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PETITIONER: M/s.  T. V. SUNDRAM IYENGAR & SONS

       Vs.

RESPONDENT: THE STATE OF MADRAS

DATE OF JUDGMENT10/10/1974

BENCH: KHANNA, HANS RAJ BENCH: KHANNA, HANS RAJ GUPTA, A.C.

CITATION:  1974 AIR 2309            1975 SCR  (2) 372  1975 SCC  (3) 424  CITATOR INFO :  R          1976 SC2108  (45)  D          1977 SC1505  (7)  RF         1977 SC1537  (25)  RF         1989 SC 962  (24)

ACT: Sales Tax-Construction of bus bodies and fitting to  chassis provided  by  customers-Property  in the  material  used  by assessee,  whether  passed  to their  customers  daring  the course of construction.

HEADNOTE: In  Civil  Appeals  Nos. 2229, 2230 and 2231  of  1969.  the Appellate Assistant Commissioner and the Appellate  Tribunal held that the appellant company was liable to pay sales  tax under the Madras General Sales Tax Act, 1939, in respect  of bodies constructed and fitted by it to the chassis  provided by the customers.  No formal agreements were produced by the assessee and the nature of the transactions  relating to the supply of bus bodies has been found on the basis of  "repair orders".These appeals on certificate have been filed against the  judgment  of the Madras High Court  by  the  appellant- assessee  company.  Civil Appeals Nos. 290 and 291  of  1970 have  been  filed  on certificate  by  the  Commissioner  of Commercial  Taxes Mysore against the judgment of the  Mysore High  Court.  The return filed by the assessee-firm for  the year  1960-61 showed receipt of Rs. 9174,460 on  account  of the bus bodies constructed under agreement dated January 23, 1959  between the assessee-firm and the Government  for  the construction  of bus bodies on the chassis supplied  by  the Govt.  The Commercial Tax Officer, held that the said amount represented  the  prices of the bus bodies received  by  the assessee  and included it in the taxable turnover under  the Mysore   Sales  Tax  Act,  1957.   On  appeal   the   Deputy Commissioner  of  Commercial Taxes held that  the  agreement between  the assessee and the Govt. was in the nature  of  a works contract and as such there was no sale of bus  bodies. The  Commissioner  in exercise of his revisional  power  set aside the order of the Deputy Commissioner and restored that of  the  Commercial  Tax Officer.  In  the  opinion  of  the Commissioner,  there  was  a  sale  of  bus  bodies  by  the assessee.   In appeal, the Mysore High Court set  aside  the

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order  of the Commissioner and restored that of  the  Deputy Commissioner.   In  the  opinion  of  the  High  Court   the agreement  between the assessee and the Govt. was for  works contract.   It  was  contended for  the  assessee  that  the construction of the bus bodies and the supply of the same by the  assessees  to  their customers was in  pursuance  of  a contract for work and labour. HELD  : (i) The Madras General Sales Tax Act, 1939  and  the Mysore  Sales Tax Act, 1957, have been enacted  respectively in  pursuance of the powers contained in entry 48, List  11, Schedule VII of the Government of India Act 1935, and  entry 54,  List  11, Schedule VII of the  Constitution  of  India, 1950.  It is now settled law that the words "sale of  goods" have  to be construed not in the popular sense but in  their legal sense and should be given the same meaning which  they carry in the Sale of Goods Act, 1930.  The expression  "sale of goods" is a nomen juris, its essential ingredients  being an  agreement  to  sell movables for a  price  and  property passing therein pursuant to that agreement. [377 F-G] The  State  of  Madras v. Gannon Dunkerley &  Co.  (1958)  9 S.T.C. 353 followed. (ii)The  salient  features of the dealings between  the  two assessees  disclose that  the property in the material  used by the assessees in constructing the bus bodies never passed to  their customers during the course of  construction.   It was  only  when  the complete bus with the  body  fitted  to chassis  was delivered to the customer that the property  in the  bus body passed to the customer.  There was nothing  to prevent  the  assessee  from  removing  a  plank,  or  other material  after fixing it to a chassis, and using it  for  a different purpose or for a different bus body.  The  present is  also  not the case wherein the  assessee  undertakes  to construct  some  building or set up a  factory  wherein  the material  used  can be said to become the  property  of  the other  party by invoking the theory of accretion.  It is  no doubt  true that the bus bodies  supplied by  the  assessees were not ready made and had, if necessary, to be constructed bit by bit and plank by plank, according to  specifications, but that fact would not make any material difference.  [379- H; 380 A-B] 37 3 Patnaik  and Company v. The State of Orissa, (1965)  16  STC 364,  and Mekenzies Ltd. v. The State of Maharashtra  (1965) 16 STC 518 followed, Commissioner of Sales Tax v. Hazi Abdul Majid, (1963) 14 STC referred to. (iii)The  use of a different nomenclature in describing  the assessee  would  not  affect  the  basic  character  of  the contract between the parties and justify differentiation  if the   terms   of  the  contract  in   other   respects   are substantially  the  same.  It is true that  in  the  present cases  there was no express mention of a sale of bus  bodies in  the  agreement.   But  it  is  not  necessary  that   to constitute a sale, the word ’sale’ has to be used. [380 D-E] Chandra Bhan Gosain v. The State of Orissa & Ors. (1963)  14 STC 766 referred to. (iv)There is nothing in the agreements between the  assessee and their customers in the present appeals which vested  the ownership of unfinished bodies in the customers. The State of Gujarat v. Kailash Engineering Co. (Pvt.) Ltd., (1967)  19  STC  13 distinguished. the State  of  Madras  v. Richardson  &  Cruddas  Ltd., (1968) 21 STC  245,  State  of Rajasthan & Anr. v. Man Industrial Corporation Ltd.,  (1969) 24 STC 349, State of Rajasthan & Ors. v. Nenu Ram (1970)  26 STC  268,  State of Himachal, Pradesh & Ors.  v.  Associated Hotels  of  India Ltd. (1972) 29 STC  474,  Commissioner  of

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Commercial Taxes, Mysore Bangalore v. Hindustan  Aeronautics Ltd. (1972) 29 STC 438 and Anglo Egyptian Navigation Co.  v. Rennie, (1875) LR 10 CP 271 referred to.  Bajoria  Halwasiya Service Station v. State of Uttar Pradesh & Anr., 26 STC 108 and Pothular Subba Rao v. The State of Andhra Pradesh 30 STC 69 approved.

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal Nos.  2229  to 2231 of 1969 and Civil Appeals Nos. 290-291 of 1970. Appeals  from the Judgment & Order dated the 29th  September 1967  of the Madras High Court in Tax Case Nos.  164-166  of 1965. S.   Swaminathan  and S. Gopalakrishnan, for the  appellants (in C. As. Nos. 2229-2231/69.) H.   B. Datar and M. Veerappa, for the appellant (in C.  As. No. 290 of 1970). M.   Veerappa, for the appellant in C.A. No 291/70. S.   T.  Desai,  A.  V Rangam and  A.  Subhashini,  for  the respondent in C.As. 2229-2231/69. S,  Swaminathan and S. Gopalakrishnan, for  the  respondents (in C.A. No. 290-291/70). The Judgment of the Court was delivered by KNANNA  J.  Whether  the  supply  for  consideration  by  an assessee  of  bus bodies constructed and fitted  to  chassis provided  by  the customers amounts to  sale  chargeable  to sales   tax   is  the  short  question  which   arises   for determination  in these five civil appeals Nos.  2229.  2230 and  2231  of 1969 and 290 and 291 of  1970.   Appeals  Nos. 2229,  2230 and 2231 of 1969 have been filed on  certificate by T. V. Sundram Iyengar & Sons Pvt.  Ltd.  Madurai  against the  judgment  of  the Madras High  Court.   The  other  two appeals  have been filed on certificate by the  Commissioner of  Commercial  Taxes  Mysore against the  judgment  of  the Mysore  High Court.  This judgment would dispose of all  the five appeals. 3 74 The matter relates in the three appeals against the judgment of the Madras High Court to assessment years 1955-56,  1956- 57  and 1957-58.  The Appellate Assistant  Commissioner  and the  Appellate Tribunal held that the appellant company  was liable  to pay sales tax under the Madras General Sales  Tax Act, 1939 in respect of bus bodies constructed and fitted by it  to  chassis provided by the customers.   On  the  matter having been taken up in revision by the appellant company to the High Court, the High Court referred to the fact that  no contracts  or  agreements  as  such  were  produced  by  the appellant  company.  It was observed that the nature of  the transactions relating to the supply of bus bodies had to  be determined  on the basis of forms of "repair  orders"  which the appellant company used to get filled in by as customers. on  the  basis  of the material on record,  the  High  Court agreed with the conclusion arrived at by the Tribunal.   The matter was, however, remanded to the Tribunal to enable  the appellant company to produce the actual agreements, if  any, between  the appellant company and its customers.  The  High Court in this context observed as under :               "As   the  evidence  stands,  we  accept   the               conclusion rightly arrived at by the  Tribunal               on  this  question.  It is not  clear  whether               there were actually contracts entered into  by               the  assessee which the customers and if  they               were so, why they were not produced.  Any way,

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             in the interests of justice we are inclined to               think that the question may be re-examined  by               the Tribunal if the contracts are filed before               it.   If  none is filed. the view  that  the               transactions are sales of goods will stand." Mr.  Swaminathan  who appears for the assessees in  all  the five appeals submits that after the remand order of the High Court, no agreements between the appellant company, and  its customers  were  filed by the appellant company  before  the Tribunal and, as such, the Tribunal reiterated the liability of  the  appellant company for the payment of sales  tax  in respect  of the above item.  Although revision petition  has been filed by the appellant company against the order of the Tribunal  after  the  remand to the  High  Court,  the  real grievance  of  the  appellant  company,  according  to   Mr. Swaminathan,  is  against  the judgment of  the  High  Court appealed  against  as the question of the liability  of  the appellant  company  to  pay sales tax in the  absence  of  a formal agreement has been determined by this judgment. We  may set out the mode of dealings between  the  appellant company  and  its customers in the three  appeals  mentioned above.   As  stated  already,  no  formal  agreements   were produced  by  the assessee and the  nature  of  transactions relating  to the supply of bus bodies has been found on  the basis  of  "repair  orders".  The repair order,  to  take  a typical  case, besides containing the name of the  appellant company,  gives the date of the order, name and  address  of the  customer,  the  make, model and  condition  of  chassis supplied  by  the customer.  Apart from other  details,  the repair  order  contains  a column, according  to  which  the assessee  appellant  undertook "to construct and  mount  one semi  saloon mofussil type bus bddy, with 7 plywood for  the floor, ally wood for sides and frames". in another column 375 tealing  with  amount balled to the customer a  sum  of  Rs. 9,000 is mentioned.  The following is written under the head "Description" :               "Aluminium  Sheets & Aluminium  Beadlings  for               panels,  rubber cushion for seats, rubber  sq.               wab  for back all covered with green  leather,               cloth with seating capacity 51 in all 4  seats               extra" for  all  of  which a sum of Rs. 450  is  charged.   Several specific items provide for windshield glass; rubber  squbas; handles  for  entrances; helper  canvass;  electric  buzzer; invoice lamp and roof lamps.  Other specific items mentioned are leather cloth; protective flaps for curtains; felt cover for engine and electric wiper.  The total bill comes to  Rs. 10,171.50. Signatures of customers were also obtained  under the following writing :               "I hereby agree and definitely understand that               M/s.   T.  V. Sundram lyengar &  Sons  Private               Ltd.  assume  no responsibility  for  loss  or               damage by whatever means to vehicles or spares               placed with them for storage; sale or  repair.               The above vehicle/spares left in your premises               or driven by your employees is entirely at  my               employer’s/owner’s risk as regards  accidents;               damage by fire or any other causes."               The Tribunal on consideration of the  material               on the record recorded the following finding :               "On  an  overall consideration of  the  entire               material  before us, we are inclined  to  hold               that   the   predominating  element   in   the               transactions was the sale of built body,  that

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             the work and labour were only subsidiary, that               it was immaterial whether a body was  prepared               in accordance with the specifications given by               the customer, then and there and fitted on the               chassis or the body had been already  prepared               prior to the order and was readily fitted with               the chassis, that the sale of the property was               the  predominating  element, that the  use  of               labour and skill was only incidental and  that               therefore,  the element of sales  predominated               over  the  element  of contract  of  work  and               labour."               The  High  Court in this context  observed  as               under :               "The  terms  as far as we are able  to  gather               from  the limited material before us  disclose               that  the property in the completed  bus  body               passed only at the time of the delivery  there               of  such as specific chattel though fitted  on               to the chassis.  There is no evidence that the               property  in  the  materials  passed  to   the               customer as and when they were worked into the               chassis in the process of body building.   The               provision   as  to  insurance  of  risk   also               confirms  this view.  In some of the  appeals,               we  find that specific articles are  mentioned               the prices of which are given separately.   As               the evidence stands, we accept the  conclusion               rightly  arrived  at by the Tribunal  on  this               question." We  may now set out the facts giving rise to  civil  appeals Nos.  290 and 291 of 1970 which relate to  assessment  years 1960-61 and 1961-62- 376 The  Store  Purchase  Committee on behalf of  the  State  of Mysore  called for tenders from persons who were willing  to construct  bus  bodies  on  the  chassis  supplied  by   the Government.   Condition (8) of the tender was that the  rate quoted  should  be per bus body.  ’finder of  the  assessee- firm;  M. G. Brothers Automobile Dealers Bellary; who  along with  others  subraitted tenders, was  accepted.   Agreement dated  1  January 23, 1969 was thereafter  executed  by  the assessee  and the State Government.  Some of  the  important clauses of the agreement were as under :               " (5) The contractors shall not be entitled to               claim  an  sort  of  concession  whatever   on               account of the rise in prices of raw materials               or  cost  of labour due to  whatsoever  causes               during the contract period.               (6)The contractors shall agree to keep up  the               delivery  period strictly otherwise the  penal               clause  shall be enforced and if there  should               be undue delay it would be open to the  Mysore               Government Road Transport Department to cancel               the order or remaining portion of the order as               a last resort.               (7)The   contractors   shall  make   good   to               Government any loss, which may arise from  the               failure to accomplish the work  satisfactorily               in   time  or  in  accordance  with   required               specifications  as  noted in the order  or  by               Government  having to get the work  done  from               other sources at rates higher than those cort-               racted  for  due to the negligence,  delay  or               incomplete  workmanship  on the  part  of  the

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             contractors.               (8)   The contractors shall insure the chassis               at their cost               for   safe  custody  of  the  same  at   their               premises.               (10)  The contractors agree to give a warranty               of 6 months               in respect of each and every bus built by them               against all defects in the construction of the               body.  If any defects are found or develop  in               the  bus built by the contractors  during  the               course of the warranty period of 6 months from               the  date they are handed over to  our  units,               the  contractors hereby agree to  rectify  the               same  by  deputing their  own  representatives               with   sufficient  tools  and   materials   as               required  to  the  operating  centres  of  the               buses, free of cost.               (11)The  contractors shall send the  bills  of               cost  in  triplicate to the  General  Manager,               Mysore  Government Road Transport  Department,               Bangalore,  who  will arrange payment  of  90%               against  the delivery of complete bus and  the               balance of 10 % after completion of the entire               order." The  return filed by the assessee firm for the year  1960-61 showed receipt of Rs. 9,74,460 on account of the bus  bodies constructed  under the above agreement., The Commercial  Tax Officer held that the said amount represented the prices  of the  bus bodies received by the assessee and included it  in the  taxable turnover under the Mysore Sales Tax Act,  1957. On appeal the Deputy Commissioner of Commer-                             377 cial Taxes held that the agreement between the assessee  and the Government was in the nature of a works contract and  as such there was no sale of the bus bodies.  The  Commissioner in  exercise of his revisional power set aside the order  of the Deputy Commissioner and restored that of the  Commercial Tax Officer.  In the opinion of the Commissioner, there  was a  sale of bus bodies by the assessee.  The matter was  then taken up by the assessee in appeal to the Mysore High Court. The  High Court set aside the order of the Commissioner  and restored that of the Deputy Commissioner.  In the opinion of the  High Court, the agreement between the assessee and  the Government  was for works contract.  The High Court in  this context  gave  certain reasons to which reference  would  be made at the appropriate stage hereafter. The  question with which we are concerned, as  would  appear from  the  resume  of  facts given  above,  is  whether  the construction of the bus bodies and the supply of the same by the  assesees  to  their customers was  in  pursuance  of  a contract  of sale as distinguished from a contract for  work and  labour.  The distinction between the two  contracts  is often  a fine one.  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  compared  with  the  value  of   the materials, is conclusive, although such matters may be taken into consideration in determining in the circumstances of  a

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particular  case, whether the contract is in  substance  one for  work and labour or one for the sale of a  chattel  (see Halsbury’s Laws of England, Vol. 34, pl. 6, Third Edition). The  Madras  General Sales Tax Act, 1939 (Madras  Act  9  of 1939)  was enacted in pursuance of the powers  contained  in entry 48 of List II of Seventh Schedule of the Government of India  Act,  1935  which  deals with  sale  of  goods.   The corresponding  entry in the Constitution is entry No. 54  in List  11  of Seventh Schedule.  It was in  exercise  of  the powers under this entry that the Mysore Sales Tax Act,  1957 (Mysore Act No. 25 of 1957) was enacted.  It is now  settled law that the words "sale of goods" have to be construed  not in the popular sense but in their legal sense and should  be given the same meaning which they carry in the Sale of Goods Act, 1930.  The expression sale of goods" is a nomen  juris, its  essential  ingredients  being  an  agreement  to   sell movables  for a price and property passing therein  pursuant to  that  agreement  (see  The State  of  Madras  v.  Gannon Dunkerley & Co. (Madras) Ltd. (1).  This Court in that  case was  concerned with a ’building contract which was  one  and indivisible.  it  was  held  that in  the  case  of  such  a contract,  the property in materials used does not  pass  to the other party to the contract as movable (1)  (1958)9S.T.C.353. 378 property.   It  would  so pass if  that  was  the  agreement between the parties.  If there was no such agreement and the contract was only to construct a building, in that case  the materials  used  therein would become the  property  of  the other party only on the theory of accretion. There  are two cases wherein this Court was  concerned  with the  construction of bus bodies and fitting of the  same  to the chassis supplied by the customers.  The cases were heard by  the  Constitution  Bench and the  Court  considered  the question  whether the party constructing the bus bodies  and fitting  the same to the chassis supplied by  the  customers did  so  in  pursuance  of a contract of  sale  or  a  works contract.  The two cases which were decided on the same  day arc  Patnaik  and  Company  v.  The  State  of  Orissa(1)and McKenzies Ltd. v. The State of Maharashtra.(2) main judgment was given in the case of Patnaik and Company by Sikri J. (as he  then was) on behalf of the majority.  The appellants  in that case entered into an agreement with the State of Orissa for  the construction of bus bodies on the chassis  supplied by  the Governor.  The agreement provided, inter alia,  that the appellants were responsible for the safe custody of  the chassis  from  the date of their receipt from  the  Governor till  their  delivery to the Governor and that they  had  to insure  their premises including the chassis  against  fire, theft,  damage and riot at their own cost.   The  appellants had to construct the bus bodies in the most substantial  and workmanlike  manner, both as regards material and  otherwise in   every   respect   in   strict   accordance   with   the specifications  and  were  to  deliver  the  bodies  to  the Governor on or before the dates specified in the  agreement. The appellants guaranteed the durability of the body for two years  from  the date of the delivery.   The  agreement,also provided  that  the work should  throughout  the  stipulated period of the contract be carried on with all due diligence, that  the  appellants were liable to pay to the  Governor  a certain  sum  as liquidated damages for every day  that  the work  remained  unfinished after the date  fixed,  that  all works  under  the contract should be open to  inspection  by the,  Controller  or  officers authorised  by  him  in  that behalf,  that they had the right to stop any work which  had

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been  executed badly or with materials of  inferior  quality and that on receipt of a written order the appellants had to dismantle  or  replace such defective work  or  material  at their own cost.  The appellants were entitled to 50 per cent of the cost of body-building at the time of delivery and the rest within one month thereafter.  In answering the question whether the agreement was a contract for work or a  contract for sale of goods, the majority consisting of Gajendragadkar C.J.,  Hidayatullah,  Sikri  and  Bachawat,  JJ.  (Shah   J. dissenting) held that the contract as a whole was a contract for  sale of goods and therefore the appellants were  liable to sales tax on the amount received from the State of Orissa for the construction of the bus bodies.  In arriving at  the above  conclusion,  Sikri  J.  speaking  for  the   majority observed as under :               "Then,  looking  at the contract as  a  whole,               what  was the real intention of  the  parties?               It will be noticed that the bus               (1)  (1965)  16  S.T.C.  364.              (2)               (1965) 16 S.T.C. 518.               379               bodies  are throughout the contract spoken  of               as  a unit or as a composite things to be  put               on  the  chassis,  and  ’his  composite   body               consists not only of things actually fixed  on               the  chassis  but movable  things  [like  seat               cushions,  and other things though  fixed  but               which can be very easily detached, e.g.,  roof               lamps,  wind screen wipers,  luggage  carrier,               too] box, box for first Lid equipment, etc.               The next point to be noticed is that under the               contract the property in the bus body does not               pass  to the Government till the chassis  with               the  bus body is delivered at the  destination               or destinations to be named by the  Controller               except in the case contemplated in clause 6 of               the  agreement.  That clause provides that  if               some  work is not satisfactorily done and  the               Body  Builder  on receipt of a  written  order               does  not dismantle or replace such  defective               work or material at his own cost within  seven               days, the Controller would be entitled to  get               the balance of the work done by another agency               and  recover the difference in cost  from  the               Body Builder.  The Controller is entitled  for               this   purpose   to  take  delivery   of   the               unfinished  body.  But even in this  case  the               property in the unfinished body would not pass               to the Government till the unfinished body  is               seized.               Suppose  a  fire  were to take  place  on  the               premises of the appellant and before  delivery               the  bus bodies were destroyed or spoilt.   On               whom  would the loss fall?  There can only  be               one  answer to this question and that is  that               the loss would fall on the appellant.   Clause               1  of the agreement provides for insurance  of               the   chassis  but  there  is   no   provision               regarding insurance of bus bodies.  Therefore,               it follows that till delivery is made, the bus               bodies  remain the property of the  appellant.               It could, if it chose to do so, replace  parts               or  whole.  of  the body at  any  time  before               delivery.   It  seems to us that  this  is  an               important  indication of the intention of  the

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             parties.  If the property passes at  delivery,               what  does  that  pass  in.?  Is  it   movable               property  or immovable property?  It will  not               be denied that the property passes in  movable               property.   Then  was  this  the  very   goods               contracted  for?   Here again  the  answer  is               plainly in the affirmative." The  dictum laid down by this Court in the case  of  Patnaik and  Company (supra), in our opinion, fully applies  to  the case  of  the two assessees with which we are  concerned  in these  five  appeals.  We agree with the High Court  in  the case of T.V. Sundram Iyengar & Sons that the property in the completed  bus body passed only at the time of the  delivery thereof as specific chattels fitted on to chassis.  Same  is also true, in our opinion, of the bus bodies constructed  by M.G. Brothers. The  salient  features  of  the  dealings  between  the  two assessees with whom we are concerned and their customers  as they emerge from the facts given above are that the property in  the material used by the assessees in  constructing  the bus bodies never passed to their customers 3 80               during  the  course of construction.   It  was               only  when  the  complete bus  with  the  body               fitted  to  the chassis was delivered  to  the               customer  that  the property in the  bus  body               passed to the customer.  There was nothing  to               prevent  the assessees from removing a  plank,               or  other  material  after  fixing  it  to   a               chassis, and using it for a different  purpose               or  for a different bus body.  The present  is               also   not  the  case  wherein  the   assessee               undertakes  to construct some building or  set               up  a factory plant wherein the material  used               can  be  said to become the  property  of               the  other  party by invoking  the  theory  of               accretion.   It is no doubt true that the  bus               bodies  supplied  by the  assessees  were  not               readymade   and  had,  if  necessary,  to   be               constructed  bit  by bit and plank  by  plank,               according  to  specifications, but  that  fact               would  not make any material difference.   The               observation  of  the Allahabad High  Court  in               Commissioner  of  Sales  Tax  v.  Haji   Abdul               Majid(1)  that it makes no difference  whether               an article is readymade article or is prepared               according to the customer’s specifications  as               also   whether  the  assessee   prepares   it.               separately from the thing and then fixes it on               or  does  the  preparation  and  the  fixation               simultaneously in one, operation was expressly               approved by this Court in the case of  Patnaik               and Company (supra).               In  holding that the case was not  covered  by               the dictum laid down in Patnaik and  Company’s               case,  the Mysore High Court referred  to  the               fact  that the assessee was described  in  the               agreement entered into with the Government  as               a contractor, while in the case of Patnaik and               Company  the assessee was described as a  body               builder.  The use of a different  nomenclature               in  describing the assessee would not, in  our               opinion,  affect  the basic character  of  the               contract  between  the  parties  and   justify               differentiation  if the terms of the  contract

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             in other respects are substantially the  same.               Another   ground  on  which  the  High   Court               distinguished  the case of the  assessee  from               Patnaik  and Company was that in the  case  of               Patnaik and Company the bus bodies were to  be               delivered as a unit, while this was not so  in               the case of the assessee firm.  We are  unable               to  agree with the High Court in this  respect               because  the terms of the agreement show  that               the  assessee had to construct and supply  the               bus body fitted to the chassis provided by the               Government.  Clause II expressly refers to the               delivery of a complete bus.  The prices  which               were  quoted were also for each bus body.   It               can, therefore, be said that the bus body  was               delivered as a unit.  The High Court has  also               referred to the fact that there was no express               mention  of  the  sale of bus  bodies  in  the               agreement.  This fact by itself is not of much               significance.   In  the case of  Chandra  Bhan               Gosain  V. The State of Orissa &  OrS.(2)  the               appellant  manufactured  and  supplied   large               quantities  of  bricks to a  company  under  a                             contract.   There was a clause in the  contract               providing  that "land will be given  free"  by               the company.  The appellant contended that the               contract was only for labour or for work  done               and material found, and that there was  really               no sale of an) goods on which sales tax  could               be levied.  It was held by this Court that the               essence  of the contract was the  delivery  of               the bricks and that it was a contract for  the               transfer  of chattels qua chattels.   Argument               was advanced in that case that the contract               (1) (1963) 14 S.T.C. 435.                  (2)               (1963) 14 S.T.C. 766.               381               nowhere  used  the word "sale"  in  connection               with the supply of bricks This contention  was               repelled and it was observed that               "it  is  not necessary that  to  constitute  a               sale, the word ’sale’ has to be used.  We have               said  enough to show that under  the  contract               there was a transfer of property in the bricks               for  consideration  and,  therefore,  a   sale               notwithstanding  that the word ,sale’ was  not               used." Mr.  Swaminathan on behalf of the assessees has referred  to the case of The State of Gujarat v. Kailash Engineering  Co. (Pvt.)   Ltd.(1)  The  respondent  in  that  case   was   an engineering  concern. it constructed three coaches over  the chassis  supplied by the Western Railway Administration  and received  money therefor.  It was provided in  the  contract between the parties that as soon as the plant and: materials were  brought on the side where the coaches were to be  con- structed,  the ownership in them would vest in the  Railway. The  coach bodies were not separately described as units  or components to be supplied by the respondent to the  Railway, The  duty  of the respondent was  described  throughout  the contract to be that of constructing, erecting and furnishing coach  bodies on the underframes supplied.  At no stage  did the contract  mention that ready coach bodies were  to  be delivered  by  the  respondent to  the  Railway.   From  the earliest  stage  during the process of construction  of  the

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coach  bodies,  the  unfinished bodies  in  the  process  of erection  were treated, under the terms of the contract,  as the property of the Railway.  Since those unfinished: bodies were   to  be  in  the  charge  of  the  respondent   during construction. the respondent was made liable under the  con- tract  to  reimburse the Railway for loss by fire.   It  was held  that as the term, of the contract indicated  that  the respondent was not to be the owner of the ready coaches  and that the property in those bodies vested in the Railway even during  the process of construction, the transaction  was  a works contract and did not involve any sale.  No assistance, in  our  opinion, can be derived by the assessees  in  these appeals from the case of Kailo-h Engineering Co. As has been pointed out above, the ownership in the material brought  on the site under the terms of the contract was to vest in  the Railway  in  the case of Kailash Engineering Co.   The  same cannot be said of the material used for the construction  of the  bus bodies by the two assessees with whom we  are  con- cerned.   Unlike  the terms of the contract in the  case  of Kailash Engineering Co. there was nothing in the  agreements between  the  assessees and their customers in  the  present appeals  which vested the ownership of unfinished bodies  in the customers.  It may be mentioned that the case of Petnaik and Company (supra) was cited before this Court in the  case of  Kailash Engineering Co. Shah J. speaking for  the  Court pointed out the essential differences between the two cases. The  case  of the assessees in these appeals,  as  mentioned earlier,  falls  squarely within the rule laid down  in  the case   of  Patnaik  and  Company.   The  case   of   Kailash Engineering Co. cannot,. therefore, be of much assistance to the assessees. (1) (1967) 19 S.T.C. 13. 382 Equally   of  no  assistance  to  the  assessees   are   the fourcases,The  State  of  Madras  v.  Richardson  &  Cruddas Ltd.(1)  State  of  Rajasthan  &  Anr.  v.  Man   Industrial Corporation  Ltd.(2),  State of Rajaasthan & Ors.  v.  Menuh Ram(3)  and State of Himachal Pradesh & Ors.  v.  Associated Hotels of India Ltd.(4) to which reference has been made  by Mr.  Swaminathan  on behalf of the assessees.  The  case  of Richardson  &  Cruddas Ltd. related to a  contract  for  the fabrication  supply and. erection of steel structures for  a sugar factory.  This Court on consideration of the  material produced  on record held that the contract was for a  works, contract  and  not one for sale.  The  case  Man  Industrial Corporation  Ltd.  related  to a work  for  fabricating  and fixing  certain  windows in accordance  with  specifications designs  drawing and instructions.  The windows were  to  be fixed  to the building with rawl plugs in cut  stone  works. It was held that the window leaves did not pass Linder  the terms of the contract as window leaves and that only on  the fixing  of the windows as stipulated could the  contract  be fully executed.  The property in the windows it was observed passed  on the completion of the work and not  before.   The contract was, therefore, held to be a contract for execution of  work and not for sale of goods. Nenu Ram’s case  related to  a work of supplying and fixing wooden windows and  doors together with frames.  The windows had also thereafter to be painted.  It was held that under the contract the goods were not  sold  as movable and that the property  therein  passed only  when  the windows and frames were fixed on  the  site. The  liability  to  pay  sales  tax  was  consequently   not attracted.   The question which arose for  determination  in the  case of Associated Hotels of India Ltd. was  whether  a hotelier  was liable to pay sales tax in respect  of’  meals

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served to the guest coming there for stay.  It was held that the   hotelier  served  meals  as  part  of  the   amenities incidental  to  the  services.  The  revenue  was  held  not entitled to split up the transaction into two parts, one  of service and the other of sale of foodstuff.  No liability to pay  sales  tax  could  consequently  be  fastened  on   the hotelier. It  is plain that there is no parallel between the facts  of the  present appeals and those of the above  mentioned  four cases. v.   Hindustan   Aeronautics   Ltd.(5)   related   to    the Manufacture and supply of     three   models   of    railway coaches  to the Railway Board.  Advance"on account"  payment to the extent of 90 per cent of the material to be used  was made  to  the  assessee  on  production  of  the  inspection certificate.   The stores were held as the property  of  the President  and in trust for him on account of  the  advance. The  property  in  the materials which  were  used  for  the construction  of  the  coaches became the  property  of  the President before they were used.  The construction was  done at  a separately located shed and no other construction  was undertaken  therein.   There  was  no  possibility  of   any material for which advance was not drawn being used for  the construction of the (1)  (1968)  21  S.T.C. 245. (2) (1969) 24 S.T.C.  349.  (3) (1970) 26 S.T.C. 268. (4) (1972) 29 S.T.C. 474. (5)  (1972) 29 S.T.C. 438. 383 coaches.    It  was  held  that  the  transaction  for   the manufacture  and  supply  of the coaches was  a  pure  works contract.   When all the materials used in the  construction of a coach belonged to the railways, there could be no  sale of the coach itself.  The difference between the price of  a coach and the cost of material could only be the cost of the services  rendered by the assessee.  Bare narration  of  the facts  of the above case would show the  difference  between this  case  and the cases which are the  subject  matter  of these appeals. Reference  has  also  been  made  by  Mt-.   Swaminathan  to observations on page 167 of Benjamin on Sales (8th  Edition) which  were based on the case of  Anglo-Egyptian  Navigation Co.  v. Rennies(1) Those observations were also referred  to in the case of Patnaik, and Company (supra).  Sikri J.  then dealt   with  the  facts  of  the  case  of   Anglo-Egyptian Navigation Co. and held that case was not authority for  the proposition that whenever a contract provides for the fixing of a chattel to another chattel, there is no sale of  goods. The learned Judge in this connection gave an illustration of a  dealer  fitting tires supplied by him to the car  of  the customer.  Could anyone deny that there had been sale of the tyres by the dealer to the customer, even though the fitting of the tyres A as not an easy operation and needed an expert hand? It  may also be mentioned that the Allahabad High  Court  in the  case of Bajoria Halwasiya Service Station v. The  State of Uttar Pradesh & Anr.(2) and Andhra Pradesh High Court  in the case of Pothula, Subbo Rao v. The State of A.P.(3)  have held that a transaction relating to the construction of  the bus bodies by the assessee on chassis supplied by  Customers constitutes a contract of sale of goods. As a result of the above, we hold that the supply of the bus bodies by the assessees in these five appeals after  fitting them  to the chassis supplied by the customers  amount--  to sale of goods for which the assessees would be liable to pay sales lax.  We accordingly dismiss civil appeals Nos.  2229,

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2230  and 2231 of 1965 with costs.  We accept civil  appeals Nos.  290 and 291 of 1970 with costs set aside the  judgment of  the High Court and restore that of the  Commissioner  of Commercial Taxes Mysore.  One hearing fee V.M.K. C. As.  Nos. 2229-2231 of 1969 dismissed. c.   4s. No. 290-291 of 1970 allowed. (1)  (1875) L. R. 10 C.P. 271. (2)  26  S.T.C. 108. (3 ’)30  S.T.C. 69. 384