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PETITIONER: STATE OF GUJARAT (COMMISSIONER OF SALES TAX, AHMEDABAD)

       Vs.

RESPONDENT: M/S. VARIETY BODY BUILDERS

DATE OF JUDGMENT26/04/1976

BENCH: GOSWAMI, P.K. BENCH: GOSWAMI, P.K. KHANNA, HANS RAJ

CITATION:  1976 AIR 2108            1976 SCR  131  1976 SCC  (3) 500  CITATOR INFO :  RF         1977 SC 197  (6)  D          1977 SC1537  (36)  RF         1984 SC 744  (25)

ACT:      Bombay sales  Tax Act-Contracts  for sale of goods and’ work contracts-Tests for deciding works contracts.

HEADNOTE:      The respondents  entered into  three written  contracts with the  Railways for  the construction  of railway coaches according to  the design  provided by  them, on  the  under- frames supplied by the Railways. The contractor was required to  make   security  deposit  for  the  due  fulfilment  and completion of the contract which in the event of breach, was liable to  be forfeited  and confiscated.  Supply  including manufacture, assembly,  fitting, fixing and finishing of all constructional materials  and fittings  including timber was by the  contractor. The  Railways were  required  to  supply electric fitting;  Railway staff  would work  in association with the  contractor’s staff  for installation of electrical equipment; Railway site was provided for the work and for no other purpose.  The Railways  had the right of inspection at all times  and of  maintenance of  control over  standard of workmanship requiring  rectification of work and replacement of materials when ordered.      The Sales  Tax officer,  holding that  the transactions were sales,  charged them to tax. The respondents’ appeal to the Assistant  Commissioner of Sales Tax. as also a revision application before  the Deputy Commissioner of Sales Tax and the Tribunal were unsuccessful. On reference, the High Court held that the contracts were works contracts.      Dismissing the appeals, ^      HELD: (1)  From the  totality of the material terms and conditions in  the agreement it is not possible to hold that the parties  intended that  the contractor  transferred  the property in  the railway  coaches to  the Railways after its completion. The  essence of  the contract  or the reality of the transaction as a whole indicates that the contract was a contract for work and labour. [139 F]      (2) The  predominant element  in the  contract was  the

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work and  labour aspect  and supply  of materials  was  only accessory although  the materials  were definitely necessary for the  execution  of  the  work.  The  term  that  if  the contractor died,  his legal  representatives would  have  no interest whatsoever  in the  agreement save  in respect of a claim for  the money  due and for the return of the security deposit, clearly  showed  that  the  contract  was  a  works contract. The  unfinished work  became the  property of  the Railways and the legal representatives were entitled only to claim for  the value  of the  work done. In the event of the death of  the contractor.  there was  no provision  for  the handing  over   of  the  unfinished  coaches  by  the  legal representatives to  the  Railways.  In  such  an  event  the Railways automatically  because the  owner of the unfinished property. [140E-G]      T. V.  Sundaram Iyengar  & Sons  v. The State of Madras (1975) 35  STC 24  and Patnaik  and Company  v. The State of Orissa, (1965) 16 STC 364, distinguished .      Commissioner of  Commercial Taxes,  Mysore v. Hindustan Aeronautics Ltd.  (1972) 29  STC 438;  State of  Gujarat  v. Kailash Engineering Co. (1967) 19 STC 13; State of Madras V. Richardson &  Cruddas Ltd., (1968) 21 STC 245: Government of Andhra Pradesh: v. Guntur Tobaccos Ltd., (1965) 16 240 and 132 Commissioner of  Sale Tax, M.P. v. Purshottam Premji, (1970) 16 STC 38, followed.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION :  Civil Appeal Nos. 1492 and 1493 of 971.      Appeals by  Special Leave  from the  judgment and order dated the  7th and  9th  November, 1 970 of the Gujarat High Court at Ahmedabad in Sales Tax Reference No. 5; of 1969      S. T. Desai and M. N. Shroff; for the Appellants.      V. S.  Desai, Vimal  Dave, Ram Phal, Ganpat Rai, (Mrs.) Sheil Sethi and (Miss) Kailash Mehta: for Respondent.      The Judgment of the Court was delivered by      GOSWAMI, J.-This judgment will govern both the appeals.      These two appeals by special leave are directed against the common  judgment of the Gujarat High Court ill Sales Tax Reference No. 5 of 3969 relating to two periods, namely, (1) from 24th  October 1955 to 31st March, 1956 and (2) from 1st April, 1956 to 31st March, 1 1957.      The Tribunal had earlier delivered a common judgment in two revision  applications No.  121 and  to. 12’ of 1961 and made a  composite reference  to the  High  Court  under  the Bombay Sales  ’Tax Act  stating the  following question  for answer           "Whether on  the facts and in the circumstances of      the  case  the  three  contracts  for  construction  of      coaches on  the under-frames  supplied by  the  Railway      Administration, the  contracts containing similar terms      were  contracts   for  sale  of  goods  and  not  works      contracts?" the  facts appearing  from the statement of      case are as fellows :-      The facts  appearing from  the statement of case are as follows:-      The respondent,  M/s. Variety  Body  Builders,  Baroda, entered  into  three  contracts  with  the  Western  Railway Administration for  construction of  railway coaches  on the under-frames supplied  by the  said railway  Administration. The three  contract were  reduced into writing and contained the terms  and conditions under which the con tracts were to

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be performed.  The first  agreement dated September 17, 1954 was  for   construction  of  25  N.G.  coaches.  The  second agreement  dated   July  11,   1955,  was   in  respect   of construction of  6 T.L.R. coaches. The third agreement dated January 14,  1956, was  for construction of 25 N.G. coaches. The Sales Tax officer held that the transactions relating to the construction  o. the  said coaches  were transactions of sales of  these coaches by the respondent. On that basis the respondent was  assessed at  Rs. 2,72,803/8/-  for the first period and  at Rs.  3,82,820/- for  the second  period.  The respondent’s appeals  to the Assistant Commissioner of Sales Tax were  unsuccessful. The  revision  applications  of  the respondent before  the Deputy  Commissioner of Sales Tax and later before the Tribunal met with the 133 same fate.  The Tribunal,  however, referred the question of law. as set out earlier to the High Court and the High Court answered the  same in  favour of  the respondent  and  hence these appeals by special leave.      The only  question with which we are concerned in these appeals  is  whether  the  contracts  entered  into  by  the respondent with  the Railway Administration for construction of railway  coaches are contracts for sale of goods or works contracts.      Since the three contracts are substantially similar the High Court  and the  authorities  below  took  note  of  the recitals of  the third  contract dated January 14, 1965, and we will also take the same into consideration.      Mr. S.  T. Desai  appearing on  behalf of the appellant and Mr.  Ram Phal appearing on behalf of the respondent took us through  all the  clauses of  the agreement  and  pressed their rival  viewpoints. Mr.  Desai submits  that  from  the totality of  the conditions  laid down  in the agreement the contract is  one for sale, being transfer of property in the railway bogies  as a  unit  of  goods  and,  therefore,  the transaction is  liable to  Sales Tax.  Mr. Ram  Phal on  the other hand,  relying on the same terms and conditions in the contract, submits  that  it  is  a  pure  and  simple  works contract and not a contract for sale of goods.      It  is  well-settled  that  when  there  is  a  written contract it  will be  necessary for  the Court  to find  out therefrom  the   intention  of  the  parties  executing  the particular contract.  That intention  has  to  be  primarily gathered from the terms and conditions which are agreed Upon by the  parties. We  will, therefore,  immediately turn  our attention to the agreement in question.      The preamble  of the  agreement shows  that it  is  all agreement entered  into between  the Railway  Administration and the respondent described as "the contractor".      The first  clause describes  the "nature  of work ’. It states  "the  contractor  hereby  agrees  to  undertake  the building of 25 Nos. Narrow Gauge Third Class Bogie Coaches . on I.R.S. under-frames to be provided by the Western Railway to the  design indicated  at the  rate of  Rs. 19141/- only. the said  work of building bodies will be carried out by the contractor in  the area  of premises  of the Western Railway Workshop at Pratapnagar, Baroda or at such other location as may be  mutually agreed upon". It also appears in the second part of  clause (1)  that each  employee working  under  the contractor "for  this work"  will have a gate pass issued in his favour on a deposit of Rs. 5/- for each gate pass. It is also stated  in the second part of clause (1) that "all gate passes issued to the contractor arc returnable within a week of termination of the contract".      Clause (3)  provides for  security deposit "for the due

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fulfilment and  completion of  this  contract".  Clause  (3) further says  that the  security deposit will be retained by the  Administration   "for  the   due  performance   of  and observance of the terms and conditions of this contract" 134 and the  same is  liable to  forfeiture "in the event of any breach on  the part  of the  contractor  of  the  terms  and condition of this contract".      Clause (4)  provides for  deduction of 10 per cent from each progressive  bill submitted  by the  contractor and the security deposit  shall be  refunded to the contractor "only on successful completion or termination of this contract".      Clause (9)  provides that  constructional material  and fittings must  be supplied by the contractor which should he ordinarily as  per the Railway’s standard. "The provision of the hand-brake  arrangements in  the Guards compartment will be done by the Railway".      Clause (11)  says that  the contractor  is required  to supply carpentry  labour for equipping coaches with electric lights,  fans   switches  and  regulators.  The  appropriate Railway staff will work in association with the contractor’s staff  to   an  extent  required  for  the  installation  of electrical equipment  and all  electrical fittings  will  be supplied by the Railway      Clause (13)  provides for removal of rubbish, debris or temporary  structure   at  contractor’s   own  cost  on  the expiration  of   the  contract   in  the  event  of  earlier termination of the contract.      Clause ( 14) says that the contractor shall provide all essential  equipment,   tools  and  plant  for  satisfactory execution of the work. By clause      By clause (15) "The contractor is required to deliver a minimum number  of two  coaches per  month starting from the expiry  of   six  months  from  the  date  of  signing  this agreement".      Clause (16)  says that  "in the event of the contractor failing to carry out and complete the work within the period stipulated as herein before provided the contractor shall be liable to  pay to  the Administration  by way of ascertained and liquidated  damages a sum equivalent one per cent of the value of  the work  arrears for each and every month or part of a  month by which the contractor shall be in default upto a maximum  of 20%  of the  value of  the  contract  but  the contractor shall  not by reason of the recovery by any means by the  Administration of  such damages be relieved from his other obligations  and liabilities  under the  contract. The recoveries may, be made from the security deposit or running bills or any sums due to the contractor"           Clause (17) may be set out:           "The contractor  shall be responsible for the safe      custody of  carriages under  construction as well as of      the material  supplied by  the Administration  for  the      purpose. till  the material  or the carriages are taken      over by  the Administration. Dates of completion of the      building work will be deemed to be the respective dates      on  which   the  Chief   Mechanical  Engineer   or  his      authorised  representative   certifies  each  coach  as      having been built to his satisfaction" 135      Clause (18)  provides that  the Railway authorities are free. to inspect the work. "The Chief Mechanical Engineer or his authorised  representative will  be the  sole  judge  to determine whether  the standard  of workmanship is according to the Railway‘s requirement and . whether any part or parts of  the   carriage  require   replacement  due   to  bad  or

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indifferent workmanship."      Clause (19)  provides that  "the contractor  shall  not under any circumstances sub-let this contract either in part or in  full without  the previous  consent in writing of the Chief Mechanical Engineer...."      Clause (20) provides for termination of the contract by giving one month’s notice to the contractor "in the event of the contractor  failing to  execute the  contractual  duties with diligence, competence and expedition".      Clause (21)  provides for  the duration of the contract which in  the normal  course be  in force for a period of 16 months from  the date  of signing of the same. There is also provision therein  for allowing  such additional time as the Administration  may   consider  to   be  justified   by  the circumstances of the case.      Clause (22)  provides for  contractor’s  liability  for damages in  the event  of failure  to execute  the work with diligence and  expedition or  in complying  with any  orders given by  the Chief  Mechanical Engineer  or his  authorised representative      from      time      to      time.      Clause (23)  provides that "the contractor will present bill through  District Mechanical  Engineer, Partapnagar for payment on  the basis  of certified  completion in  terms of coaches completed and handed over to him".      Clause (25)  states that "if during, the continuance of this agreement  the contractor  shall die  or be adjudicated insolvent or  if‘ the contractor being a company shall enter into liquidation  whether voluntary  or compulsory....  this agreement shall absolutely cease and determine and the legal representative  of   the  contractor   or/his  assignee   in insolvency or  (in the  case of  a company)  the liquidators shall have no interest whatsoever under this agreement other than in  respect of  a claim  for the money due for the work done under  this contract and for the return of the security deposit subject to the provisions herein contained      Clause (30)  makes provision  for  fair  wages  to  the labourers engaged by the contractor.      Clause (31)  says that  the contractor  shall  have  to abide by safety rules.      Clause (32)  provides that  the  contractor  shall  not employ children under l:‘j years of age.      Clause (33)  says that the contractor shall comply with the provisions  of the  Payment of  Wages Act  and the rules made thereunder. 136      Clause (34)  provides that  "the contractor shall pay a nominal rent of Re. 1/- per mensem for the area which may be allotted to him i-or the purposes of building the coaches".      Clause (35)  provides for water and conservancy charges to be paid by the contractor      Clause (36) provides for supply of electrical energy to the contractor on payment.      Clause (38)  says that  certain conditions  of  ’Tender shall be  deemed to. be incorporated in the agreement. These tenders are, however. not before us.      Before we  proceed further we may. Observe that for the meaning of‘  the expression  "sale of goods" we will have to derive assistance  for the  legal connotation of those words from the  provisions of  the Sale of Goods Act? 1930. As has been held by a Constitution Bench of this Court in the State of Madras  v Gannon Dunkerly & Co. (Madras Ltd’) "that, both under the common law and the statute law relating to sale of goods in  England and  in India, to constitute a transection of sale  there should  be an  agreement, express or implied, relating to  goods to  be completed  by passing  of title in

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those goods.  It is of the essence of this concept that both the agreement and the sale should relate to the same subject matter on  the true  interpretation. Of the expression ’sale of Goods’ there must be an agreement between the parties for the sale  of the  very goods  in which  eventually  property passes".      Bearing in  mind the above legal concept of the sale of goods we  will have  to consider  whether the  terms of  the contract, which we have set out earlier, can be construed in favour of  a contract  for sale  of the  railway Coach which were constructed by the respondent.      Mr.Desai  is  right  when  he  submits  that  the  word contractor appearing."  in the  preamble is  not decisive on the question.  As we have stated earlier the entire document with all  the relevant  and material  clauses throwing light upon the  real intention of The parties and the  real nature of the  transaction must  be given due weight in coming to a conclusion one way or the other.      The  following   material  features  in  the  agreement immediately draw  our attention so far as may be relevant in considering whether  the contract is one of sale or contract of work and labour:           (i)  Undertaking  by   the  Contractor   work   of                building bodies  on under-frames supplied. by                Railway, according  to design  provided by  a                Railway (Cl. 1a).           (2)  Security  deposit   by  contractor   for  due                fulfilment and  completion  of  the  contract                (Clause 3).           (3)  Confiscation  or   forfeiture   of   security                deposit in  the event  of any  breach by  the                contractor of  terms and  conditions  of  the                contract (Clause 3).      (1) 9 S.T.C. 353. 137           (4)  Deduction of  10% from  each progressive bill                of  contractor  to  cover  any  likely  loss,                damage etc. (Clause 4) .           (5)  Import   licence    and   foreign    exchange                arrangements by contractor (Clause 6).           (6)  Supply,  including   manufacture,   assembly,                fitting,  fixing   and  finishing,   of   all                constructional   materials    and    fittings                including timber  by the  contractor  (Clause                9).           (7)  Provision of  hand-brake arrangements  in the                Guard’s compartment by Railway (Clause 9).           (8)  Supply of electrical fittings by Railway (Cl.                11).           (9)  Railway staff  working  in  association  with                contractor’s  staff   for   installation   of                electrical equipment. (Clause 11) .           (10) Use of Railway site provided for the work and                for no other purpose. (Clause 12).           (11) Removal  of   rubbish,  debris  or  temporary                structure at  contractor’s own cost. (Clause-                13).           (12) Earlier   termination    of   contract   also                envisaged. (Clause 13) .           (13) Essential  equipment   to  be   provided   by                contractor.  for   execution  of   the  work.                (Clause 14).           (14) At least  two coaches  to  be  delivered  per                month after  expiry of  six months  from  the                signing of the con tract. (Clause. 15) .

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         (15) Contractor’s  liability   to  pay  liquidated                damages in  the event of failure to carry out                and  complete   the  work  within  stipulated                period. (Clause 16).           (16) Provision for running bills. (Clause 16).           (17) Responsibility of contractor for safe custody                of carriages under construction as well as of                the materials  supplied by  Railway till they                are taken over by Rail way.  (Clause 17) .           (18) Date of  completion of  binding work  on  the                date   of    certification    by    Railway’s                representative to  his satisfaction.  (Clause                17).           (19) Right of  inspection of  the work  by Railway                at all  times and  of maintenance  of control                over  standard   of   workmanship   requiring                rectification of  work and  re  placement  of                materials when ordered. (Clause 18).           (20) No subletting  of contract  wholly or in part                without the previous written consent of Chief                Mechanical Engineer. (Clause 19). 138           (21) Authority  to   terminate  contract   by  one                month’s notice in the event of the contractor                s  lack;   of   diligence,   competence   and                expedition in  executing contractual  duties.                (Clause 20).           (22) Any losses incurred by Railway and occasioned                through failure of contractor to company with                contractual  obligations  will  be,  deducted                from security deposit. (Clause 20).           (23) Contract to  be in force for 16 months unless                extended  on  reasonable  ground  subject  to                waiver of  loss or damage by Railway. (Clause                21).           (24) Contractor’s liability for damage for failure                to  execute   the  work  with  diligence  and                expedition  or   to  comply  with  orders  of                Railway Administration. (Clause    22).           (25) Bills to  be submitted  by contractor  on the                basis of  certified completion  in  terms  of                coaches completed.  and handed  over  to  the                District Mechanical Engineer. (Clause 23 ) .           (26) Contractor,   his    heirs,   executors    or                administrators    to     indemnify    Railway                Administration, from  and against  all claims                including   claims    under   the   Workmen’s                Compensation  Act,   Payment  of  Wages  Act,                Factory Act, etc. (Clause 24).           (27) In case  of contractor’s  insolvency of death                agreement   shall    absolutely   cease   and                determine and  the legal  representatives  of                the contractor  or the liquidators shall have                no interest  whatsoever under  the  agreement                other then  in respect  of a  claim  for  the                money due  for the   for  the work done under                the  contract  and  for  the  return  of  the                security deposit  subject to  the pro visions                of the agreement (Clause 25)           (28) Arbitration  clause   in  the  event  of  any                dispute  in  connection  with  the  contract.                (Clause 28).           (29) Contractor to  pay fair  wages  to  labourers                employed. (Clause 30).           (30) Contractor  to abide by safety rules. (Clause

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              31).           (31) No employment  of children  under 15 years by                con tractor. (Clause 32).           (32) Responsibility of contractor under Payment of                Wages Act. (Clause 33).           (33) Nominal  rent   of  Re.  1/-  per  month  for                occupation  of   the  Railway  area  for  the                purpose of building the coaches. (Clause 34). 139           (34) Contractor to pay to the Railway conservancy-                charges and  for supply of electrical energy.                (Clauses 35 and 36) .      Reading the  agreement as  a whole  and bearing in mind the above  features, is it possible to conclude that what is contracted is  to sell  the railway coach constructed by the contractor to  the Railway  ? In  . that  event the  railway coach when  constructed by  the contractor  to the  Railway? In that  event the railway coach when constructed must be as a unit the property of the contractor.  But has the assessee alone contributed  to the  result  ?  There  were  materials supplied by  railway. There  was labour supplied by Railway. It is  different from the case of a bus-body fitted into the chassis with  all materials  supplied by  the contractor and all skill and labour contributed by the contractor.      A contracts  to sell  a certain  article to must be the owner   of the  article and  B must  be at the receiving end having no  interest in  the article prior to passing of. the property therein.  Is the  contractor owner  of the  railway coach when  It was  completed? the  answer must  be  in  the negative.   Apart from  the fact that the under frame is not of the  contractor (which  may in  a given case be a neutral factor) not  all his  materials nor all his labour and skill contributed to  the coach.   The  railway supplied  men  and materials  although  the  substantial  portion  is  for  the contractor.   This goes  to bring  out the  intention of the parties in they were intent upon performance of the work the manner of the work  the quality of the materials used in the work and  upon completion  of the work in the most efficient way  resulting   ultimately  in  a  completed  coach.    The intention of  the parties  at the  time of entering upon the contract was  not to transfer any completed railway coach by the contractor  to the  Railway.  The end-product, being the railway coach,  is the  result of work, labour and materials of the  contractor as  well as of the railway as also of the latter’s constant supervision and control.      From the totality of the material terms, and conditions in the  agreement set  out above, it is not possible to hold that the  parties intend  that the  contractor transfers the property in  the railway.  coach to  the Railway  after  its completion. The  essence or  the contract  or the reality of the transaction as a whole indicates that. the contract is a contractor work and labour.      Mr. Desai  submits  that  clauses  15  ,17  and  23  in particular make  it absolutely  clear that the property in a unit   in the shape of a completed railway coach passes only on handing  over of  the same  to  the  District  Mechanical Engineer after  the same has been complete and the specified authority certifies  the coach  as having  been built to his satisfaction.   He particularly  draws our  attention to the word" deliver"  in clause  15 and  the words" taken over" in clause 17  and "  handed over’  in clause 23 .  According to Mr. Desai these three clauses clearly disclose the intention of the  parties that  a railway  coach as  a unit  after its completion,  is   contracted  to  the  handed  over  by  the respondent to  the Administrating.  The contract, therefore,

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that is entered in terms of the agreement is one of contract of sale of good and not a works contract says Mr. Desai. 140      Although  the   submission  on   the  first   blush  is attractive and appears to be of some force, it will not bear lose scrutiny.  Perusal of clause 17 itself upon which great reliance has  been placed  by Mr. Desai shows that "dates of completion of  the building  work will  be deemed  to be the respective dates  on which  the Chief Mechanical Engineer or his authorised representative certifies each coach as having been built  to his  satisfaction". It  is also apparent from the contract that the contractor has to complete two coaches each month  after expiry  of the  first six  months  of  the contract. It  is also  clear that the con tractor has to get payment by  submitting running  bill; on  completion of  the coaches every  month. In  the above  context when  clause 17 refers to a fictional completion or the building work on the date of  certificate by the Chief Mechanical Engineer or his authorised representative  there is  no  requirement  for  a further  ritual   of  delivery  or  handing  over  to  which reference made  in clauses  15 and.  ’ 23  respectively. The work is  undertaken in  the  Railway  premises.  people  are admitted on  gate passes for building the railway coaches on the under  frames supplied  by  the  Administration.    Some materials such  as electrical  goods. were  supplied by  the Railway.   Besides, there is cooperation of Railway’s labour with the  contractor’s labour  in construction  of the coach the hand-rake  arrangements in  the Guard’s  compartment are also agreed  to be  done by the ’Railway. Regular inspection of the  contractor’s work  is carried  out at  all times and instructions to  rectify defects  have  to  be  carried  out immediately.   Unless a  close inspection  of  the  work  is carried out  from day to day, it may be difficult to rectify defect t  after the  work progresses.   All this would go to show that  the predominant  element in  the contract  is the work and  labour   aspect and  supply of  materials is  only accessory although  the materials  were definitely necessary for execution  of the  work.  There is yet another important clause which throws a flood of light on this issue Clause 25 deals with  the contractor’s  insolvency or  death.   It  is agreed between  the parties,  as per  clause 25, that if the contractor dies,  his legal  representatives shall  have  no interest whatsoever  in this  agreement save in respect of a claim for  the money due for the work already done under the contract and  for the return of the security deposit subject to other  provisions.  This would also clearly show that the contract is  a works  contract  and  unfinished  work  would become the property of Railway and the legal representatives will be  entitled only  to claim  for the  value of the work done.   There is no provision in the agreement in that event for handing  over of  the unfinished  railway coach  by  the respondent or  his legal representatives or assignees to the Railway  Administration.      The   Railway   Administration automatically becomes  the owner  of the unfinished property which was lying in its premises.  This is another reason why no exaggerated  importance can  be  assigned  to  the  words "delivery"  and   "  handed  over"  in  clauses  15  and  23 respectively as urged by Mr. Desai.      This is  therefore, not a contract where it can be said that there  is an  agreement to  supply a  completed railway coach which  when produced  will  be  the  property  of  the contractor. Along  with those  of the contractor’s materials and labour of Railway are also required to be 141   !THIS PAGE IS NOT WELL SCANED

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142      the value  of the materials us conclusive although such      matters may  be taken into consideration in determining      i the  circumstance of  a particular  case whether  the      contract is in substance one for work and labour or one      for the sale of the chattel".      It can  be treated  as well-settled  that there  is  no standard formula by which one can distinguish a contracts of sale from  a contract for work and labour. There may be many common features  in both  the  contracts,  some  neutral  in particular context  and yet  certain clinching  terms  in  a given case may fortify a conclusion one way or the other. It will depend  upon the  facts and circumstances of each case. The question  is not  always easy and has for all time vexed jurists all over.      In  Commissioner   of  Commercial   Taxes,  Mysore   v. Hindustan Aeronautical  Ltd.(1) a  bench of  five Judges  of this Court  to which  my learned  brother was a party had to deal with  a works  contract With  regard to manufacture and supply of railway coaches. This Court after consideration of all the  facts In  that case and the salient features of the contract came  to the  conclusion that  it was  a pure works contract with  Court further  held that the case was in line with the decision in State of Gujarat v. Kailash Engineering Co.(2). Indeed Kailash Engineering’s case (supra) was relied upon by  the respondent  before us. It was held in that case that  as  the  terms  of  the  contract  indicate  that  the respondent was  not to  he the  owner of  the ready  railway coaches and  that the property in those bodies vested in the Railway  even   during  the  process  of  construction,  the transaction was clearly a works contract and did not involve any sale.      Mr. Desai  strenuously contends that clause (29) of the contract in Kailash Engineering’s case (supra) distinguishes that case  from the  case at  hand Clause  29 was a specific provision for certain contingencies in case of loss theft or destruction  of   the  materials   or  plant.  This  special provision was  to the  effect  that  the  liability  of  the contractor  was   not  to   be   diminished   in   any   way notwithstanding the fact that the materials and plant became the property  of the Railway as soon as they were brought to the Railway  premises. We  however do  not see much point in this submission  In that  case since the plant and materials were brought  on the  site when  the  contract  were  to  be constructed the  ownership is  said to  have vested  in  the Railway. In  the present  case also  substantially the  same result follows.  The agreement  here  shows  that  when  the contractor dies  his legal representatives or assignees have no interest  in the  contract which terminates and they will be only paid for the value of the work done. This would mean the property  constructed  upto  that  point  was  impliedly agreed upon  to  be  vested  in  the  Railway  as  and  when materials  were   worked  into  the  chassis.  This  is  the implication of the agreement and not merely on the theory of accretion. At  any rate the passing of property in this case is ancillary  to the  primary contract  for execution of the work. (1) (1972) 29 S. T. C. 438.        (2) (1967) 19 S. T. C. 13 143      In the  Slate of  Madras v. Richardson & Cruddas Ltd(1) this Court  was dealing  with a contract for fabrication and installation of  steel structure  for sugar  factory in  the State of  Mysore. In  the course  of the judgment this Court observed as follows:-           It  had  therefore  to  be  established  that  the

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    consideration was  received under  a contract  to  sell      specific goods  for a  price and  property in the goods      contracted to  be sold  passed to  the society when the      goods were delivered in a pursuance of the contract. If      the contract was for completing the stipulated work and      for that  purpose to  use materials  belonging  to  the      respondents in  the performance  or  execution  of  the      contract as accessory to ‘work and labour’ the contract      must be regarded as a works contract and not a contract      for sale  even in  the property in the goods ultimately      passes as a result of the contract .      The Court further observed at page 252 as follows .           The  contract  being  one  for  supplying  for  an      inclusive price a specially designed fabricated unit to      be  assembled   and  installed   by  specially  trained      technicians ill the premises of the customer it was not      a contract for sale of a unit or different parts of the      unit is specials good but a works contract .      In the Government of Andhra Pradesh. v. Guntur Tabaccos Ltd.(2) this  Court dealing with an identical issue observed as follows at page 255:           The fact  that in  the execution of a contract for      work some  materials are used and property in the goods      so used  passes  to  the  other  party  the  contractor      undertaking to  do the  work will  not  necessarily  be      deemed on that account to sell the materials . Again at page 258:           Whether a contract for service or for execution of      work invokes a taxable sale of goods must be decided on      the facts  and circumstances of the case. The burden in      such a  case lies  upon the  taxing authorities to show      that there  was a  taxable sale  and that burden is not      discharged by  merely showing  that property  in  goods      which belonged  to the  party per  forming  service  or      executing the  contract stands transferred to the other      party .      This Court  in  Commissioner  of  Sales  Tax,  M.P.  v. Purshottam Premji(3)  dealt with  the difference  between  a contract of work or service and a contract for sale of goods in the following passage:           The primary difference between a contract for work      or service  and a contract for sale of goods in that in      the former (1) (1968) 21 S. T. C. 215.      (2) (1965) 16 S. T. C. 240.                  (3) (1970) 26 S. T. C. 38. 144      there is  in the  person performing  work or  rendering      service no  property in  the thing  produced as a whole      notwithstanding that  a part  or even the whole of‘ the      material’ used  by him  may have  been his property. In      the case of a contract for sale the thing produced as a      whole has individuals 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 there   to  the other  party for  price.  Mere      transfer of  property in goods used in, the performance      of a  contract is  not sufficient; to constitute a sale      there must  be an agreement express or implied relating      to the sale of goods and completion of the agreement by      passing of  title in  the very goods contract the to be      sold. Ultimately  the true  effect of an accertion made      pursuance to  a contract  has to  be judged  not by  an      artificial rule  that the  accretion may he presumed to      have become  by vitrue of affixing to a chattel part of      that chattel  but from  the intention of the parties to

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    the contract.      We are  fortified by  all the  above decisions  of this Court in our conclusion in favour of the assessee.      We are  therefore clearly  of opinion that the contract in the  present case  is one  of works contract and the High Court is  not in  answering the  question in  favour of  the assessee. The  appeals therefore fail and are dismissed with costs. One hearing fee for counsel. P.B.R.                                    Appeals dismissed. 145