SMT. NAGAWWA A.

VEERANNA SHIVALINGAPPA KONJALGI & ORS.

April 23, 1976 ' ,.. fA. C. GUPTA AND S. MURTAZA fAZAL ALI, JJ.]

COde of Crin1inal Procedure, ss. 202, 204-Enquiry under s. 202-Scope of ... . -Accused if had locus sta'ndi.

The appellant filed a complaint before the Magistrate alleging that the police did not deliberately charge-sheet respondents 1 and 2 despite the fact that they abetted in the murder of her son because they were influential persons.

After the inquiry the Magistrate issued a process to respondents 1 and 2 under c s. 204(l){b) of the Code of Oiminal Procedure, 1973. Tho revision petition of respondents I and 2 filed under s. 482 Cr.P.C. was allowed by the High Court. Jn appeal to this Court it. was contended for the appellan? that the High Court was ih error in examining the order of the Magistrate on merits after taking j, nto consideration the doculll';::nts filed by the respondents, which did not form part af the complaint or evidence recorded in support thereof before tho Magistrate.

Allowing the appeal, ))

HELD : The order of the High Court suffers from a serious legal infirmity and. the High Court has exceeded its jurisdictiOn. in interfering in revision b-y

qua; hing the order of the Magistrate.

[129 H]

( 1) In the following case! an order of the Magistrate can be quashed or liet aside :

(a) Where the allegations made in the complaint or the statements of the witne"S.scs recorded in supp0rt of the same taken at their face value make out absolutely no case against the accused or the COD"Jplaint docs not disclose the essential ingredients of an offence which is alleged against the accused;

(b) Where the allegation! made in the compiaint are patentiy absurd and ioh.erently improbable so that no prudent person ca"n ever reach a conclusion that ijhere is sufficient ground for proceeding against the accused.

(1:) Where the discrtion exercised by the Magistrate in issuing process is capricious and arbitrary having been based either on no evidence or on materi~Is which are wholly irrelevant or inadmissible; and

{d) Where the complaint suffers from fundamental legal defects, such as, want of sanction, or absence of a complaint by legally competent authority and the like.

(128 C-E]

(2)(a) At the stage of issuing the process the Magistrate is n1ainly oon ccrned with allegations made in the complaint or the evidence led and he is onty to be. prima fade Satisfied whether there are sufficient grounds for proc:eedio.g against the accused. It is not the province of thti Magistrate to enter into a detailed discussion on the merits or demerits of the case. The scope of the

in.qujry under s. 202 Cr.P.C. is extremely limited-lin1ited to the ascertainment of the truth. or falsehood of the allegations made in the complaint:

(i) on the materials placed by the complainant before the court (ii) for the limited Purpose of finding out whether a prima facie case for issue of process had been made out and (iii) for deciding the question purely from the point of view .of the complainant without at all adverting to any defence that the accused may have. In prooeedings under s. 202 the accused has got absolutely llO focus standi and iSi not entitled to be heard on the question whether the process should be issued against him or not. (126 E; 127 E+l

SUP!\EME COURT REPORTS

(1976] SUPPLEMENTARY

A Chandra Deo Sing/1 v. Prokas/i Chandra Bose, [1964] I S.C.R. 6l9 and Vadilal Panchal v.

Dattatraya Dulaii Ghadigaonker and Another, [19"61] 1 S.C.R. I, followed.

(_b) In coming to a decision as to \Vhether a process should be issued the

~:1ag1strate can take into consideration inherent improbabilities appearing on the face of the complaint or in evidence led by the complainant in support of the allegations.

Once the Magistrate has exercised judicially the discretion given to him it is not for the High Court or even this Court to substitute its own discretion for that of the Magistrate or to examine the case on merits with a view to find out whether or not the allegations in the complain!, if proved. would ultimately end in conviction of the accused. These considerations are totally foreign to the scope and ambit of inquiry under s.. 202 of the Code of Criminal Procedure, which culminates in an order under s. 204

of the Code.

[1_27 G.H; 128 A-BJ

(3) In the instant case the High Court should not have quashed the proceedings.

The order of the Magistrate was a reasoned one \\'hieb took into consideration the alle2ations in the complaint as also the evidence adduced in support of it.

It was not a case where the Magistrate had passedan order in a mechanical manner or just by way of routine.

Th~ High Court could n6t go into this matter in its revisional jurisdiction which is a very limited on<.

[128 F-G]

CRIMJNAL APPELLATE JURISDICTION : Criminal Appeal No. 99 of 1976. '

Appeal by Special Leave from the Judgment and Order dated 16-12-75 of the Karnataka High Court in Criminal Petition No. 50 of 1975.

N. B. Datar and R. B. Datar for the Appellant.

E M. C. Bhandare, (Mrs.) S. Bhandare, M. S. Narsimhan, K. JC

Sharma, and A. K. Mathur for Respondents 1 and 2.

Narayan Nettar for Respondent No. 3.

The Judgment of the Court was delivered by

FAZAL Au, J.

This appeal by special leave is directed against the judgment of the Karnataka High Court by which it set aside the crder of the Additional Judicial Magist, rate, First Class, Gokak issuing process against respondents 1 & 2 in exercise of his discretion under s. ~04 of the Code of Criminal Procedure.

The facts of the case lie within a very narrow compajs and although the High Court has taken great pains to write a laboured judgment the point involved. is short and simple and does not merit a detailed discus_sio_n.

The police ol Gokak Police Station submitted a charge-sheet against Nagappa Giddannavar -and seven others under ss. 302, 114, 148, 147 and other sections on the allegations that on July 19, 1973 the accused persons had wayh\id and murdered one Nagappa son of the appellant in this Court. The appellant, who had filed the report before the police does not appear to have been satisfied with the investigation by the police which according to her was tainted and had suppressed some important materials, file_d a complaint before the Magistrate at Gokak on October 4, 1-973 alleging that _respondents 1 & 2 had in fact abetted the offence ?f murder committed by the other accused but as they were inll\Jentrnl

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]'IAGAWWA V, V, s. KONJALG! (Fazal Ali,/,) 125

persons their names were deliberately left out in the report as also in the dying declaration, On receiving the complaint on October 4, 1973 the Magistrate decided to hold an inquiry into the complaint himself and in pursuance of his decision he recorded some evidence on October 8, 1973, Thereafter the case was posted for October 10, 1973 for arguments and further evidence, if any, On October 10, 1973 the Magistrate observed that six witnesses had been examined and the evidence recorded so far was sufficient for the Court to determine the question as to whether or not process should be issued to respondents 1 & 2.

He then adjourned the case for argument for October 12, 1973. On that day arguments were heard but before any order could be passed the Magistrate who had recorded the evidence was transferred and therefore the case had to be adjourned.

The new Magistrate took up the matter on November 26, 1973 and after hearing the complainant he adjourned the case to December 3, 1973 and on this day he directed that further inquiry may be made by Superintendent of Police, Belgaum and he accordingly referred the matter for inquiry and report to the Superintendent of Police,' Belgaum asking him to submit his report within six weeks, It seems to us that in view of the change of the Magistrate the successor Magistrate was not able to grasp the implications of the proceedings which had been taken by his predecessor who had in fact first decided to hold an inquiry himself and after recording the evidence had decided to pass an order under s. 204 of the Code of Criminal Procedure.

Before however be could pass any order he was .succeeded by the present Magistrate. The appellant filed an application in revision to the High Court on December 11, 1973 against the order of the Magistrate dated December 3, 1973 referring the matter to the Superintendent of Police for inquiry and report.

Whiie the application was pending before the High Court, respondents 1 & 2 filed a petition before the High Court praying for an early hearing of the revision and for vacation of the stay order.

Along with this petition the respondents filed a number of documents including the copies of the petitions sent by the appellant to the Chief Minister and the Speaker.

We might indicate here that there was absolutely no occasion for the respondents to have filed the documents before the High Court in a miscellaneous petition nor <lid they obtain any permission of the Court for filing those documents, The High Court, after hearing the revision application filed by the appellant, allowed the same mainly on the ground that as the Magistrate had ultimately decided to hold an inquiry into the trnth or falsehood of the complaint himself he had no jurisdiction to stop that inquiry and then make a reference to the police afresh.

The High Col!ft accordingly quashed the order of the Magistrate and directed him to decide the case in accordance with the law after recording further evidence, if any. It appears that the High Court did not give any directions to the Magistrate for considering the documents which had been filed by the respondents before it but by a subsequent order merely forwarded the documents to the Magistrate.

The papers were sent back to the Magistrate on January 7, 197 5 and by his order dated January 27, 1975 the Magistrate was informed tha.t the appellant did not want to adduce any further evidence.

The matter was accordingly posted for argument on February 7, 197 5 and after hearing the

12 6

SUPREME COURT REPORTS

[1976] SUPPLEMENTARY

arguments and . considering the evidence recorded by the Magistrate he by his order dated February 11, 1975 directed process to be issned against respondents 1 & 2 under s. 204( 1) (b) of the Code of Criminal Procedure.

Respondents 1 & 2 then preferred a revision against this order to the High Court under s. 482 of the Code of Criminal Procedure praying that the order of the Magistrate may be quasbed.

This revision was allowed by the High Court by the impugned order against which special leave was granted by this Court at the instance of the appellant

In support of the appeal Mr. H. B. Datar submitted that the Magistrate had given cogent reasons for holding that there were sufficient grounds for proceeding against respondents 1 & 2 and the High Court was in error in interfering with the order of the Magistrate by examining the merits of the case after taking into consideration the documents filed by the respondents which could not be looked into by the Magistrate as they did not form part of the complaint or the evidence recorded in support thereof.

In our opinion the contention raised by the learned counsel for the appellant is well-founded and must prevail.

Mr. M. C. Bhandare sought to repel the argument of the appellant on the ground that the order of the Magistrate was perverse and as the case was full of patent absurdities and was politically motivated the prosecution of respondents 1 & 2 would amount to unnecessary harassment resulting in abuse of the process of the Court.

In the view we take in the instant case it is not necessary for us to enter into the merits of the case at this stage. It is well settled by a long catena of decisions of this Court that at the stage of issning process the Magistrate is mainly concerned with the allegations made in the complaint or the evidence led in support of the same and he is only to be prima fade satisfied whether there are sufficient grounds for proceeding against the accused.

It is not the province of the Magistrate to enter into a detailed discussion of the merits or demerits of the case nor can the High Court go into this matter in its revisional jurisdiction which is a very limited one.

In Chandra Deo Singh v. Prakash Chandra Bose(') this Court had after fully considering the matter observed as follows :

"The courts have also pointed out in these cases that what the Magistrate has to see is whether there is evidence in support of the allegations of the complainant and not whether the evidence is sufficient to warrant a conviction.

The learned Judges in some of these cases have been at pains • to observe that an enquiry under s. 202 is not to be likened to a trial which can only take place after process is issued, and that there can be only one trial.

No doubt, as stated in sub-s. (1) of s. 202 itself, the object of the enquiry is to ascertain the truth or falsehood of the complaint, but the Magistrate making the enquiry has to do this only with reference to the intrinsic quality of the statements made before him at the enquiry which would naturally mean the complaint itself, the statement on oath made by the complainant --------

(!) (1964) t S. C.R. 639 , 648.

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and the statements made before him by persons examined at the instance of the complainant."

Indicating the scope, ambit of s. 202 of the Code of Criminal Procedure this Court in Vadilal Panchal v. Dattatrya Dulaji Ghadigaonker and Another(') observed as follows :

"Section 202 says that the Magistrate may, if he thinks lit, for reasons to be recorded in writing, postpone the issue

of process for compelling the attendance of the person complained against and direct an inquiry for the pupose ?f ascertaining the truth or falsehood of the complamt; m other words, the scope of an inquiry under the section is limited to

finding out the truth or falsehood of the complaint in order to determine the question of the issue of process. The inquiry is for the purpose of ascertaining the truth or falsehood of the complaint; that is, for ascertaining whether there is evidence i11 support of the complaint so as to justify the issue of process and commen.cement of proceedings against the person concerned. The section does not say that a regular trial for adjudging the guilt or otherwise of the person complained against should take _place at that stage; for the person complained against can. be legally called upon to answer the accusation made against him only when a process has issued and he is put on trial." lt would thus be clear from the two decisicms of this Court that the scope of the inquiry under s. 202 of the Code of Criminal Procednre is extremely limited-limited only to the ascertainment of the truth or falsehood, of the allegations made in the complaint-(!) on the materials placed by the complaint before the Court; (ii) for the limited purpose of finding out whether a prima facie case for issue of process has been made out; and (iii) for deciding the question purely from the point of view of the complainant without at all ndverting to any defence that the accused may have.

In fact it is well settled that in proceedings under s. 202 the accused has got absolutely no locus standi and is not entitled to be heard on the question whether the process should be issued against him or not.

Mr. Bhandare laid great stress on the words "the truth or falsehood of the complaint" and contended that in determining whether the complit is false the Court can go into the question of !he broad prnbabiht!es of the ase or. intrinsic infirmities appearing

rn the evidence. It is true that m .conung t" a decision as to whether a pro"ess should be issued the Magistrate can take into consideration inherent improbabilities appearing on the face of the complaint or in the evidence led by the complainant in support of the allegations but

t~re apears. tC'. be .a very thin line of demarcation between a probability 01 _convit10n of the acused and establishment of a prima facie

cas~ agrnst him.

The Magistrte has been given an undoubted discreh?n m the matter and the discretion has to be judicia ll v exercised 'by him. Once the Magistrate has exercised his discretion it is not for

(l) (1961] l S. C.R. 1, 9.

SUPREME COURT REPORTS (1976] SUPPLEMENfARY

A the High Cour_t, or even this Co\lrt, to substitute its own discretion for that of the Magistrate or to examine the case on merits with a

view to find out whetJ.ier or not the allegations in the omplaint, if proved, would ultimately end in conviction of the accused.

These considerations, in our opinion, are totally foreign to the scope and ambit of an inquiry under s. 202 of the Code of Criminal Procdure which culmir.ates into an order urider s. 204 of the Code. Thus it B may be safely held that in the following cases an order oi the Magistrate issuing process against the accused can be quashed or set aside :

(1)

(2)

Where the allegations made in tllll complaint or the statements of the witnesses recorded in support of the _same taken at their face value make out absolutely no case against the accused or the complaint does not disclose the essential ingrediems of an offence which - is alleged against the accused;

where the allegations made in the complaint are patently absurd and inherently improbabl~ so that no prudent person can ever reach a conclusion that there is sufficient ground for proceeding against the accused; .

(3) where the discretion exercised by the Magistrate in issuing process is capricious and arbi:rary having been based either on no evidence or on materials which are wholly irrelevant or inadmissible; and

( 4) where the complaint suffers from fundamental legal defects, such as, want of sanction, or absence of a complaint by legally competent auth0rity and the like.

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The cases mentioned by us are purely illustrative and provide sufficient . ._

guidelines to indicate contingencies where the High Court can quash proceedings.

Applying these principles to the facts of the present case it seems to us that the present case is not one in which th~ !-ligh Court should have quashed the proceedings.

To begin with, the order of the Magistrate dated February 11, 1975 issuing process against respondents l and 2 is a very well reasoned one which takes into consideration the allegations in the complaint as also th3 evidenc~ adduced in support of it.

Tile Magistrate clearly applied his mind anrl has analysecl the evidence into three categories-(i) those witnesses who have deposed as eye witnesses regarding the actual occurrence and the part attributed to respondents 1 and 2. The Magistrate then refers to other witnesses who cr, rroborated the evidence of the complainant; and thirdly the Magistrate relied on the evidence of witnesses who were admittedly signat<Jries to the dying declaration and had clearly stated on oath that the n.nnes of respondents 1 and 2 were mentioned in their presence by the deceased but were not recorded by the Police Patel in the dying decJ.aration and in spite of the protest by the wituesses they were made to sign the dying declaration as attesting witnesses under threat and duress. On a consideration of this evidew:c the Magistrate was satis-

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fied that a prima facie case against respondents 1 and 2 was made out and he accordingly issued process against them. It was not a case where the Magistrate had passed an order issuing process in a mechanical manner or just by way of routine. The High Court <.ppears to have gone into the whole h.istory of the cse, examined. the merits .o! the evidence, the contradictions and what 1t called the 1mprobab1h11es and aft<r a detailed discussion not only or the materials produced before t~ Magistrate but also of the doeument' which had been filed by the defence and which should uot have been looked into :; it the stage when the matter was pending under s. 202, has held that the order of the Magistrate was illegal and was fit to be quashed.

In the first place the High Court ought not to have considered the document' filed by respondents 1 and 2 in the_ previous revision with<'Ut obtaining the permission of the Court and particularly when the liigh Court itself gave no directions whatsoever to the Magistrate to consider those documents.

In fact the Magistrate considering the question a! to whether process should be issued against the accused or not cannot go into the materials placed by the accused and therefore the High Court could not have given any iuch directions while disposing of the previous rev!Slon.

The impugned order of the High Court prnceeds on the basis that it was incumbent on the Magistrate to have considered the documents and their effect on the truth or falsehood of the allegations made by the complainant. This was an entirely wrong approach.

As we arc clearly of the opinion that the Magistrate . was fully justified in completely excluding the documents from consideration, we refrain from making any observation regarding the effect of those documents.

In fact the documents filed by the respondents were mere copies and they were, therefore, not admissible. At any rate, at the stage of s. 202 or s. 204 ot the Code of Criminal Procedure as the accused had fl:) locus standi the Magistrate had absolutely no jurisdiction to go into any materials or evidence which may be produced by the accused who could be present only to watch the proceedings and not to participate in 1 hem.

Indeed if the documents or the evidence produced by the ,.ccuse<.i is ~!lowed to be taken by the .Magistrnte then an inquiry under s. 202 would have to be converted into a full-dress trial defeating the very object for which this section has been engrafted.

I'he Hig:1 Court in quashing the order .c.f the Magistrate completely failerl to consider the limited s_cope of an inq1Jiry under s. 202. liaving one throu5h the order of the Magistrate we do not find any error of bw committed by him.

The Magistrate !las exercised his discretion nnd has given cogent reasons for his conclusion.

Whether the reasons were good or bad, sufficient or insufficient, is not a matter which .could

hae been examined by the J:Iigh Court in revision.

We ure eon~ tramed to o?serve that. the. Hih Court. went out of its way to wrilt a laboured Judgment h1ghbghting certam aspects cf the case of the

accncd as appearing from the documents filed by them which they were. not entitled to file and which were not entitled in law 1e lte cmlS!dtred.

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Fr these reasons, therefore, we are satisfied that the order of the High Court suffers from a serious legal infirmity and the High Court

11-833 SCl/76

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13 0 SUPREME COURT j(EPORTS

[1976) SUPPLEMENTARY

A has exceeded its jurisdiction in interfering in revision by quashing the order of the Magistrate.

We, therefore, allow the appeal, set aside the order of the High Court dated December 16, 1975 and restore the order of the Magistrate issuing process against respondents 1 and 2.

At lhe time of granting the special leave, we had directed the Sessions Judge who was trying the 0riginal case resulting from the B F.I.R. lodged before the police to stay proceedings to the extent that the judgment was not to be pronounced untJl this appeal was disposed of.

We understand that the Sessions case is now concluded before the learned Sessions Judge and arguments haw also hee.n heart!.

In view of the order of the Magistrate issuing process against respont!ents l and 2 which has been confirmed by us, t!Je respondents will have to face a supplementary trial and it is 'not conducive in the interests of C justice to allow the other trial to be stayed any further. The Sessions Judge is therefore directed to dispose of the Sessions Case and the stay granted by this Court earlier is vacated.

'< I

NAGAWWA

VEERANNA SHIVALINGAPPA KONJALGI & ORS

fA. C. GUPTA

S. MURTAZA fAZAL ALI, JJ.

ss. 202, 204

s. 202

s. 204(l)

Code of Oiminal Procedure, 1973

s. 482

Cr.P.C

s. 202

Cr.P.C

s. 202

Code of Criminal Procedure

s. 204

Code of Criminal Procedure

ss. 302, 114, 148, 147

s. 204

Code of Criminal Procedure

s. 204( 1)

Code of Criminal Procedure

s. 482

Code of Criminal Procedure

s. 202

s. 202

s. 202

Code of Criminal Procedure

Section 202

s. 202

s. 202

s. 202

s. 204

s. 202

s. 202

s. 204

Code of Criminal Procedure

s. 202

s. 202


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STATE OF GUJARAT (COMMISSIONER OF SALES TAX,

AHMEDABAD)

M/S. VARIETY BODY BUILDERS

April 26, 1976

(H. R. KHANNA AND P. K. GOSWAMI, JJ.]

Bon1bay Sales Tax Act-Contracts for sale of goods and works conrracts- J'ests for decidin!l works contracts.

The respondents entered into three written contracts with the Raihvays 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 C 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 n1anufacture, assembly, fitting, fixing and finishing of all constructional n1aterials 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 D of workmanship requiring rectification of '\Vork and replacement of materials when ordered.

The Sales Tax Officer, holding that the transactions were salCs, charged the1n to tax. The respondents' appeal to the Assistant Commi3sioncr of Sales Tax. as also a revision application before the Deputy Cornmisioner of Sales Tax :-ind the Tribunal were unsuccessful. On reference, the High Court held that the contracts were works contracts. ,

Dismissing the appeals,

JJELD : (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 coinpletion.

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.

[139FJ

(2) The predominant element in the contract was the work and labour aspect and supply of materials was only accessory although the lnaterials \Vere definitely necessary for the execution of the work. The term that if the con- tractor died, his legal representatives would have no interest whatsoever in the agreement save in respect of a claim for the money due nnd for the r return of the security deposit, clearly showed that the contract was n works contract. The unfinished work became the property of the Raih~'ays and the legal representatives were entitled only to claim for the value of the \''Ork done.

Jn 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 becaine the ov.ner

, of the unfinished property. (140 E-G)

T. Y. Sundaram Iyengar & Sons v. The State of Madras (1975) 35 STC 24 nd Patnoik and Company v. The State, of Orissa, (1965) 16 STC 364, di•ti1>. :uished.

Conimissioner of Con1mercial Taxes, Mysore v. Hindustan Aeronautics Ltd.,

(1972) 29 STC 438; State of Gujarat v. Kaila1h Engineerin~ Co, (1967) 1'.

STC 13; State of Madra,~ v.r Richardson & Cruddas Ltd., (1968) 21 STC 245: Go.emment of Andhra Pradesh v. Guntur Tobaccos Ltd., (1965) 16 240 and

Commissioner of &les Tax, M.P. v. Purshottani Premji, ( 1970) 16 STC 38, followed.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1492 and 1493 of 1971.

Appeals by Special Leave from the Judgment and Order dated the 7th and 9th November, 1970 of the Gujarat High Court at Ahrnedabad 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.) S/uif Sethi and (Miss) Kai/ash Mehta; for Respondent.

C The Judgment of the Court was delivered by

GOSWAMI, J.-This judgment will govern both the appeals.

These two apeals by special leave ar~ directed &gainst the common judgment of the Gujarat High Court in Sales Tax Reference No. 5 of J 969 relating to two periods, namely, (l) from 24th October, 1955 to 31st March, 1956 and (2) from 1st April, 1956 to 31st March, 1957.

The Tribunal had earlier delivered a common judgment in two revision applications No. 121 and No. 122 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 1and in the circumstances of the case the three contracts for constmction 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 follows

The respondent, M/s: Variety Body Builders, Baroda, entered int•> three contracts with the Western Railway Administration for construction of railway coaches on the umler .. frames supplied by fl~ said rarlway Administration.

The three comracts were reduced into writing ancl contained the terms ancl conditim1s under which the eontracts were to 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 respet of construction of 6 T.L.R. coaches. The third agreement dated January 14, 1956, was for coos· truction of 25 N.G. coaches.

The Sales Tax Officer held that the transactions relating to the construction of 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 re\1sion applications of the respondent before the Deputy Commissioner of Sales Tax and later before the Tribunal met with the

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oSame fate.

The Tribunal, however, referred the question of law as A

et 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- B

for sak 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 Jarman 14, 1956, 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 1he 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 8nd simple worh contract and not a contract for sale of goods.

It is well-settled that when there is a written contract it will be 11ecessary 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 conditiom which are agreed E upon by the parties. We will, therefore, immediately tum our attention to the agreement in question.

The preamble of the agreement shows that it is an agreement enterrd into between the Railway Administration and the respondent described as "the contractor''.

The first clause describes the "natu!'ll of work". It states "the contrnctor 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 Qn 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 are returnable within a week of termination of the contract".

Clause (3) provides for security deposit "for the due fulfllment and H -completion of this contract".

Gause (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"

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SUPREME COURT REPORTS [1976] SUPPLl!MllNTARY

A and the same is liable to forfeiture "in !he event of any breach on the part of the contractor of the terms and conditions of this contract".

Clause ( 4) provides for deduction of 10 per cent from each pro- . .,,- gressive bill submitted by the contractor and the security deposit shalt be refunded to the contractor "only on successful completion or termi- 1rntion of this contract". ' B- Clame (9) provides that constructionai material and fittings must be supplied by the contractor whkh should be ordinarily as per the

Rilway'o standard. "The provision of the hand-brake arrangement~ in the Guard's compartment will be done by the Railway",

(Jame (11) says that the contractor is required to supply carpentry labour for equipping coaches with electric lights, fans switches ancl regulators.

The appropriate Railway stalf 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 Railw"y.

Clause ( 13) provides for removal of rubbish, debris or temporary structure at contractor's own cost on the expiration of the contract fir in tltc event of earlier termination of the contract.

Cfausc (14) says that the contractor shall provide all essential oquipment, tools and plant for satisfactory execution of the work.

By clause (15) "The contractor is required to deliver a minimum

numer of two coaches per month starting from the expiry of six E month:-: fro1n the date of signing this agreen1ent".

Claus" (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 tc on= per cent of the value of the work in arrears for each and every month or part of a month by which the contractor shall be in default upio <: maximum of 20% of the va!toc 0f the contract but the contractrr shall not by reason of the reco1cry by any means by the Administration of such damages be relieved from his other obligations and ii abilities 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 o! carrias under construction as well as of the material supplied by the Administration for the purpose till the materiai or the carriages are taken over by the Administration.

DaJes 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 ha\ing been built to his satisfaction".

I , J

Ciausc (18) provides that the Railway authorities are free to A inspect the work. "The Chief Mechamcal Engineer or his authorised representative will be the sole judge t:> 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 indifferent workmanship."

Clause (19) provides that "the contractor shall not under any cir- B cums1anccs sub-lS"t 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 dntie.s with diligence, competence and ex; iedition".

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.

(:J2usc (22) provide~ 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 ce:tified completion in terms of coaches completed and handed over

f<_1 hirri".

C!use (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 rnluntary or compulsory. . . . this agreement ; hall absolutely cease and determine and the legal represntative of the contractor or.lhis assignee in insolvency or (in the case of a company) the liquidators shall liave no interest whatsoever under this agreement other than in respect of a claim for the money due for the work done under this contract und for the return of the security deposit subject to the provisions herein contained . ..... "

Ciausc ( 30) makes provision for fair wage~ to the labourers engaged G by tl1e contractor.

C!ause (31) says that the contractor shall have to abide by safety rules. ·

Clause (32) provides that the contractor shall not employ children under 15 years of age.

Clause (33) says that the contractor shall complv with the pro- H visions of the Payment of Wages Act and the rules made thereunder.

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 for the purposes of building the coaches".

Clo.use (35) provides for water and conservancy charges to be paid by the contractor.

Clame (36) provides for supply of electrical energy to the contractor on payment

Clause (38) says that certain conditions of Tender shall be deemed to l:>e 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 deriv~ assistance for the legal connotation of those words from the prov1s10ns of the.

Sale •)f Goods Act, 1930. As has been held by a Constitution Bench of this Court in the Stat' of Madras v.

Gannon Dunkerley & Co. (Madri.uj Ltd.(') "that, both under the common law and the statute ; aw relating to sale of goods in England and in India, to constitute a transaction of sale there should be an agreement, expres. or implied, relating to goods to be comploted by passing of title in those good~.

It is of the essence of this concept that both the agreement and the sale soould relate to the same subject matter ..... On the true interpretation of the expression 'sale of gooos' there must be an agreement between the parties for the ale of the very goods in which eventually property passes". , 1 ·-c.,,,.., ..... ~-_,;,; r .-;_.'"_. ,.,,...,.,,;.. ,.,,.

Bearing in mind the above legal concept of the sale of goods we will have to consider whether the terms oc the contract, which we have set out earlier, can be construed in favour of a contract for sale of the railway coaches which were constructed by the respondent.

l\k 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 F 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 releJant in considering whether the contract is one of sale or contract of work and labour :

( 1) Undertaking by the Contractor work of building bodies on under-frames supplied by Railway according to design provided by a Railway (Cl. l (a).

( 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 termi and conditions of the contract (Clause 3).

(I) 9 S.T.C. 353.

' )

I ,..

( 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).

I ( 7) Provision of hand-brake arrangements in the Guard's compartment by Railway (Claus~ 9). ( S) Supply of electrical fittings by Railway (Cl. 11).

(9) Railway staff working in association with contractor's staff for installation of ek; trical 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 O\VIl cost. (Claus~ 13). •

(12) Earlier termination of contract also envisaged. (Clause 1-3). (l 3) Essential equipment to be provided by contractor for execution of the work:. (Clause 14).

(14) At least two coa_ches to be delivered per month after expiry of six months from the signing of the contract. (Clause 15).

O 5) Contractor's liability to pay liquidated damages in the event of failure to carry out and complete the work within stipulated perlod. (Clause 16).

(16) Provision for running bills. (Clause 16). ( 17) Re_sponsibility of contractor for safe custody of carriages under construction as well as of the materials supplied by Railway till they are taken over by Railway. (Clause 17). .

(18) Date of completion of b'lilding work on the date of certification by Railway's representative to his satisfaction. (Clause 17). (! 9) 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 replacement of materials whea ordered. (Clause 18).

(20) No subletting of contract whoily or in part without

the previous written consent of Chief Mechanical Engineer. (Clause 19).

(2i) Authority to terminate comract by one month's notice in the event of the contractnrs Jack of diligence, competence and expedit1on in executing contractual duties. (Clause 20).

(22j Any losses incurred by Railway and occasioned through failure of coutractor to comply with con tractual obligations will be deducted from security deposit. (Clause 20).

(23) Co11tract to be iu force [or 16 months unless extended

on reasonable ground subject to waiver of Joss or damage by Railway. (Cla.w; e 21).

(24) Contractor's liability for damages for failure to execute the work with diligence an, J expedition or to comply with orders of Railway Administratio11. (Clause 22).

(25) Bills to be submitted by contractor ow the basis of certified completion in terms of coaches completed and handed over to the District Mechanical Engineer. (Clause 23).

(26) Contractor, his heirs, :xccut<Jrs 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).

( 2 7) In case of contractor's insolvcnc y or death, Rgreement

shall absolutely cease and determine and the iegal representatives of the contractor or the liquidators shall have no interest whatsoever under the agreement other than in respeGt of a claim for the money due for the work done under the contract and for the return of the security deposit subject to the provisions of the agreement. (Clause 25).

(28) Arbitration clause in the vent of any dispute in connection with the contract. (Clause 28).

(29) Contractor to pay fair wages to labourers mployed.

(Clause 30).

(30) Contractor to abide by safety rules. (Clause 31).

( 31) No employment of children under 15 year; by contractor. (Clause 32).

(32) Responsibility of contractor under Payment of Wages

Act. (Clause 33).

(33) Norn~] rent of Re. 1/- per month for occupation of the Railway area for the purpc•se of building the coaches. (Clause 34).

( 34) Contractor to pay to the llailwa y 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 coa.ch constructed by the contractor to the Railway ? In that event the railway coach when constructed must b~ as a unit the 1t property o( 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 differeut from the case of a bus-body fitted into the chassis with all materials supplied by the contrmtor and

all skill and labour contributed by the contractor.

A contricts to sell a certain article to B.

A must be the owner C of the article and B must be at the re,:eiviH~ end having nn interest in the article prior to passing of the property therein. Is the contractor owner of the railway coach when it was completeJ'? The answer must be in the negative. Apart from the fact th"t 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 material; although the substantial D portion is of the contractor. This goes to bring out the intention of the patties in that they were intent upon performance of the work, the manner of the work, the quality of the materials used in the work and upcn 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 conch by the contractor \o the Railway.

The cud-product, E 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 llte totality of the material terms aud 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 o" the contract or the reality of thr transaction as a whole indicates that the contract is a contract for work and labour.

Mr. Demi submits that clauses 15, 17 and 23 in particular make it absolutely clear that the property in a 1111it, 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 completed 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 o! the parties that a railway coach as a unit, after its compkt'tcn, is contracted to be han<led over by the respondent to the Administration.

The contract, therefore, that is entered in terms of the ngre.ement is one of contract of sale of goods and not a works contract, &ays Mr. Desai.

; Jl

Although the submission on the !irst blush is attracttve and appears to be of s0me force, it will not bear close scrutiny. Perusal of clause 17 itself upon which great reliance has been placed by Mr. Desai shows that "dates of completion of the buiidi ng work will be deemed to be the respective dates on which the Chief Mechanical Engineer or his authrnised representative certifies et>ch 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 the expiry of the fiist six months of the contract. It is also clear that the contractor has to get payment by submitting running bills on completion of the coaches eyery month.

In the above context when clause 17 refers to a fictional completion of the building work on the date of certtfkate by the Chief Mechanical Engineer or his authorised representatl.vc there is no requirement for a further ritual of delivery or handing over to which reference is made in clauses 15 and 23 respectively.

The work is undertaken in the RailY'av premises.

Materials are brought to the Railway premises.

People are admitted on gate passes for building the railway c.x1ches on the under.frames supplied by the Administration. Some materials, such as electrical goods, were supplied by the Railway.

B0sidcs; there is cooperation of Railway's labour with the contractor's labour in construction of the coach The hand-brake arrangements in the Guard's compartment are also agreed to be done by the Railway.

Regular inspection of the coutractcr's work is carried out at all times and instructions to rectify c1efects leave to be carried out immediately. Unless a close in; pection

of the work is carried out from day to day, it may be ditlicult to rectify defects after the work progressc>.

All this would go to show that the predominant element in the contract is the work and labour aspe.; t and supply of materials is onlv accessory although the materials 'f"erc definitely. necessary for execntion of the work.

There is yet another important clause which thr<iws a flood of light on this issue.

Clause 25 deals with the contractor's insolvency or death. Jt 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 the Railway and the legal representatives will be entitled only to claim for the value of the work done. There is no provision in the a!!feement in that event for handing over of the unfinished railwny conch by the resppndent or hi~ JegaJ representatives or assignees to the Railway Administrntion. The Railway Admiliistration automatically becomes the owner of the unfinished property 'f"hich was lying in its premises. This is another reason whv no exaggerated importanc can be assigned to the \Vonis "delivery" and "handed over'' in clauses 15 and 23 respectively ns urged by Mr. Desai.

This is. therefore, not a contract where it can be said that there is an ogreerncnt to supply a completed railway coach which when prodt•ced will be the propertv of the contraclor. Along with those of the i:ontractor's. materials and labour of R.aihvay are also required to be

GUJARAT STATE v. VARIETY BODY BUILDINGS (Goswami, I.) 141

pnt in for production of the completed railway coach. It is contract primarily for work and labour and that clement predommantly runs through the entire document from the preamble to the end as seen

abov~.

Mr. Desai very strenuously relies upon a recent decision of this Court in T. V. Sundaram Iyengar & Sons v. The State ofMadras( 1) B. to which my learned brother was a party.

That was a case relating to the contract for supply of bus bodies constructed and fitted to the chassis provided by the customer. This Court held that the rule laid down in Patnaik and Company v. The State of Orissa( 2) was applicable to the facts of the two cases that came up for consideration in the above decision. This Court held that the property in the material• used by the assessees in constructing the bus bodies never passed to C their customers during the course of construction and that it was only when the complete bus with the body fitted to the chassis was deli- ., vered to the customer that the property in the bus body passed to the customer. This Court, therefore, held that the supply of bodies consituted a sale and the assessees were liable to sales tax. The conclusion of this Court in T. V. Sundaram /yengar's case (supra) is brought out clearly in the following passage : D

"The salient features of the deaiirn'.s between the two assessees

wir!t whom we are concerned and their customers as they emerge from the facts given a ove are that the property in tile material used by the assessees in constructing the bus {Jo, Ees never passed to their 'ustomcrs during the course of constrnction. It was only when the complete bus with _the body fitted to the chassis was delivere-0 to the cu; tomer that the property in the bus body passed to the customer. There \vas nothing to prevent the assessees fron1 removing a piank,

or other material after fixin1t it to a chassis, and using it for a different purpose or for a different bus body".

Thts Cnmt in several decisions quoted with approval the followin~ I' passage from Halsbury's Laws of England, Third Edition, Volume 34, at page 6. with regard to the distincti•.m between a contract of sale and a contract for work and labour :

"A contract of sale of goods must be distinguished from a contract for work and labour.

The distinction is often a fine cne. A contract of sale is a contrat whose main object is the transfer of the property in, and t11e deliverv of the rosse'Sion of, a chattel as a chattel to the buyer.· Where the niain object of work undertaken by the payee of the price is not tl1e transfer of a chattel qua chattel. the contract is one f0f work and labour. The test is whether or not the work

and labour bestowed end in anything that can properly bec:-mc the subject of sale; nei.ther the <'Wnership of the mate· m I; nor the value of the skill anu labour as compared with

(1) (!q75) 35 S. T. C. 24.

(2) (1965) 16 S. T. C. 364.

the value of the materials, ,, conch1sive, although such matters may be taken into considernti.on in determining, iu the circumstance of a particular case, whether the contract is i11 ml>stance one for work and labour or one for the sale of. a chatel".

It can be treated as well-settled that there is no standard formula by which one can distinguish a contract of sale from a contract for work and labour.

There may be many common features in beth the contracts. some neutral in particular context, antl yet certain clinching tenns .in a given case may fortify a conclusio11 one way or the other.

It will depend upon the facts and circumstance' of each case.

The question is not always easy and has for all time vexed jurists ali over.

In Commissioner of Commercial Taxes, klysore v.

Hi11dusta11 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 t,, manufacture and supply of railway coaches.

This Court after consideration of all the facts ill that case and the salient features 0f the contract came to the conclusion that it was a pure works contract.

The Court further held lhat the case was in line with the decision in State of Gujarat v.

K,1i/ash Engineering Co.(').

Indeed Kai/ash Engineering's case (supra) was relied upon by the respondent before us. It was held in that case that as the termr. 0f the contract indicated that the respondent was not to be the owner of tloe ready railway coaches and that the property in those bodies vested in the Rail\'Vay eveu during the process of conslrL:ction, the transactior~ \vas clearly a .works contract and did not involve any sale.

Mr. Desai. strenuously contends that clause (291 of the contract in Kailash Engineering's case (supra) distinguishes that case from the case at l; and.

Clause 29 was a specific provision for certain contingencies in case of loss, theft or destruction of the materials or plant.

This sperial 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 Raiiway as soon as they were brought to the Railway premises.

We, however, do no1 see much point in this sHbmi3sion. In that case since the piant an<l 111aterials were brought on the site , x, herc the coache3 "·"ere to be conmucted the ownership is said to h:ive vesterl in the Railway.

In the present case also substantially the same resnlt follows. The aree ment here shows that when the contractor dies, his Ieal representatives or assignees have no interest in the contract which terminates anct they will bt only paid for the value of the work done.

This would mean the property constructed uoto 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 ; my rate the passing of property in this case is ancillary to the primary contract for execution of the work.

(I) (1972) 29 S. T. C. 438.

(2) (1967) 19 S. T. C 13

GUJARAT STATE v: VARIETY BODY BUILDINGS (Goswami, /.) 143

In the State of Madras v. Richardson & Cruddas L"1.( 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 obser\'ed as follows :--

"lt had, therefore, to be estabEsheJ that the 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 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 executi<ln ol the

contn1ct as accessory to 'work and labour' the contract must be regarded as a works contract, and not <l contract for sale, even if the property in the goods ultuuately J .. asses as a result of the .contract".

The Comt further observed at page 252 as follows :

"The contract _being one for supplying for an inclusive price " specially designed fabricated unit to be assembled and installed by specially trained technicians in the premises of the customer, it was not a contract for sale of a unit or differem parts of the unit as specific goods, but works cuntract".

In the Government of Andhra Pradesh. v.

Guntur Tobaccos 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 s0me materials are used and property in the goods so used passes to the other party, the comrcctor undertaking to do the work will not necessarily he deemed on that account to sen the materials".

Again at page 258 :

"Whether a contract for service or for executioa of work, involves a taxable sale of goods must he 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 performing service or executing the contract stands transferred to the other party".

This Court in Commissioner uf Sales Tax, M.P. v. Purshottam Premji(') dealt with the difference between a contract of work or senke and a contract for sale of goods in the fo!iowing passage :

''The primary difference between a contract for work or service and a contract for sale of goods in that in the former

(!) (1968) 21 S. T. C. 245.

(2) (1965) 16 S. T. C. 240.

(3) (1970) 26 S. T. C. 38.

there is in the person performing work or rendering service no property in the thing produced as a whoi.e notwithstanding that a part or even the whole of the materials used by him may have been his property. 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 prke. Mere transfer of property in goods used in the performanC'c of a contract is not sufficient; to constitute a sal• there must be an agreement express or implied relating to the sale of goods and completion of the agreement by passing of title in !_he very goods contracted to be sold. Ultimately the true effect of an accertion made pursuance to a contract has to be judged, not by an artitkial rule that the accretion may be presumed to have become by 'irtue o'. affixing to a chattel, part of that chattel, but from the intention of the partir;; to the c0ntract". ·

We are fortified by all the above decisions of this Court in our conclusi.on in favour of the assessee.

D We are, therefore, clearly of opinion that the contract in the pre1ent case is one of works contract and the High Court is right in answering • the question in favour of the assessee.

The appeals, therefore, fail and are dismissd with costs.

One hearing fee for counsel.

P.B.R.

S. VARIETY BODY BUILDERS

H. R. KHANNA

P. K. GOSWAMI, JJ.

Sales Tax Act

Payment of Wages Act

Goods Act, 1930

Clause 3

Clause 3

Clause

4

Clause 6

Clause 9

Cl. 11

Clause 11

Clause 12

Clause 1

Clause 14

Clause 15

Clause 16

Clause 16

Clause 17

Clause 17

Clause 18

Clause 19

Clause 20

Clause 20

Clause 22

Clause 23

Payment of Wages Act

Clause 24

Clause 25

Clause 28

Clause 30

Clause 31

Clause 32

Clause 33

Clause 34

clause 15

clause 17

clause 23

clause 17

clause 17

Clause 25

clause 25

Clause 29