TMI Blog1965 (5) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... essee indicated as one of its conditions that besides the costs of the work he will charge sales tax extra. The Executive Engineer disputed this, saying that no liability of sales tax arose where the goods were purchased for the use of the Government and insisted on the exclusion of this term from the agreement. We are unable to say whether this term was excluded from the agreement or not as the copy of the agreement is not on record. However, the Sales Tax Officer, Jaipur City Circle "B" while assessing the assessee for the year 1957-58 taxed it on Rs. 23,408 representing the amount received by it on this contract between the assessee and the Central Government despite objection. An appeal was preferred by the assessee before the Deputy Commissioner, Excise and Taxation, who held that the Sales Tax Officer should re-examine the case of the assessee because the agreement in question consisted of two separable parts of (a) providing, and (b) fixing the windows, and the assessee was only liable for the amount covered by the first part of the contract. The assessee preferred a revision against this order before the Board of Revenue for Rajasthan, Ajmer, challenging the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was divisible between two parts representing the sale of the windows and the labour charges in fixing the same and thus partly liable to sales tax?" It is this question which we propose to answer. The learned counsel for the assessee argued that having regard to the language of the tender that it was a contract for "work", for "providing and fixing special type steel windows as per approved drawing", namely, "the senior architect drawing No. 3354," etc., and "the work was to be completed within six months", the transaction was not one of sale but for work. The specifications appended with the tender detailed the type of the work which was to be executed by the assessee and fitted in the office building of the Accountant-General. The confirmation order which followed likewise employed phrases like "providing and fixing" and unmistakably indicated the same intention that the contract was one for work and not of sale. Alternatively he urged that even if it was a composite contract then it was indivisible and not liable to sales tax. He placed reliance on the State of Madras v. Gannon Dunkerley Co. (Madras) Ltd.[1958] 9 S.T.C. 353., Carl Still G.m.b.H. Another v. The State of Bih ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to set up a complete coke oven battery ready for production as well as by-products plants at Sindri. The appellant was to provide accessories and articles and render services described in the schedule for an all inclusive price. The agreement provided that all materials brought to the site would become the company's property, but if they were destroyed by fire, tempest or otherwise, the loss would fall not on the company but on the appellant. It was held by the majority of their Lordships of the Supreme Court that the contract was entire and indivisible for the construction of specific works for a lump sum and not a contract of sale of materials as such, and the Sales Tax Authorities had no right to impose a tax on the materials supplied in execution of that contract. In Voltas' case[1963] 14 S.T.C. 446., Messrs. Voltas Limited were assigned the contract for providing in a building with a system of air-conditioning. The contract contained detailed particulars of the work that had to be done by the assessee and the different types of machinery that would be utilised in the fabrication of the air-conditioning unit. The company was to design the machinery, set it up in a particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the use of materials is accessory or incidental to the execution of the work; or it may be a contract for work and use or supply of materials though not accessory to the execution of the contract is voluntary or gratuitous. In the last class there is no sale because though property passes it does not pass for a price. Whether a contract is of the first or the second class must depend upon the circumstances; if it is of the first, it is a composite contract for work and sale of goods; where it is of the second category, it is a contract for execution of work not involving sale of goods. The King's Bench case[1944] 1 K.B. 484. does not appear to render much assistance and need not be discussed. In Banarsi Das' case[1958] 9 S.T.C. 388., their Lordships of the Supreme Court reaffirmed the principles laid down in Dunkerley's case[1958] 9 S.T.C. 353., and need not be discussed in detail. In Kays Construction Company's case[1962] 13 S.T.C. 302., a contractor undertook to build some passenger bogies for the railway. Under the contract, the underframes were to be supplied by the railway. The superstructure over these underframes was to be constructed by the contractor according to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contract of works and is not a contract of sale. (See Carl Still's case[1961] 12 S.T.C. 449. and Voltas' case[1963] 14 S.T.C. 446. 3.. Even where a contractor affixes a structure on to a movable underframe supplied by the employer and the contractor is paid an all inclusive price for the materials and work such a contract is not a contract for sale and liable to sales tax. (See Kailash Engineering Co.'s case[1964] 15 S.T.C. 574. and Kays Construction Co's case[1962] 13 S.T.C. 302.; and contra See Mckenzie's case[1962] 13 S.T.C. 602. In the light of the above principles let us now examine the contract which is the subject-matter of controversy before us. A tender was submitted with a caption that the tender was for "works" to be executed for the President of India. The work was specified in the under-written memorandum and was to be completed within the time stipulated in such memorandum at the rates stated therein, and in accordance with the specifications, designs, drawings and instructions. The condition of the memorandum included that the assessee was to provide and fix special type steel windows as per approved drawing, the details whereof were given in the list. The cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pletion of this stage that the property in the fabricated windows which had become part of the building construction that the property in the goods passed. In our opinion these circumstances go to show that the contract of the assessee partakes of the nature of a building contract. Hudson's Buildings and Engineering Contracts, 8th Edition (1959) at page 36 describes building contracts in the following terms: "Building and engineering contracts are those agreements under which a person (in this book referred to as 'the builder' or the 'contractor') undertakes to execute building or civil engineering works for another person (in this book referred to as the 'employer' or 'the building owner'). The extent of the works to be executed may vary from the construction or repair of a small structure to the erection of large multiple buildings and housing estates and engineering works of every description and magnitude." The assessee's contract before us was a part of building contract and the assessee was bound to complete the works in its entirety before it was entitled to any payment. This is a vital condition and when read with others, viz., that the price was all inclusive without ..... X X X X Extracts X X X X X X X X Extracts X X X X
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