learned Additional Collector's order and by its judgment dated 16th December, 1960, the Tribunal dismissed the appeal. The order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tificate No. M/60 (1) 1/B/PRTN, dated 4th October, 1958, the performance of the works of building, erecting and furnishing 3 B.G. coaches over the chassis supplied by the Railway is a works contract not amounting to sale or whether it is a transaction of sale?" In our opinion the question of law posed by the applicant-company arises out of our judgment. The recital in the contract and clause 29 above referred to prima facie show that the contract is a works contract and that the property in the materials was transferred to the Railway not as a result of any building of the coaches but by reason of their being brought on the site. We have however rejected this construction of the recital and the clause after considering them in the context of other clauses of the general conditions. Therefore the question whether the contract in question is a works contract or amounts to a contract of sale depends on the construction of the written agreement between the parties as a whole and raises a question of law as to the construction of a written contract. We therefore refer the following question to the High Court under section 61 of the Bombay Sales Tax Act, 1959: "Whether on a proper cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 27 of the Bombay Sales Tax Act, 1953, for the determination of the question whether the case fell within the definition of "sale" and whether they were liable to sales tax under the provisions of the Bombay Sales Tax Act, 1953. The Additional Collector of Sales Tax, by his order dated 29th June, 1959, held that the transaction covered by the aforesaid bill dated 4th October, 1958, was a sale and that tax was payable in respect of the same. The applicants preferred an appeal from that decision before the Sales Tax Tribunal. The Tribunal, by its judgment dated 16th December, 1960, dismissed the appeal. The matter has come up before us for the determination of the question following: "Whether on a proper construction of the agreement as a whole and its general conditions and specifications, the work done and covered by contract certificate No. M/60/(1)1/PRTN, dated 4th October, 1958, the performance of the works of building, erecting and furnishing 3 B.G. coaches over the chassis supplied by the Railway is works contract not amounting to sale or whether it is a transaction of sale?" We shall first turn to the provisions of the Bombay Sales Tax Act, 1953. Section 6 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of 24 (twenty-four) months from the date of signing of agreement. The contractor shall be required to complete the building of a minimum number of four coaches per month following the initial preparatory period of four (4) months." Clause 17 of the tender provides as under: "The successful tenderer/tenderers shall be required to execute an agreement with the President of India acting through the Chief Mechanical Engineer, for carrying out the work in accordance with the relative specifications and drawings mentioned in para 2 above for the work and in accordance with the terms and conditions of the agreement, special conditions and tender conditions." The terms of the tender indicate that the tender is invited in connection with the construction of work therein mentioned and that the tenderers were required to quote the rates for undertaking such work. When we turn to the agreement in writing executed by the President of India on the one hand and the applicants on the other, there is a recital to the effect following: "Whereas the contractor has agreed with the railway for the performance of the works of 'building, erecting and furnishing 99 (ninety-nine) non-vestibule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for use in the works and the contractor shall pay full freight charges at public tariff rates therefor. Clause 20(4) provides as under: "The Railway shall have the right to let other contractors in connection with the works. The contractor shall afford other contractors reasonable opportunity for the storage of their materials and the execution of their work and shall properly connect and co-ordinate his work with theirs............" Clause 22(1) provides that the whole of the works shall be executed in perfect conformity with the specifications and drawings of the contract and that if the contractor performs any work in a manner contrary to the specifications or drawings or any of them and without such reference to the Engineer he shall bear all the costs arising or ensuing therefrom and shall be responsible for all loss to the railway. Clause 25 of the general conditions provides that the contractor shall at his own expense provide himself with sheds, storehouses and yards in such situation and in such numbers as in the opinion of the Engineer is requisite for carrying on the works and the contractor shall keep at each of such sheds, storehouses and yards a sufficient quantit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all apparatus and plant required on the works, except such tools, plant or materials as may be specified in the contract to be supplied to the contractor by the Railway." Clause 33 provides that the contractor shall be bound to hand over the works executed under the contract to the Railway complete in all respects to the satisfaction of the Engineer and that the Engineer shall determine the date on which the work is considered to have been completed. Clause 43 provides that as soon as in the opinion of the Engineer the works shall have been substantially completed and shall have satisfactorily passed any final test or tests that may be prescribed the Engineer shall issue a certificate of completion in respect of the work and the period of maintenance of the works shall commence from the date of such certificate. By clause 45 it is provided that the contract shall not be considered as complete until a maintenance certificate shall have been signed by the Engineer stating that the works have been completed and maintained to his satisfaction. Clause 55 provides as under: "55-(1) The Railway shall be entitled to determine and terminate the contract at any time should, in the Railw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." In Benjamin on Sale, 8th Edition, at page 167, it has been observed as under: "A contract whereby a chattel is to be made and affixed by the workmen to land or to another chattel before the property therein is to pass is not a contract of sale, but a contract for work, labour and materials, for the contract does not contemplate the delivery of a chattel as such." The aforesaid tests for the purpose of regarding the contract in question as a contract for work and labour have been fully and completely satisfied in the present case. It is not possible for us to consider that there is a contract for the sale of any chattel as a chattel. The contract is for the carrying out of the whole work which has been un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there should be an agreement between the parties for the purpose of transferring title to goods, which presupposes capacity to contract, that it must be supported by money consideration, and that as a result of the transaction property must actually pass in the goods. One of the tests laid down by the Supreme Court in that case for the purpose of considering whether there was a contract for the sale of goods or not, is that there must be an agreement "to sell the materials as such". That test has not been satisfied in the present case. We are supported in the conclusion which we have reached by a decision of the Allahabad High Court in Kays Construction Company v. The Judge (Appeals) Sales Tax, Allahabad and Another[1962] 13 S.T.C. 302. In that case the petitioner, a contractor, undertook to build some passenger bogies for the Railway. Under the contract the underframes were to be supplied by the Railway, but the property in the frames was always to remain in the Railway. The superstructure over these underframes was to be constructed by the petitioner according to certain specifications and the petitioner was to be paid for the work at the rate of Rs. 50,200 for each bogie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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