9911796707
TMI Blog1968 (2) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... partnership firm carrying on business under the name and style of Messrs. Vasani Cloth Stores. The applicants sell cloth and also run a tailoring department. The issue raised in the question referred to us arises out of amounts collected in the tailoring department. For the accounting period 1st April, 1954, to 30th September, 1954, the Sales Tax Authorities did not accept the turnover of sales from the cloth department returned by the applicants, and enhanced the same by including in the turnover the tailoring charges received by the applicants in respect of the garments prepared by them according to the orders of the customers. Reference had been made to sample bills on the basis of which the authorities and the Tribunal seem to have come to the conclusion that the charges for tailoring include the charges for articles like silk lining, and though the question refers to other materials like hair canvas there is no reference to their use, at any rate, in the bills which form part of the record. But it is possible that hair canvas may have been used though there is no evidence in the proceedings as to the quantity, or price or value of such hair canvas, or, for the matter of that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the parties to have these two types of contracts. If the use of the material is ancillary to the work and labour involved in the contract, the mere fact that either the material is chosen of a particular quality, or that the cost of the material used represents a certain percentage in the total charge, will not be decisive of the question. Our attention is drawn in particular to the observations of this Court in the case of Arun Electrics[1965] 16 S.T.C. 385. It may be mentioned that the main decision in the case was vacated later in the Supreme Court on the finding that the evidence which consisted merely of the bill did not justify the finding that there were two separate contracts on the facts of that case: Arun Electrics, Bombay v. Commissioner of Sales Tax, Maharashtra State[1966] 17 S.T.C. 576. But the judgment of this Court is useful, as it has considered in detail the factors which enter in the decision of the issue similarly involved at page 389. The Division Bench has observed as follows: "If A contracts to buy a coat made for him by B for a certain price, there is a contract for the sale of a coat between A and B, although the coat before it is delivered by B to A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem. After completion of the embroidery work on the saris, the applicants returned the saris to the customers along with a consolidated bill for the entire work done by them. The question was whether the contract between the applicants and their customers was a works contract, or was a composite agreement, one for sale of the jari materials and another for doing embroidery work. It was held by the Court that the contract was one and indivisible and was not separable into two contracts, one for service and the other for the sale of the jari materials. The contract essentially was one of work and labour and the supply of jari materials in the execution of the embroidery work was merely ancillary. In our opinion, the principle of this decision should apply to the facts before us. In the Gujarat case, the value of the jari material used represented as much as 30 percent. of the charges paid for by the customer. The fact that valuable material is required to be used in the execution of the works contract will not be necessarily decisive of the question whether it was intended between the parties that there should be an agreement to purchase and an agreement to sell the material as such. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stitching order have been separately priced or charged in the bill. Reference was made to two other decisions which arose out of tailoring contracts. The first is the decision in the case of Indralaya Ltd. v. Additional Commissioner, Commercial Taxes, West Bengal, and Others[1958] 9 S.T.C. 633. In that case, the Court laid down four propositions which are to be found at page 637. With respect, it is very difficult to find out what the ratio of the decision is. The nearest case to the present case is in the first proposition where the customer brings his own goods or materials to be made up into garments. In such a case, it is said that there is no sale of goods except for such things as buttons or thread, etc., which may be supplied by the dealers and which may be the subject-matter of sales tax, but this is pure work done and labour supplied. The second proposition consists of a case where the customer goes to the piece-goods department, purchases certain material, pays the price, takes delivery and then goes to the tailoring department and orders it to be made up. If all such facts were strictly proved, it would be, so far as the tailoring department is concerned, in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the passing of property is merely ancillary to the contract for the performance of work, such a contract does not thereby become a contract of sale. We have already pointed out that one of the tests which may be useful in deciding such a case would be whether the supply of material or the use of material which would undoubtedly be involved in execution of the contract, is ancillary to the execution of the works contract, or forms part of a separate agreement of sale. On a consideration of all the circumstances of the present case, we have found it difficult to accept the view of the Tribunal that, either from the bill or from any other material on record, it can be said reasonably that two separate contracts can be spelt out, one for the supply and sale of lining material or hair canvas or, for the matter of that, for the supply and sale of thread and buttons, and the other for service charges. The two are indivisible. Supply is inevitable, for, without either thread or buttons or lining material, it may not be possible to execute the work. That these articles are required to be used need not be determinative of the question whether there is no separate agreement for purchase. Or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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