TMI Blog1987 (7) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... es and Disposals, Government of India, and sold them to the Indian Navy for a sum of Rs. 5,55,000. The assessing authority sought to assess the said turnover to tax under the Central Sales Tax Act. The assessee objected to the said assessment contending that the agreement entered into with the Director General of Supplies and Disposals was in the nature of a contract for work and labour and did not evidence a contract for sale of goods. The objection raised by the assessee was overruled and assessment was made on the said turnover. On appeal, the Additional Appellate Assistant Commissioner of Agricultural Income-tax and Sales Tax, Ernakulam, agreed with the assessing authority and dismissed the appeal filed by the assessee. The assessee too ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt's risk till delivery to the company. The contention raised by the company was that the contract was not one for sale but was one for work. Repelling that contention, their Lordships found the contract to be a contract of sale on the ground that it was a contract for the transfer of chattels qua chattels since the essence of the contract was the delivery of bricks. Again in Patnaik and Company v. State of Orissa [1965] 16 STC 364, a Constitution Bench of the Supreme Court had considered the question whether the contract entered into between the appellant and the State was one for work and labour or whether it was a contract for sale of goods. In that case the appellant was to build bus bodies on chassis supplied to it by the Government. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supervise the execution of the contract at all stages of the work. If the Inspector finds any work to be defective, the purchaser had the right to reject the same and to get it substituted at the cost of the contractor. The contract further enabled the purchaser to declare the same to have come to an end in case it is found that the contractor is unable to perform the work. Clause 18 of the contract enjoined the contractor to take insurance in the name of the purchaser. Under clause 19, the contractor is bound to provide for the care and protection of the work, machineries, etc. As per clause 20, after the completion of the work the purchaser is to take over the craft on issue of a taking over certificate. Clause 22 related to the ownership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing reasons. 6.. As per the terms of the contract entered into between the parties, payments were to be made by the purchaser at various stages of the construction. The first instalment, 15 per cent of the value is to be paid when keel is laid. As the work progresses further instalments are to be paid. The entire amount is thus divided into five or six instalments depending on the nature of the craft. As per clause 18 of the contract, the contractor has to get the vessel insured in the name of the purchaser, before the payment of the first instalment is actually effected. The relevant provision is: "The contractor shall immediately upon the granting by the Inspector of his certificate that the contractor is entitled to the first insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of construction. Clause 19, inter alia, provided that the contractor shall be in charge of and entirely responsible for the care and efficient protection and working of the vessel, and all the machinery and things supplied and connected with it, until the said vessel and machinery, boilers and other things have been tried and accepted by the purchaser as satisfactory under the condition 's of the order. This provision makes it abundantly clear that the contractor continues to be the owner of the craft and all the articles attached to it. It is further provided in unmistakable terms, that in case the vessel or part thereof is destroyed or damaged by fire or otherwise, the contractor has to rebuild or repair the same at his cost. For the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of weather or otherwise howsoever, since the contract provides that the loss or damage on account of theft, fire, stress of weather or otherwise is to be borne by the contractor himself. We have no hesitation in holding that the contract was one for sale of the vessel. This view is further strengthened by the fact that the purchaser was not supplying any material for the construction of the craft. In these circumstances, we hold that the contract entered into between the assessee-respondent and the Director General of Supplies and Disposals, Government of India, was one for a contract of sale of hulls. The contrary view taken by the Tribunal is illegal and we reverse the same. In the result, the tax revision case is allowed, the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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