Full Judgment Text
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PETITIONER:
SENTINEL ROLLING SHUTTERS & ENGINEERING CO. (P) LTD.
Vs.
RESPONDENT:
COMMISSIONER OF SALES TAX, MAHARASHTRA
DATE OF JUDGMENT12/09/1978
BENCH:
BHAGWATI, P.N.
BENCH:
BHAGWATI, P.N.
TULZAPURKAR, V.D.
CITATION:
1979 AIR 1747 1979 SCR (1) 644
1978 SCC (4) 260
ACT:
Contract of Work and Labour and Contract of Sale tests
for guidance.
HEADNOTE:
The appellant assessee entered into a contract dated
28th June, 1972 for fabrication, supply erection and
installation of Sentinel’s Pull and Push type and Reduction
Gear type rolling shutters in sheds Nos. 3 and 4 of the
Sidheshwar Sahakari Sakar Karkhana belonging to M/s. C. M.
Shah & Co. (P) Ltd as per the terms and conditions of the
contract. The special terms and conditions provided that the
actual transportation charges would be in addition to the
price stipulated in the contract and the delivery would be
6/8 weeks, ex-works from the date of receipt of the final
confirmation of the order. The terms of payment also formed
part of the special terms an(l conditions and they provided
25% advance, 65% against delivery and remaining 10% after
completion of erection and handing over of shutters to the
satisfaction of the company. The assessee carried out its
part of the contract by erecting and installing the rolling
shutters. Since the assessee entertained doubt as to whether
the contract was a contract for sale or a contract for work
and labour, the assessee made an application dated 16-9-72
to the Commissioner of Sales Tax for determining this
question. The Deputy Commissioner of Sales Tax took the view
that the contract was a contract for sale of rolling
shutters and the work of erection and installation was
merely incidental to the sale and the assessee was therefore
liable to pay sales tax on 95% of the amount receivable by
it under the contract. In appeal the Sales Tax Tribunal held
the contract to be a composite contract consisting of two
parts, one for sale of the rolling shutters and the other
for execution of the work of erection and installation. The
High Court on a reference agreed with the tribunal and
answered it in favour of the Revenue.
Allowing the appeal by special leave the Court
^
HELD: ( 1 ) The contract was a contract for work and
labour and not a contract of sale. The contract is one
single and indivisible contract and the erection and
installation of the rolling shutter is as much a fundamental
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part of the contract as the fabrication and supply.
[655 D-E]
Vanguard Rolling Shutters & Steel Works v. Commissioner
of Sales Tax, U.P. 39 STC 372 applied.
Various component parts do not constitute a rolling
shutter until they are fixed and erected on the premises. It
is only when the component parts are fixed on the premises
and fitted into one another that they constitute a rolling
shutter as a commercial article and till then they are
merely component parts and cannot be said to constitute a
rolling shutter. The erection and installation of the
rolling shutter cannot, therefore, be said to be incidental
to its manufacture and supply. It is a fundamental and
integral part of the contract because without it the rolling
shutter does not come into being. The manufacturer would
undoubtedly be the owner of the component parts When he
fabricates them, but at no stage does he become the owner of
the
645
rolling shutter as a unit so as to transfer the property in
it to the customer. The rolling shutter comes into existence
as a unit when the component parts are fixed in position on
the premises and it, becomes the property of the customer as
soon as it comes into being. There is no, transfer of
property in the rolling shutter by the manufacturer to the
customer as a chattel. It is essentially a transaction for
fabricating component parts and fixing them on the premises
so as to constitute a rolling shutter. The contract is thus
clearly and indisputably a contract for work and labour and
not a contract for sale.
[653 H, 654 A]
(2) Whether a particular contract is one for sale of
goods or for work and labour depends upon the main object of
the parties gathered from the terms of the contract, the
circumstances of the transaction and the custom of the
trade.
[649 D-E]
(3) A contract where not only work is to be done but
the execution of such work requires goods to be used may
take one of three forms. The contract may be for work to be
done for remuneration and for supply of materials used in
the execution of the work for a price: it may be a contract
for work in which the use of materials is accessory or
incidental to the execution or the work; or it may be a
contract for supply of goods where some work is required to
be done as incidental to the sale. Where a contract is of
the first type, it is a composite contract consisting
essentially of two contracts, one for the sale of goods and
the other for work and labour. The second type of contract
is clearly a contract for work and labour not involving sale
of goods. while the third type is a, contract for sale where
the goods re sold as chattels and some work is undoubtedly
done, but it is done only as incidental to the sale. The
primary test is whether the contract is one whose main
object is transfer of property in a chattel as a, chattel to
the buyer, though some work may be required to be done under
the contract as ancillary or incidental to the sale or it is
carrying out of work by bestowal of labour and service and
materials are used in execution of such work.
[649 F-H, 650 F-G]
(4), To resolve the difficulties experienced in
application of the primary test courts have evolved some
subsidiary tests. one such test may be formulated as
follows: "The primary difference between a contract for work
or service and a contract for sale of goods is that in
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former there is in the person performing work or rendering
service no property in tho thing produced as a whole .. In
the case of a contract for sale, the thing produced as a
whole has individual existence as the sole property of the
party who produced it, at some time before delivery, and the
property therein passes only under the contract relating
thereto to the other party for price".
[651 B-C]
Commissioner of Madhya Pradesh v. Purushottam Premji 26
S.T.C. 38; State of Rajasthan v. Man Industrial
Corporation, 24 S.T.C. 349; State of Rajasthan v. Nenu
Ram, 26 STC 268; referred to.
(5) The provision "ex-works delivery" in the contract
does not make the contract a contract for sale. A rolling
shutter as a complete unit is not fabricated by the
manufactures in his factory but he manufactures only the
component parts and it is only when the component parts are
fitted into position and fixed on the premises that a
rolling shutter comes into being as a commercial article
and, therefore, when the contract provides that the delivery
af the goods shall be ex-works, what is obviously meant is
that the com-
646
ponent parts shall be delivered to the company at the works
of the assessee and once they are delivered, they shall not
be liable to be rejected by the company. But that does not
mean that as soon as the component parts are delivered to
the company, the contract is fully executed. The component
parts do not constitute a rolling shutter and it is the
obligation of the assessee under the contract to fix. the
component parts in position on the premises. and erect and
instal a rolling shutter. The execution of the contract is
not completed until the assessee carried out this obligation
imposed upon it under the contract and a rolling shutter is
erected and installed at the premises.
[654 C-F]
(6) The true nature of The contract cannot depend on
the mode of payment of the amount provided in the contract.
The parties may provide by mutual agreement that the amount
stipulated in the contract may be paid at different stages
of the execution of the contract, but that cannot make the
contract one for sale of goods if it is otherwise a contract
for work and labour. The payment of the amount due under the
contract may be spread over the entire period of the
execution of the contract with view either to put the
manufacturer or contractor in possession of funds for the
execution of the contract or to secure him against any risk
of non-payment by the customer. That cannot have any bearing
on the determination of the question whether the contract is
one for sale or for work and labour.
[654 H, 655 A-C]
State of Madras v. Richardson & Cruddes Ltd., 21 STC
245 referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1001 Of
1977.
Appeal by Special Leave from the Judgment and order
dated 24-2-77 of the Bombay High Court in Sales Tax
Reference No. 28 of 1975.
Hemendra K. Shah, M. H. Gami, P. H. Parekh, C. B. Singh
and M. Mudgal for the Appellant.
S. T. Desai and M. N.Shroff for the Respondent.
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The Judgment of the Court was delivered by
BHAGWATI, J. This appeal by special leave raises the
vexed question whether a particular contract is a contract
of sale or a con tract of work and labour. This has always
been a difficult question, because most of the cases which
come before the courts are border line cases and the
decisions given by courts are by no means uniform. But so
far as the present case is concerned, it does not present
any serious difficulty and is comparatively free from
complexity or doubt for there is a decision of this Court
which is directly applicable and is determinative of the
controversy between the parties.
The assesses who is the appellant before us is a
private limited company carrying on business as engineers,
contractors, manufacturers and fabricators and in the course
of its business, it entered in to a contract dated 28th
June, 1972 with M/s C. M. Shah & Co. (P) Ltd. (hereinafter
referred to as the Company) for fabrication, supply,
647
erection and installation of Sentinel’s Pull and Push type
and reduction Gear type rolling Shutters in sheds Nos. 3 and
4 of the Sidheswar Sahakari Sakar Karkhana belonging to the
Company. The detailed specifications of the Rolling Shutters
were given in the contract and the price was stipulated to
be Rs. 7/- per sq. ft. and rft. for Pull and Push Type
Rolling Shutters and Rs. 9/- per sq. ft. and rft. for the
Reduction Gear Type Rolling Shutters, the price in both
cases being inclusive of "erection at site". The contract
was expressed to be subject to the terms and conditions set
out in a printed form and there were also certain special
terms and conditions which were specifically written out in
the contract. Since considerable reliance was placed on
behalf of the Revenue on some of the printed terms and
conditions of the contract, we shall set them out in
extenso:
"2. Once the delivery of the goods is effected,
rejection claims cannot be entertained.
4. All erection work shall be carried out at
Customer’s own risk and no claim for incidental
structural breakages, damages to the property of the
customers or others shall be entertained. All masonry
works require before and or after erection shall be
carried out by customer’s own cost.
10. All payment shall be on overall measurements
only. Customer desiring to check the correctness of the
overall measurements shall notify their intention in
advance and shall get the measurements checked before
installation. No dispute on this ground shall be
entertained once the erection is completed.
12. Terms of Business: 50% advance with the order
and the balance against delivery of the goods ex-work
prior t erection, or against through Banks."
The special terms and conditions provided that the actual
transportation charges would be in addition to the price
stipulated in the con- tract and the delivery would be 6/8
weeks ex-works from the date of receipt of the final
confirmation of the order. The terms of payment also formed
part of the special terms and conditions and they provided
"25% advance, 65% against delivery and remaining 10% after
completion of erection and handing over of shutters to the
satisfaction" of the Company. The assesses carried out its
part of the contract and manufactured the two types of
Rolling Shutters according to the specifications provided in
the contract and erected and
648
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installed them in sheds Nos. 3 and 4 of the Sidheswar
Sahakari Sakar Karkhana. It does not appear from the record
as to when the bill relating to the contract was submitted
by the assesses to the Company, but it was dated 19th August
1972 and presumably it was sent by the assessee after the
fabrication of the two types of Rolling Shutters was
completed, but before they were erected and installed at the
premises of the Company. Since the assessee entertained
doubt as to whether the contract was a contract for sale or
a contract for work and labour, the assessee made an
application dated 16th September 1972 to the Commissioner of
Sales Tax for determining this question, for on the answer
to it depended the taxability of the amount to be received
by the assessee against fulfilment of the contract. The
deputy Commissioner of Sales Tax, who heard the application,
took the view that the contract was a contract for sale of
the two types of Rolling Shutters and the work of erection
and installation was merely incidental to the sale and the
assessee was, therefore, liable to pay sales tax on 95% of
the amount receivable by it under the contract, since that
represented the sale price of the Rolling Shutters, the
remaining 5% being attributable to the work and labour
involved in erection and installation. The assessee, being
aggrieved by the order passed by the Deputy Commissioner of
Sales Tax, preferred an appeal to the Sales Tax Tribunal,
but the Sales Tax Tribunal also took the same view and held
that the transaction of supply of the two types of Rolling
Shutters embodied in the contract amounted to a sale but so
far as the price was concerned, the Sales Tax Tribunal
observed that since 90% of the amount under the contract was
payable at the stage of delivery, that should be taken to be
the sale price and the balance of 10% should be held to be
"the charges for the work". The contract was thus held by
the Sales Tax Tribunal to be a composite contract consisting
of two parts, one for sale of the two types of Rolling
Shutters and the other for execution of the work of erection
and installation. This led to an application for a reference
by the assessee and on the application, the following
question of law was referred for the opinion of the High
Court:
"Whether having regard to the facts and
circumstances of the case the Tribunal was justified in
law in coming to the conclusion that the contract in
question essentially consisted of two contracts, one
for supply of materials for money consideration and the
other for service and labour done."
The High Court made a detailed and exhaustive review of the
decided cases and held, agreeing with the Sales Tax
Tribunal, that the con tract between the assesses and the
Company "was a divisible con-
649
tract which essentially consisted of two contracts, one for
the supply A of shutters of the aforesaid two types for
money and the other for service and labour", and accordingly
answered the question in favour of the Revenue and against
the assesses. The assesses thereupon brought the present
appeal with special leave obtained from this Court.
Now the question whether a particular contract is a
contract for sale or for work and labour is always a
difficult question and it is not surprising to find the
taxing authorities divided on it. The difficulty, however,
lies not in the formulation of the tests for determining
when a contract can be said to be a contract for sale or a
contract’ for work and layout, but in the application of the
tests to the facts of the case before the Court. The
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distinction between a contract for sale and a contract for
work and labour has been pointed out by this Court in a
number of decisions and some tests have also been indicated
by this Court, but it is necessary to point out that these
tests are not exhaustive and do not lay down any rigid or
inflexible rule applicable D alike to all transactions. They
do not give any magic formula by the application of which we
can say in every case whether a contract is a contract for
sale or a contract for work and labour. I‘hey merely focus
on one or the other aspect of the transaction and afford
some guidance in determining the question, but basically and
primarily, whether a particular contract is one for sale of
goods or for work and labour depends upon the main object of
the parties gathered from the terms of the contract, the
circumstances of the transaction and the custom of the
trade.
It may be pointed out that a contract where not only
work is to be done but the execution of such work requires
goods to be used may take one of three forms. The contract
may be for work to be done for remuneration and for supply
of materials used in the execution of the work for a price:
it May be a contract for work in which the use of materials
is necessary or incidental to the execution of the work; or
it may be a contract for supply of goods where some work is
required to be done as incidental to the sale. Where a
contract is of the first type, it is a composite contract
consisting essentially of two contracts, one for the sale of
goods and the other for work and labour. The second type of
contract is clearly a contract for work and labour not
involving sale of goods, while the third type is a contract
for sale where the goods are sold as chattels and some work
is undoubtedly done, but it is done only as incidental to
the sale. No difficulty arises where a contract is of the
first type because it is
650
divisible and the contract for sale can be separated from
the con tract for work and labour and the amount payable
under the compo site contract can be apportioned between the
two. The real difficulty arises where the contract is of the
second or third type, because in such a case it is always a
difficult and intriguing problem to decide n in which
category the contract falls. The dividing line between the
two types of contracts is some what hazy and "thin
partitions do their bounds divide". But even so the
distinction is there and it is very much real and the Court
has to perform at times the ingenious exercise of
distinguishing one from the other.
The distinction between a contract for sale and a
contract for work and labour has been pointed out in
Halsbury’s Laws of England Third Edition, Volume 34, Article
3 at page 6 in the following words:
"A contract of sale is a contract whose main
object is the transfer of the property in, and the
delivery of the possession of, a chattel as a chattel
to the buyer. Where the main object of work undertaken
by the payee of the price is not the transfer of a
chattel qua chattel, the contract is one for 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 com
pared 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
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and labour or one for the sale of a chattel."
The primary test is whether the contract is one whose main
object is transfer of property in a chattel as a chattel to
the buyer, though some work may be required to be done under
the contract as ancillary or incidental to the sale or it is
carrying out of work by bestowal of labour and service and
materials are used in execution of such work. A clear case
of the former category would be a contract for supply of
airconditioner where the contract may provide that the
supplier will fix up the airconditioner in the premises.
Ordinarily a separate charge is provided in such contract
for the work of fixing up but in a given case it may be
included in the total price. Such a contract would plainly
be a contract for sale because the work of fixing up the
airconditioner would be incidental to the sale. Then take a
contract for constructing a building where considerable
quantity of materials are required to be used in the
execution of the work. This
651
would clearly be a contract for work and labour and fall
within the latter category. But, as we pointed out earlier,
there may be, and indeed as the decided cases show, there
are a large number of cases which are on the border line and
it is here that difficulty is often experienced in the
application of this primary test. To resolve this
difficulty, the courts have evolved some subsidiary tests.
One such test is that formulated by this Court in
Commissioner of Madhya Pradesh v. Purshottam Prentji(1),
where it has been said:
"The primary difference between a contract for
work or service and a contract for sale of goods is
that in the former there is in the person performing
work or rendering service no property in the thing
produced as a whole. In the case of a contract for
sale, the thing produced as a whole has individual
existence as the sole property of the party who
produced it, at some time before delivery, and the
property therein passes only under the contract
relating thereto to the other party for price."
This was the test applied by this Court in the State of
Rajasthan v. Man Industrial Corporation(2) for holding that
a contract for providing and fixing four different types of
windows of certain size according to "specifications,
designs, drawings and instructions" set out in the contract
was a contract for work and labour and not a contract for
sale. This Court, speaking through Shah, J., analysed the
nature of the contract and pointed out: "The contract
undertaken by the respondent was to prepare the window-
leaves according to the specifications and to fix them to
the building. There were not two contracts-on., of sale and
another of service. "Fixing" the windows to the building was
also not incidental or subsidiary to the sale, but was an
essential term of the contract. The window-leaves did not
pass to the Union of India under the terms of the contract
as window-leaves. Only on the fixing of the windows as
stipulated, the contract could be fully executed and the
property in the windows passed on the completion of the work
and not before." The contract was not for transfer of
property in the window leaves as window leaves. It was a
contract for providing and fixing windows and windows could
come into existence only when the window-leaves were fixed
to the building by bestowing labour and skill. It was,
therefore, held to be a works contract. The same reasoning
was applied by this Court in State of Rajasthan v. Nenu
Ram(3) for holding that a contract for supply and
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(1) 26 S.T.C. 38
(2) [1969] 24 S.T.C. 349 (S.C.)
(3) 26 S.T.C. 268
652
fixing of wooden doors and windows with sashes and frames
and wooden chawkhats in the Police Lines building was a
contract for work and labour. Let us, therefore, apply this
test in order to deter-mine what is the nature of the
contract in the present case: is it a contract for sale or a
contract for work and labour ?
Now, it is clear that the contract is for fabrication,
supply, erection and installation of two types of Rolling
Shutters and not only are the Rolling Shutters to be
manufactured according to the specifications, designs,
drawings and instructions provided in the contract, but they
are also to be erected and installed at the premises of the
Company. The price stipulated in the contract is inclusive
of erection and installation charges and the contract does
not recognise any dichotomy between fabrication and supply
of the Rolling Shutters and their erection and installation
so far as the price is concerned. The erection and
installation or the Rolling Shutters is as much an essential
part of the contract as the fabrication and supply and it is
only on the erection and installation of the Rolling
Shutters that the contract would be fully executed. It is
necessary, in order to understand the true nature of the
contract, to know what is a Rolling Shutter and how it is
erected and installed in the premises. It is clear from the
statement Ex. to the petition for special leave, which
statement was submitted before the Sales Tax Tribunal and
the correctness of which was at no time disputed before us,
that a Rolling Shutter consists of five components parts.
namely, two brackets welded with ’U’ type clamps, one pipe
shafting with high tension springs Shutter screen made out
of 20G/18G thickness of metal as required by the customer,
side guides or guide channels welded with iron clamps to the
bottom with provision of locking arrangements with welded
handles and tope cover. These component parts are fabricated
by the manufacturer and taken to the site and fixed on the
premises and then comes into existence a Rolling Shutter as
an identifiable commercial article. The method of fixing the
component parts in position in the premises so as to bring
into existence the commercial article known as a Rolling
Shutter is fully described in the statement Ext. C. First of
all, certain masonry work is required to be done by the
customer and that has to be carried out by the customer at
his own cost. Then the brackets are fixed on either side on
the top portion of the opening by grouting holes on the
masonry walls and inserting the bolts. Thereafter the holes
are filled with cement and the pipe shafting with high
tension springs is inserted into the ’U’ clamps of the
brackets. Then the iron curtain of the Rolling Shutter is
hoisted over the high tension springs and tightened by means
of nut bolts and guide channels are then fixed
653
by grouting masonry walls where side guide clamps are to be
fixed After fixing the clamps to the grouted portion of the
wall, the same is plastered and then the iron curtain of the
shutter is lowered through the guide channels to operate the
shutter manually up and down. The Rolling Shutter is then
’born’ and it becomes a permanent fixture to the premises.
The Indian Standards Specification Book for Metal Rolling
Shutter and Rolling Grills also gives a similar procedure
for fixing the component parts of the Rolling Shutter on the
premises It clearly shows that a rolling shutter consists of
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curtain, lock plates, guide channels, bracket plates,
rollers, hood covers, gears, worms, fixing bolts, safety
devices, anchoring rods, central hasp and staple. Each guide
channel has to be provided with a minimum of three fixing
cleats or supports for attachment to the walls or column by
means of bolts or screws. The guide channels are further
attached to the jambs, plumb either in the overlapping
fashion, projecting fashion or embedded in grooves,
depending on the method of fixing. All these operations take
place at the site after despatch of the component parts of
the rolling shutter. Hood cover is fixed in a neat manner
and supported at the top at suitable intervals. This also
has to be done at the site. Item 11.1 of the specifications
shows that the rolling shutter curtain and bottom lock plate
are interlocked together and rolled in one piece, but the
other parts like guide channels, bracket plates, rollers,
etc., are despatched separately. Item ]2.] shows that all
the rolling shutters are erected by the manufacturer or his
authorised representative in a sound manner, so as to afford
trouble-free and easy operation, long life and neat
appearance". It will, thus, be seen that the component parts
do not constitute a rolling shutter until they are fixed and
erected on the premises. It is only when the components are
fixed on the premises and fitted into one another that they
constitute a rolling shutter as a commercial article and
till then they are merely component parts and cannot be said
to constitute a rolling shutter. The erection and
installation of the rolling shutter cannot, therefore, be
said to be incidental to its manufacture and supply. It is a
fundamental and integral part of the contract because
without it the rolling shutter does not come into being. The
manufacturer would undoubtedly be the owner of the component
parts when he fabricates them, but at no stage does he
become the owner of the rolling shutter as a unit so as to
transfer the property in it to the customer. The rolling
shutter comes into existence as a unit when the component
parts are fixed in position on the premises and it becomes
the property of the customer as soon as it comes into being.
There is no transfer of property in the rolling shutter by
the manufacturer to the customer as a chattel. It is
654
essentially a transaction for fabricating component parts
and fixing them on the premises so as to constitute a
rolling shutter. The contract is thus clearly and
indisputably a contract for work and labour and not a
contract for sale.
The Revenue leaned heavily on the provision in the
contract that the delivery of the goods shall be ex-works
and once the delivery of the goods is effected, no claim for
rejection shall be entertained and relying on this
provision, the Revenue contended that under the contract the
rolling shutters were to be delivered by the assessee to the
company ex-works, that is, at the works of the assessee and
the property in the rolling shutters passed to the company
as soon as they were delivered and hence it was a contract
for sale. We do not think this contention of the Revenue has
any force and it must be rejected. It is clear from the
above discussion that a rolling shutter as a complete unit
is not fabricated by the manufacturer in his factory but he
manufactures only the component parts and it is only when
the component parts are fitted into position and fixed on
the premises that a rolling shutter comes into being as a
commercial article and, therefore, when the contract
provides that the delivery of the goods shall be ex-works,
what is obviously meant is that the component parts shall be
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delivered to the company at the works of the assessee and
once they are delivered, they shall not be liable to be
rejected by the company. But that does not mean that as soon
as the component parts are delivered to the company, the
contract is Fully executed. The component parts do not
constitute a rolling shutter and it is the obligation of the
assessee under the contract to fix the component parts in
position on the premises and erect and instal a rolling
shutter. The execution of the contract is not completed
until the assessee carries out this obligation imposed upon
it under the contract and a rolling shutter is erected and
installed at the premises. It is true that clause (12) of
the printed terms and conditions provides that 50% of The
amount under the contract shall be paid as advance and the
balance against delivery of the goods ex-works but this
clause is clearly overridden by the special term
specifically written out in the contract that 25% of the
amount shall be paid by way of advance, 65% against delivery
and the remaining 10% after completion of erection and
handing over of the rolling shutters to the satisfaction of
the company. This provision undoubtedly stipulates that 90%
of the amount due under the contract would be paid before
erection and installation of the rolling shutters has
commenced, but that would not make it a contract for sale of
rolling shutters. The true nature of the contract cannot
depend on the mode of payment of the amount provided in the
contract. The parties may provide by mutual agreement that
the
655
amount stipulated in the contract may be paid at different
stages of the execution of the contract, but that cannot
make the contract one - for sale of goods if it is otherwise
a contract for work and labour. It may be noted that the
contract in State of Madras v. Richardson & Cruddas Ltd.(1)
contained a provision that the full amount due under the
contract shall be paid in advance even before the execution
of the B, work has started and yet the Madras High Court
held, and that view was affirmed by this Court, that the
contract was a works contract. The payment of the amount due
under the contract may be spread over the entire period of
the execution of the contract with a view either to put the
manufacturer or contractor in possession of funds for the
execution of the contract or to secure him against any risk
of non- payment by the customer. That cannot have any
bearing on the determination of the question whether the
contract is one for sale or for work and labour.
Here the last portion of the special term in regard to
payment of the amount due under the contract also makes it
clear that it is only when the component parts are fitted
into position in the premises that t a rolling shutter would
be complete and this rolling shutter has to ii be to the
satisfaction of the company and it is then to be handed over
by the assessee to the company and then, and then alone,
would the remaining 10% be payable by the company to the
assessee. It is, therefore, clear that the contract is one
single and indivisible contract and the erection and
installation of the rolling shutter is as much a fundamental
part of the contract as the fabrication and supply. We ’j
must, in the circumstances,.hold, driven by the compulsion
of this logic, that the contract was a contract for work and
labour and not a contract for sale. This view which we are
taking is completely sup- ported by the decision of this
Court in Vanguard Rolling Shutters & Steel Works v.
Commissioner of Sales Tax, U.P.(2) to which one of us
(Bhagwati, J.) was a party.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 11
We accordingly allow the appeal, set aside the judgment
of the High Court and hold that the contract in the present
case was a con tract for work and labour and not a contract
for sale and conformably G with this view, we answer the
question referred by the Sales Tax Tribunal in favour of the
assessee and against the Revenue. The State will pay the
costs of the assessee throughout.
S.R. Appeal allowed.
(1) 21 S.T.C. 245.
(2) 39 S.T.C. 372.
8-549 SCI/78
656