SARVODAYA MOTOR WORKS Vs. STATE OF GUJARAT

JUDGEMENT

(1.) THE question which arises in this reference is whether the contract sought to be assessed by the revenue was a contract of sale of goods or for work and labour.

(2.) THE applicants carry on business as builders of bodies of trucks and of repairing cars and other vehicles. On 7th August, 1962, they entered into a contract with Messrs Patel Maraman Bhaya and Mohanlal and Co. of Keshod, whereby they undertook to construct the body of a truck belonging to the said firm. THE contract set out the various specification "for building the body of the truck on W.B. (i.e., wheel base)". THEse specifications inter alia provided the size of the body, its length, width and height, and the materials of which the floor thereof was to be made, the manner in which nuts and bolts had to be affixed as also the central pillar, which was to be a folding one, the number of hooks to be affixed and for a cabin with two full size doors for the driver. THE contract then states that a lump sum of Rs. 3,021 was to be paid for the work. THE contract also contained the following term which the parties added in ink to the printed terms, namely, "THE body is to be prepared and delivered on or before 25th August, 1962." It also provided that over and above the said sum of Rs. 3,021, it was the customer who had to pay for the "chanda" (mirror) and charges for painting, presumably such things as "public carrier" etc. On 31st August, 1962, the assessees prepared two bills, one for the amount of Rs. 1,900 in respect of the materials used for building the body and another for Rs. 1,245, being labour charges.

(3.) MR. Nanavati who appears for the applicants placed two contentions before us, (1) that on a true interpretation of the contract embodied in the specifications dated 7th August, 1962, the contract was one for work and labour and not for the sale of the body of the truck, and (2) in the alternative, that it was composite contract, one for materials sold and the other for work and labour and, therefore, the amount received for work and labour was in any event not taxable. MR. Nanavati argued that the Tribunal was in error in interpreting the contract as one of sale of the body of the truck, for the agreement however stated that the entire body was to be delivered and that on the delivery of the truck, the price was to be paid. The contract, therefore, was for the construction and not for the sale of the body. MR. Nanavati went further and argued that no sooner a plank, nut or a part was affixed, the property in that material would pass to the customer. If such material was destroyed before the body was completed, the customer would ordinarily have to be bear the loss, but that consequence was saved in the instant case because the customer was to pay a lump sum for the entire work and the applicants therefore could not demand the price or part of the price before the work was finished and the body was completed and delivered. On the order hand, the learned Assistant Government Pleader contended that the contract was clearly a contract of sale of the body, that the contract indicated clearly that it was upon the completion of the body and its delivery that the customer would be liable to pay the aforesaid amount of Rs. 3,021, and that it was only when delivery of the completed body was made that the property in it would pass to the customer.