{"id":135336,"date":"1965-01-19T00:00:00","date_gmt":"1965-01-18T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/patnaik-company-vs-state-of-orissa-on-19-january-1965"},"modified":"2017-01-28T02:09:43","modified_gmt":"2017-01-27T20:39:43","slug":"patnaik-company-vs-state-of-orissa-on-19-january-1965","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/patnaik-company-vs-state-of-orissa-on-19-january-1965","title":{"rendered":"Patnaik & Company vs State Of Orissa on 19 January, 1965"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Patnaik & Company vs State Of Orissa on 19 January, 1965<\/div>\n
Equivalent citations: 1965 AIR 1655, \t\t 1965 SCR (2) 782<\/div>\n
Author: S C.<\/div>\n
Bench: Gajendragadkar, P.B. (Cj), Hidayatullah, M., Shah, J.C., Sikri, S.M., Bachawat, R.S.<\/div>\n
           PETITIONER:\nPATNAIK & COMPANY\n\n\tVs.\n\nRESPONDENT:\nSTATE OF ORISSA\n\nDATE OF JUDGMENT:\n19\/01\/1965\n\nBENCH:\nSHAH, J.C.\nBENCH:\nSHAH, J.C.\nGAJENDRAGADKAR, P.B. (CJ)\nHIDAYATULLAH, M.\nSIKRI, S.M.\nBACHAWAT, R.S.\n\nCITATION:\n 1965 AIR 1655\t\t  1965 SCR  (2) 782\n CITATOR INFO :\n D\t    1967 SC 547\t (6)\n RF\t    1969 SC1245\t (11)\n RF\t    1972 SC 744\t (11)\n RF\t    1972 SC1131\t (10)\n F\t    1974 SC2309\t (9,10,11,12,13,17)\n RF\t    1976 SC2108\t (45)\n R\t    1977 SC1537\t (37)\n RF\t    1989 SC 962\t (24)\n\n\nACT:\nOrissa\tSales Tax Act, (14 of 1947)--Contract to  build\t bus\nbodies\ton chassis supplied by purchaser-If a  contract\t for\nsale or for work.\n\n\n\nHEADNOTE:\nThe  appellant\tclaimed to deduct from its  gross  turnover,\namounts received from the State Government for building\t bus\nbodies,\t on the chassis supplied by the Government  under  a\ncontract.\nUnder  the  contract, the bus bodies were to be put  on\t the\nchassis\t and the body consisted not only of things  actually\nfixed  on the chassis but movable things like seat  cushions\nand  other  things  which  though  fixed  could\t be   easily\ndetached,  like\t roof-lamps etc.  The chassis with  the\t bus\nbody was to be delivered at the destination named within the\nstipulated  time.  If some work was not satisfactorily\tdone\nthe Government was entitled to seize the unfinished vehicle,\nget  the  work\tdone  by  another  agency  and\trecover\t the\ndifference in cost from the appellant.\tWhile the  appellant\nwas required to protect the chassis by insurance, there\t was\nno  provision  regarding  insurance  of\t bus  bodies.\t The\ncontract  also provided that the process of manufacture\t was\nto  be supervised on behalf of the Government, and that\t the\nwork  should be done with due deligence.  There was  also  a\nprovision for payment of damages until the defects  detected\non inspection were rectified.\nThe  Sales Tax Officer refused to allow the  deduction.\t  On\nappeal, the claim was allowed by the Collector, whose  order\nwas  affirmed  by the Sales Tax Tribunal, on appeal  by\t the\nDepartment.  On a reference to the High Court, the question,\nas to whether the amounts were not chargeable to sales\ttax,\nwas answered against the appellant.\nIn  the appeal to the Supreme Court, on the question  as  to\nwhether\t the contract was one for execution of work  or\t for\nperformance  of\t service, or whether it was a  contract\t for\nsale of goods.\nHELD  :\t (Per Gajendragadkar C.J., Hidayatullah,  Sikri\t and\nBachawat,  JJ) : The contract as a whole was a contract\t for\nthe sale of goods and the amounts were therefore  chargeable\nto sales tax. [792 G]\nThe  answer to the question depended on the construction  of\nthe agreement regarding the building of bus bodies.  On\t the\nterms  of the contract the property in the bus body did\t not\npass  on its being placed or constructed on the chassis\t but\nwhen the whole vehicle including the bus body was delivered.\nThe provision regarding insurance showed that till  delivery\nwas made, the bus bodies remained the property of the appel-\nlant  and  unlike  the\tcase of a  contract  a\tconstruct  a\nbuilding, where the property does not pass in the  materials\nas movable the bus body never lost its character as  movable\nproperty  and  the property in it passed  to  Government  as\nmovable\t Property.   It\t is not the  law,  that\t whenever  a\ncontract  provides  for the fixing of a chattel\t to  another\nchattel\t there is no sale of goods; and, a contract for\t the\nsale  of  goods to be manufactured does not cease  to  be  a\ncontract  for sale of goods, merely because the\t process  of\nmanufacture is supervised by the purchaser. [785 C-D; 788 F;\n790 A-B; 791 A, D; 792 A]\n783\nGannon\tDunkerley's Case, [1959] S. C.R. 379 and Carl  Still\nv. State of Bihar, [1962] 2 S.C.R. 81, distinguished.\nAnglo-Egyptian Navigation Co. v. Rennie, (1875) L.R. 10 C.P.\n271, explained.\nPer  Shah, J. (dissenting) : The contract was one  for\twork\nand  not a contract for sale, because, the contract was\t not\nthat  the parties agreed that the \"bus body\" constructed  by\nthe  appellants should be sold to the State.   The  contract\nwas  one  in which the appellants agreed to  construct\t\"bus\nbodies\" on the chassis supplied to them as bailers, and such\na  contract being one for work, the consideration  paid\t was\nnot taxable under the Sales Tax Act.\nThe  primary  difference  between a  contract  for  work  or\nservice\t and  a contract for sale of goods is  that  in\t the\nformer there is in the person. performing work or  rendering\nservice\t no  property  in  the thing  produced\tas  a  whole\nnotwithstanding\t that  a  part\tor even\t the  whole  of\t the\nmaterials  used by him may have been his property.   In\t the\ncase  of a contract for sale the thing produced as  a  whole\nhas  individual existence as the sole property of the  party\nwho  produced  it,  at some time before\t delivery,  and\t the\nproperty  therein  passes only under the  contract  relating\nthereto\t to  the other party for price.\t  Mere\ttransfer  of\nproperty  in goods used in the performance of a contract  is\nnot  sufficient\t :  to constitute a sale there\tmust  be  an\nagreement  express or implied relating to sale of goods\t and\ncompletion of the agreement by passing of title in the\tvery\ngoods contracted to be sold.  Ultimately the true effect  of\nan  accretion made pursuant to a contract has to be  judged,\nnot  by\t any  artificial  rule that  the  accretion  may  be\npresumed to have become by virtue of affixing to a  chattel,\npart of that chattel, but from the intention of the  parties\nto the contract. [793 D; 794 A-C; 797 H; 798 A, C]\nIn  the instant case, imposition of the obligation to  carry\nout  the  work\twith due diligence,  the  liability  to\t pay\ndamages\t and the right of the Government  representative  to\nsupervise  the\tproduction and to take away  the  unfinished\nvehicles and get them completed by some other agency are all\nindicative of the contract being one for work. [795 D-E,  G;\n796 D-E]\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos.  179\t to,
\n181 of 1964.\n<\/p>\n
Appeals\t by special leave from the judgment and order  dated
\nAugust\t21, 1962, of the Orissa High Court in O.J.C. No.  28
\nof 1961.\n<\/p>\n
A. V.  Viswanatha Sastri and R. Gopalakrishhnan,  for  the
\nappellants (in all the appeals).\n<\/p>\n
M.C.  Setalvad, R. Ganapathy Iyer and R. N. Sachthey  for
\nthe respondent (in all the appeals).\n<\/p>\n
The Judgment of P. B. GAJENDRAGADKAR C.J., M.  HIDAYATULLAH,
\nS. M. SIKRI and R. S. BACHAWAT JJ. was delivered by SIKRI J.
\nSHAH J. delivered a dissenting Opinion.\n<\/p>\n
Sikri  J. These three appeals by special leave are  directed
\nagainst\t the  judgment\tof the Orissa High  Court  in  three
\nreferences  made by the Orissa Sales Tax Tribunal  under  S.
\n24(1) of the
\n784<\/span>
\nOrissa\tSales Tax Act, 1947, in respect of  assessments\t for
\nthree quarters ending June 30, 1957, September 30, 1957\t and
\nDecember  31,  1957.   All  these  appeals  raise  a  common
\nquestion of law and it would be sufficient if facts relating
\nto the assessment for the quarter ending June 30, 1957 alone
\nare given.\n<\/p>\n
For  the  quarter ending June 30, 1957, the  appellant,\t M\/s
\nPatnaik\t & Co., claimed to deduct from their gross  turnover
\nreceipts  totalling  Rs. 11,268.45 received from  the  State
\nGovernment  of\tOrissa for building bodies  on\tthe  chassis
\nsupplied  by the Government, during the quarter.  The  Sales
\nTax Officer refused to deduct this amount.  On appeal,\tthis
\nclaim was allowed by the Collector of Sales Tax,  purporting
\nto  follow  an\tearlier decision of  the  Orissa  Sales\t Tax
\nTribunal.  The Department appealed against this order to the
\nSales  Tax Tribunal which, by its order dated June 2,  1961,
\naffirmed  the  order  of the Collector.\t  The  Tribunal,  in
\nbrief,\theld that it was impossible to spell out a  distinct
\nand  separate contract to sell any materials or chattels  to
\nthe  customers in the work of construction of the bodies  on
\nthe  chassis.\tOn the application of  the  Department,\t the
\nSales Tax Tribunal referred to the High Court the  following
\nquestion :\n<\/p>\n
\t      “Whether in the facts and circumstances of the
\n\t      case,  the Tribunal is right in  holding\tthat
\n\t      the amounts received by the opposite party  on
\n\t      the construction of bodies on chassis supplied
\n\t      by  its customers under written contracts\t are
\n\t      not chargeable to the Orissa Sales Tax.”\n<\/p><\/blockquote>\n
The  High Court, in a short order, flowing its\tdecision  in
\nThe  Commissioner  of Sales Tax Orissa v. Patnaik  &  Co.<\/a>(1)
\nanswered the question in the affirmative, i.e., against\t the
\nappellant.   In\t that case, the High Court had\tconstrued  a
\nsimilar\t contract and had come to the conclusion  that\t“the
\ncontract, therefore, as contemplated between the parties, is
\nthat the assessee was to deliver a specific goods, namely, a
\nfinished bus body built under the specifications  prescribed
\nby  the Government for a fixed price. It cannot,  therefore,
\nescape\tfrom the position that the transaction was  one\t for
\nsale  of  some\tgoods within the meaning  of  the  Act.”  It
\nfurther\t observed that “what exactly is\t the  distinguishing
\nfeature of a sale from a works contract has been elaborately
\ndiscussed in a case decided by this very Bench in S.J.C. No.
\n7  of 1959 M\/s. Thakur Das Mulchand v. The  Commissioner  of
\nSales Tax) on 6th July 1961 where it was held that a  normal
\ncontract to make a chattel and deliver it when made includes
\na contract of sale, but
\n(1)  S.J.C. No. 77 of 1959-Judgment delivered in the  Orissa
\nHigh Court on July 26,1961.\n<\/p>\n
\t\t   785<\/span><\/p>\n
it  may\t not be always so.  The test would  be\twhether\t the
\nthing  to be delivered has any individual  existence  before
\ndelivery as the sole property of the party who is to deliver
\nit”.   The  High Court distinguished  Gannon  Dunkerley’s(1)
\ncase on the ground that as far as the terms of the  contract
\nbetween\t  the\tparties\t  were\t concerned,   they   clearly
\ncontemplated  a\t case of sale of goods liable to  sales\t tax
\nunder the Act, and it was not a works contract, as contended
\nby  the\t party.\t  As  stated  above,  the  appellant  having
\nobtained special leave, the appeal is now before us.
\nMr.   Viswanatha  Sastri,  the\tlearned\t counsel   for\t the
\nappellant,  has\t addressed an elaborate argument to  us\t and
\ncontended that the present case is not distinguishable\tfrom
\nthe  decision of this Court in Gannon  Dunkerley’s(1)  case.
\nHe  has\t cited\ta number of authorities in  support  of\t his
\ncontention, but it will not be necessary to review all these
\nauthorities  as\t we  feel that the answer  to  the  question
\nrefer-red  must depend on the construction of the  agreement
\nregarding the building of bus bodies.  As laid down by\tthis
\nCourt  in  Chandra Bhan Gossain v. The State  of  Orissa(2),
\n“was it the intention of the parties in making the  contract
\nthat  a\t chattel  should be produced and  transferred  as  a
\nchattel for a consideration.”\n<\/p>\n
The  agreement was entered into on April 20,  1957,  between
\nthe  appellant, called in the agreement “the Body  Builders”
\nand  the  State\t of  Orissa.  The  State  had  accepted\t the
\nquotations and decided to place orders for construction of 4
\n(four) numbers of Bus Bodies on the Chassis namely 4  (four)
\nnumbers\t of  190″  Wheel  Base\tF.F.C.\tDodge\/Fargo  Chassis
\nsupplied by the Governor.  The relevant clauses are as below
\n:\n<\/p>\n
\t      “1.  (a)\tThat  the  Body\t Builders  shall  be
\n\t      responsible  for\tthe  safe  custody  of\t the
\n\t      chassis as described in Schedule ‘A’ from\t the
\n\t      date  of the receipt of the Chassis  from\t the
\n\t      Governor (Supplier) till their delivery to the
\n\t      Governor\tand  shall  insure  their   premises
\n\t      against fire, theft, damage and riot at  their
\n\t      cost,  so\t that these chassis are\t covered  by
\n\t      insurance against such risks.\n<\/p><\/blockquote>\n
\t      (b)That  while the works are in  course  of
\n\t      construction  and\t until the Bus\twith  Bodies
\n\t      built are taken over by the Governor, the Body
\n\t      Builder  shall be responsible for the  chassis
\n\t      and materials supplied to them and shall inde-
\n\t      mnify  the Governor for any loss or damage  to
\n\t      the said material.\n<\/p><\/blockquote>\n
\t      (1)   [1959] S.C.R. 379.\n<\/p><\/blockquote>\n
\t      (2) 14 S.T.C. 766.\n<\/p><\/blockquote>\n
\t       786<\/span><\/p>\n
\t      (c)The completed Bus Bodies covered by this
\n\t      contract shall be delivered to the Governor on
\n\t      or  before the 28th May 1957 for two and\t20th
\n\t      June 1957 for the remaining two buses.\n<\/p><\/blockquote>\n
\t      2.That  the passenger Bus Bodies shall  be
\n\t      constructed   on\tthe  chassis  in  the\tmost
\n\t      substantial  and workmanlike manner,  both  as
\n\t      regards  materials  and  otherwise  in   every
\n\t      respect\tin   strict  accordance\t  with\t the
\n\t      specifications mentioned in Schedule ‘B’.<\/p><\/blockquote>\n
\t      3.That   if   any\t  additional   work   is
\n\t      considered   necessary   by   the\t   Transport
\n\t      Controller,  Orissa  (hereinafter\t called\t the
\n\t      ‘Controller”)  for which no rate is  specified
\n\t      in   the\tcontract,  the\tBody  Builder\twill
\n\t      immediately inform the Controller, in  writing
\n\t      the rate which they intend to charge for\tsuch
\n\t      additional  work.\t If the Controller does\t not
\n\t      agree  to the rates the Body Builder will\t not
\n\t      be  under\t any obligation to  carry  out\tsuch
\n\t      additional work.\n<\/p><\/blockquote>\n
\t      Provided\tthat  the Body Builder will  not  be
\n\t      entitled\tto  any payment for  any  additional
\n\t      work  unless  they have received an  order  in
\n\t      writing from the Controller to that effect.\n<\/p><\/blockquote>\n
\t      4.That  the  Body\t Builder  will\tgive   a
\n\t      guarantee regarding the durability of the Body
\n\t      for  a  period of two years from the  date  of
\n\t      delivery\t to   the  Governor   and   if\t any
\n\t      imperfection  or\tdefective  material   became
\n\t      apparent within the guaranteed period the Body
\n\t      Builder shall rectify the defects at their own
\n\t      expenses.\n<\/p><\/blockquote>\n
\t      5.That  the time allowed for carrying  out
\n\t      the  work as entered in the contract shall  be
\n\t      strictly\tobserved  by the  Body\tBuilder\t and
\n\t      shall  be reckoned from the date of supply  of
\n\t      Chassis  to them.\t The work  shall  throughout
\n\t      the  stipulated  period  of  the\tcontract  be
\n\t      carried  on with all due diligence time  being
\n\t      deemed  to be of the essence of  the  contract
\n\t      and the Body Builder shall be liable to pay to
\n\t      the  Governor as liquidated damages an  amount
\n\t      equal  to 50 % on the amount of the  estimated
\n\t      cost  of\tthe  whole  work  as  shown  in\t the
\n\t      contract\tfor every day that the work  remains
\n\t      unfinished  after\t the  date  fixed  and\t the
\n\t      Governor may deduct such sum or sums from\t any
\n\t      money  due  to the Body Builders\tunder  these
\n\t      presents or may recover it otherwise.
\n\t      7 8 7
\n\t      Provided that the work will not be  considered
\n\t      as  finished  until the  defects\tdetected  on
\n\t      inspection  as  provided\tby  clause  6,\t are
\n\t      rectified,   to\tthe  satisfaction   of\t the
\n\t      Controller.\n<\/p><\/blockquote>\n
\t      6.That  all  works under or in  course  of
\n\t      execution\t or  executed in pursuance  of\tthis
\n\t      contract\tshall  at  all\ttimes  be  open\t  to
\n\t      inspection  by  the  Controller  or   officers
\n\t      authorised  by  him in this  behalf  and\tthey
\n\t      shall  have  the right to stop  by  a  written
\n\t      order  any  work which in the opinion  of\t the
\n\t      Controller,  is deemed to have  been  executed
\n\t      with  unsound,  imperfect,  unskilful  or\t bad
\n\t      workmanship  or  with  materials\tof  inferior
\n\t      quality.\tThe Body Builder on receipt of\tsuch
\n\t      written order, shall dismantle or replace such
\n\t      defective work or material at their own  cost.
\n\t      In  the  event of failure to comply  with\t the
\n\t      order  within 7 days from the date of  receipt
\n\t      of the order, the Controller shall be free  to
\n\t      get the balance of the work done by any  other
\n\t      agency and recover the difference in cost from
\n\t      the Body Builder.\n<\/p><\/blockquote>\n
\t      Provided that for this purpose the  Controller
\n\t      shall be at liberty to enter upon the premises
\n\t      of  the Body Builder and take delivery of\t the
\n\t      unfinished bodies.\n<\/p><\/blockquote>\n
\t      7.That the Body Builder shall be paid  50%
\n\t      of  the cost of body building at the  time  of
\n\t      delivery and the rest one month thereafter.\n<\/p><\/blockquote>\n
\t      8.That  the Body Builder will deliver  the
\n\t      vehicles\t complete   with   bodies   at\t the
\n\t      destination or the destinations to be named by
\n\t      the Controller at their own cost and risk\t and
\n\t      shall be entitled to recover from the Governor
\n\t      the actual cost of transport by road or  rail,
\n\t      transit  insurance  charges if any  and  other
\n\t      necessary incidental charges.”\n<\/p><\/blockquote>\n
Schedule   ‘B’\t gives\tthe   various\tspecifications\t for
\nconstruction  of  composite  bus bodies.  Clause  9  of\t the
\nSchedule  provides the specifications of seat  cushions\t for
\nthe upper class and lower class seats.\tClause 1 1  provides
\nfor the fixing of two roof lamps and its necessary switches.
\nClause 14 provides for the fixing of luggage carrier on\t the
\ntop of the roof and an iron ladder up to luggage carrier  at
\nthe rear.  Various miscellaneous fittings are required to be
\nfitted\tby clause 16, e.g., hand operated  driver’s  traffic
\nsignal,\t nickel plated conductor’s bell, wind screen  wipers
\nfor the wind screen, tool box for First Aid equipment, etc.
\n788<\/span>
\nThen, looking at the contract as a whole, what was the\treal
\nintention  of the parties ? It will be noticed that the\t bus
\nbodies are throughout the contract spoken of as a unit or as
\na  composite  thing  to\t be put on  the\t chassis,  and\tthis
\ncomposite body consists not only of things actually fixed on
\nthe chassis but movable things like seat cushions, and other
\nthings\tthough fixed but which can be very easily  detached,
\ne.g., roof lamps, wind screen wipers, luggage carrier,\ttool
\nbox for First Aid equipment, etc.
\nThe next point to be noticed is that under the contract\t the
\nproperty  in  the bus body does not pass to  the  Government
\ntill  the  chassis  with the bus body is  delivered  at\t the
\ndestination  or destinations to be named by  the  Controller
\nexcept\tin  the\t case  contemplated  in\t clause\t 6  of\t the
\nagreement.   That clause provides that if some work  is\t not
\nsatisfactorily\tdone  and the Body Builder on receipt  of  a
\nwritten\t order does not dismantle or replace such  defective
\nwork  or  material at his own cost within  seven  days,\t the
\nController would be entitled to get the balance of the\twork
\ndone  by another agency and recover the difference  in\tcost
\nfrom the Body Builder.\tThe Controller is entitled for\tthis
\npurpose\t to take delivery of the unfinished body.  But\teven
\nin this case the, property in the unfinished body would\t not
\npass to the Government till the unfinished body is seized.
\nSuppose\t a  fire were to take place on the premises  of\t the
\nappellant and before delivery the bus bodies were  destroyed
\nor spoilt.  On whom would the loss fall ? There can only  be
\none answer to this question and that is that the loss  would
\nfall  on the appellant.\t Clause 1 of the agreement  provides
\nfor  insurance\tof  the chassis but there  is  no  provision
\nregarding  insurance of bus bodies.  Therefore,\t it  follows
\nthat  till  delivery  is made, the  bus\t bodies\t remain\t the
\nproperty of the appellant.  It could, if it chose to do\t so,
\nreplace\t parts\tor  whole of the body  at  any\ttime  before
\ndelivery.   It\tseems  to  us  that  this  is  an  important
\nindication of the intention of the parties.  If the property
\npasses\tat delivery, what does the property pass in ? Is  it
\nmovable\t property  or immovable property ? It  will  not  be
\ndenied\tthat the property passes in movable property.\tThen
\nwas  this  the very goods contracted for ?  Here  again\t the
\nanswer is plainly in the affirmative.\n<\/p>\n
Mr.  Sastri draws our attention to the following passage  in
\nBenjamin On Sales (8th Edition), p. 167
\n\t      “Where a contract is made to furnish a machine
\n\t      or  movable thing of any kind and\t before\t the
\n\t      property in it passes, to fix it to land or to
\n\t      another chattel, it is not a
\n\t      789<\/span>
\n\t      contract\tfor  the  sale of  goods.   In\tsuch
\n\t      contracts the intention is plainly not to make
\n\t      a sale of movables as such, but to improve the
\n\t      land  or\tother chattel, as the case  may\t be.\n<\/p>\n
\t      The consideration to be paid to the workman is
\n\t      not  for a transfer of chattel, but  for\twork
\n\t      and labour done and materials furnished.”
\nHe says that here the bus body is being fitted to a chassis,
\ni.e., another chattel, and if this passage lays down the law
\ncorrectly and according to him it does-the present  contract
\nis not a contract for the sale of goods.\n<\/p>\n
The only case cited in the footnote relating to fixing of  a
\nchattel to another chattle is Anglo-Egyptian Navigation\t Co.
\nV.  Rennie(1).\tThat case would be relevant if the  question
\nin  this case was whether property in the materials used  in
\nthe construction of the body passed to the Government  plank
\nby  plank,  or\tnail by nail.  The answer would\t be  in\t the
\nnegative,  according to the above decision.  But we are\t not
\nconcerned  with this question here.  The facts in that\tcase
\nmay   be  conveniently\ttaken  from  the  head\tnote.\t The
\ndefendants contracted with the plaintiff to make and  supply
\nnew boilers and certain new machinery for a steamship of the
\nplaintiffs  and to alter the engines of such steamship\twith
\ncompound   surface   condensing\t engines  according   to   a
\nspecification.\t  The  specification   contained   elaborate
\nprovisions  as to the fitting and fixing of new boilers\t and
\nmachinery  on board the ship and the adaptation of  the\t old
\nmachinery  to the new.\tThe boilers and other new  machinery
\ncontracted  for\t were completed, and ready to  be  fixed  on
\nboard, and one instalment of pound 2000 had been paid  under
\nthe  contract, when the ship was lost by perils of the\tsea.
\nA  second  instalment of pound 2000 was\t subsequently  paid.
\nThe  plaintiffs\t claimed delivery of the boilers  and  other
\nmachinery  completed  under  the contract,  and\t this  being
\nrefused, brought an action for the detention of the same, or
\nto  recover  back  the\tpound  4000  paid  by  them  to\t the
\ndefendants.  It was held that the contract was an entire and
\nindivisible   contract\tfor  work  to  be  done\t  upon\t the
\nplaintiffs’   ship  for\t a  certain  price,   from   further
\nperformance of which both parties were released by the\tloss
\nof the ship; that the property in the articles\tmanufactured
\nwas not intended to pass until they were fixed on board\t the
\nship; and that consequently the plaintiffs were not entitled
\nto  the\t boilers and machinery, nor could they\trecover\t the
\npound 4000 already paid as upon a failure of  consideration.
\nHere the question was whether according to the contract, the
\nproperty  in  each  portion certified by  the  inspector  as
\nproperly
\n(1)  [1875] L.R. 10 C.P. 271.\n<\/p>\n
790<\/span><\/p>\n
done  passed to the plaintiffs as and when  his\t certificate
\nwas  given.   This question was answered  in  the  negative.
\nThis case is no authority for the proposition that  whenever
\na  contract provides for the fixing of a chattel to  another
\nchattel,   there  is  no  sale\tof  goods.   A\tfew   simple
\nillustrations  will  show that this cannot be  the  law.   A
\nwants  new motor tyres.\t He goes to a dealer and  asks\tthat
\nthese may be supplied fitted on the car.  Is there a sale of
\nmotor tyres or not ? It is not an easy operation to fix\t new
\ntyres;\tit needs an expert hand.  But it will not be  denied
\nthat  it was in essence a contract for sale of goods.\tTake
\nanother illustration.  A wants a luggage carrier to be fixed
\nto  his car.  The carrier which B has needs to be altered  a
\nlittle.\t  The contract is that lie will alter it and fix  it
\nto the car.  Has there been a sale of the luggage carrier or
\nnot ? The answer obviously is ‘yes’.\n<\/p>\n
Mr.  Sastri  further relies on a passage in  Gannon  Dunker-
\nley’s(1) case, at pp. 413-414 :-\n<\/p>\n
\t      “It  is  of the essence of this  concept\tthat
\n\t      both the agreement and the sale should  relate
\n\t      to  the same subject-matter.  Where the  goods
\n\t      delivered under the contract are not the goods
\n\t      contracted for, the purchaser has got a  right
\n\t      to  reject them, or to accept them  and  claim
\n\t      damages  for  breach of warranty.\t  Under\t the
\n\t      law,  therefore, there cannot be an  agreement
\n\t      relating to one kind of property and a sale as
\n\t      regards\tanother.   We  are  accordingly\t  of
\n\t      opinion that on the true interpretation of the
\n\t      expression  “sale of goods” there must  be  an
\n\t      agreement between the parties for the sale  of
\n\t      the  very goods in which\teventually  property
\n\t      passess.\t  In   a  building   contract,\t the
\n\t      agreement between the parties is that the con-
\n\t      tractor should construct a building  according
\n\t      to   the\tspecifications\tcontained   in\t the
\n\t      agreement,  and  in  consideration   therefore
\n\t      receive  payment as provided therein,  and  as
\n\t      will  presently be shown there is in  such  an
\n\t      agreement\t neither  a  contract  to  sell\t the
\n\t      materials\t used in the construction, nor\tdoes
\n\t      property\tpass  therein as  movables.   It  is
\n\t      therefore impossible to maintain that there is
\n\t      implicit\tin  a building contract\t a  sale  of
\n\t      materials as understood in law.”\n<\/p><\/blockquote>\n
We  are,  however,  unable to appreciate  how  this  passage
\nassists the appellant.\tIn this case both the agreement\t and
\nsale  relate to one kind of property, namely, the bus  body.
\nThe case of a con-\n<\/p>\n
(1)  [1959] S.C.R. 379.\n<\/p>\n
791<\/span><\/p>\n
tract  to  construct a building is quite different  and,  as
\nheld by this Court, the property there does not pass in\t the
\nmaterials as movables; but under this contract the bus\tbody
\nnever  loses  its  character as movable\t property,  and\t the
\nproperty in the bus body passes to the Government as movable
\nproperty.   The\t following  extract  from  the\tjudgment  in
\nDunkerley’s  case  brings out the fact that the title  in  a
\ncase  of  building  contract  passes  to  the  owner  as  an
\naccretion thereto :\n<\/p>\n
\t      “That  exception does not apply  to  buildings
\n\t      which are constructed in execution of a  works
\n\t      contract,\t and the law with reference to\tthem
\n\t      is  that the title to the same passes  to\t the
\n\t      owner  of\t the land as an\t accretion  thereto.
\n\t      Accordingly, there can be no question of title
\n\t      to the materials passing as movables in favour
\n\t      of the other party to the contract.”\n<\/p><\/blockquote>\n
As  we\thave already said, it is clear on the terms  of\t the
\ncontract in this case that the property in the bus body does
\nnot  pass on its being placed or constructed on the  chassis
\nbut  when  the\twhole  vehicle including  the  bus  body  is
\ndelivered.\n<\/p>\n
Mr. Sastri then relied on the decision of this Court in Carl
\nStill v. The State of Bihar(1).\t That case does not apply to
\nthe  facts  of\tthis case because this\tCourt  came  to\t the
\nconclusion  on a construction of the agreement in that\tcase
\nthat  the contract there was entire and indivisible for\t the
\nconstruction  of specified works including buildings  for  a
\nlump sum and not a contract of sale of materials as such.
\nMr.  Sastri then says that clause 3 is inconsistent with  an
\nagreement  for\tsale  of goods.\t This  clause  provides\t for
\nadditional work to be done for which no rate is specified in
\nthe contract.  The clause, according to us, merely  provides
\nfor  extra payment if the Controller decided to\t order\tsome
\nadditional  things  to\tbe placed in the body.\t This  is  a
\nneutral clause equally applicable to a contract for sale  of
\ngoods or a contract for work and labour.\n<\/p>\n
Mr.  Sastri then points to clauses 5 and 6 and submits\tthat
\nthese  are  totally inconsistent with an agreement  for\t the
\nsale of goods.\tBut we are unable to assent to this.  Clause
\n5 provides for a time schedule and ensures that the delivery
\nof the bus body shall take place within the stipulated time.
\nClause\t6 is designed to avoid disputes in the future as  to
\nthe  quality  of the material used and ensures\tthat  proper
\nmaterial is used.  A contract for the sale of
\n(1) [1962] 2 S.C.R. 81.\n<\/p>\n
ASup\/65-4
\n792<\/span>
\ngoods to be manufactured does not cease to be a contract for
\nsale  of goods merely because the process of manufacture  is
\nsupervised by the purchaser.  For example, if in a  contract
\nfor  the manufacture and sale of military aircraft, a  great
\ndeal  of supervision is insisted upon by the purchaser,\t the
\ncontract would not become a contract for works and labour.
\nWe may now notice some of the Indian cases in which a  simi-
\nlar point arose.\n<\/p>\n
In  Commissioner of Sales Tax, U.P. v. Haji Abdul  Majid<\/a>(1),
\nthe  Allahabad High Court arrived at the conclusion that  in
\nthe circumstances of the case the transaction was a contract
\nfor  the sale of bus bodies and not a contract for work\t and
\nlabour.\t  Desai,  C.J., rightly pointed out at p.  443\tthat
\n“since it makes no difference whether an article is a ready-
\nmade  article  or is prepared according\t to  the  customer’s
\nspecification, it should also make no difference whether the
\nassessee  prepares  it separately from the  thing  and\tthen
\nfixes  it  on it or does the preparation  and  the  fixation
\nsimultaneously in one operation.”\n<\/p>\n
In  Jiwan  Singh v. State of Punjab (2) the  High  Court  of
\nPunjab\talso held that a contract by a firm for fitting\t and
\nbuilding motor bodies with its own materials on the  chassis
\nsupplied by customers is a contract for the sale of goods.
\nIn  Kailash Engineering Co. v. The State of  Gujarat(3),  it
\nwas  held  that\t the contract in  that\tcase  for  building,
\nerecting  and furnishing of third class timber coach  bodies
\non  broad  gauge underframes to be supplied by\tthe  Railway
\nadministration\twas  not a contract for the sale  of  goods.
\nThe same conclusion was reached in Kays Construction Company
\nv. The Judge (Appeals) Sales Tax, Allahabad (4).  We do\t not
\npropose to say whether these cases were correctly decided on
\nthe  facts  for, as we have said in the beginning,  in\teach
\ncase it is a question of intention of the parties.
\nTo  conclude, we have come to the finding that the  contract
\nas  a whole is a contract for the sale of  goods.   Agreeing
\nwith the High Court, we hold that the answer to the question
\nreferred  is against the appellant.  The appeal\t accordingly
\nfails and is dismissed with costs.\n<\/p>\n
In  the\t other two appeals relating to assessments  for\t the
\nquarters  ending September 30, 1957 and December  31,  1957,
\nthe  agreements\t are  similar and these also  fail  and\t are
\ndismissed with costs.  There will be one set of hearing\t fee
\nin all the three appeals.\n<\/p>\n
(1)  14 S.T.C. 435.\t       (2) 14 S.T.C. 957.\n<\/p>\n
\t\t\t       (4) 13 S.T.C.  302.\n<\/p>\n
(3)  15 S.T.C. 574.\n<\/p>\n
793<\/span><\/p>\n
Shah  J. Whether a contract is one for execution of work  or
\nfor  performance  of service, or is a contract for  sale  of
\ngoods must depend upon the intention of the parties gathered
\nfrom  the  terms  of the contract viewed  in  the  light  of
\nsurrounding circumstances.  If the contract is one for\twork
\nor  for performance of service, the mere  circumstance\tthat
\nthe  party  doing the work or performing  the  service\tuses
\ngoods or materials belonging to him in the execution of\t the
\ncontract  will\tnot  be of  any\t importance  in\t determining
\nwhether the contract is one for sale of goods.\tIt is common
\nground\tthat under the scheme of the Sales Tax Acts  enacted
\nby State Legislatures, if in its true nature the contract is
\none  for performance of service or for\twork,  consideration
\npaid is not taxable, for the States have authority under the
\nConstitution by Sch.  VII to legislate on the topics of\t tax
\non  sale  or purchase of goods (other than  newspapers)\t and
\nhave  no power to tax remuneration received under  contracts
\nfor  work  or  service.\t The primary  difference  between  a
\ncontract  for  work or service and a contract  for  sale  of
\ngoods  is  that\t in  the  former  there\t is  in\t the  person
\nperforming  work  or rendering service no  property  in\t the
\nthing  produced\t as a whole notwithstanding that a  part  or
\neven  the whole of the materials used by him may  have\tbeen
\nhis property.  In the case of a contract for sale, there  is
\nin the first instance a chattel which belongs exclusively to
\na  party and under the contract property therein passes\t for
\nmoney  consideration.\tAs observed in\tHalsbury’s  Laws  of
\nEngland (Third Edition) Vol. 34, pp. 6-7, Para 3 :\n<\/p>\n
\t      ”\t A  contract  of  sale\tof  goods  must\t  be
\n\t      distinguished  from  a contract for  work\t and
\n\t      labour.  The distinction is often a fine\tone.
\n\t      A\t contract of sale is a contract\t whose\tmain
\n\t      object  is the transfer “of the  property\t in,
\n\t      and  the\tdelivery  of the  possession  of,  a
\n\t      chattel as a chattel to the buyer.  Where\t the
\n\t      main object of work undertaken by the payee of
\n\t      the price is not the transfer of a chattel qua
\n\t      chattel,\tthe  contract is one  for  work\t and
\n\t      labour.\tThe test is whether or not the\twork
\n\t      and  labour bestowed end in anything that\t can
\n\t      properly\tbecome the subject of sale;  neither
\n\t      the ownership of the materials, nor the  value
\n\t      of  the skill and labour as compared with\t the
\n\t      value   of  the  materials,  is\tconclusive,,
\n\t      although\tsuch  matters  may  be\ttaken\tinto
\n\t      consideration    in   determining,   in\t the
\n\t      circumstances  of a particular  case,  whether
\n\t      the contract is in substance one for work\t and
\n\t      labour or one for the sale of a chattel.”\n<\/p><\/blockquote>\n
\t      794<\/span><\/p>\n
To  constitute a sale there must therefore be  an  agreement
\nand  in performance of the agreement property  belonging  to
\none  party  must stand transferred to the  other  party\t for
\nmoney  consideration.\tMere transfer of property  in  goods
\nused  in  the  performance of a contract  is,  however,\t not
\nsufficient  :  to  constitute  a  sale\tthere  must  be\t  an
\nagreement-express  or implied-relating to sale of goods\t and
\ncompletion of the agreement by passing of title in the\tvery
\ngoods  contracted to be sold.  It is of the essence  of\t the
\ntransaction  that. the agreement and sale should  relate  to
\nthe  same subject-matter, i.e., the goods agreed to be\tsold
\nand in which the property is transferred.\n<\/p>\n
To  determine  the liability of the appellants\tto  pay\t tax
\nunder the Orissa Sales Tax Act on the consideration received
\nby them under the terms of the contract, the true  intention
\nof  the parties must be determined.  The agreement which  is
\nthe  subject-matter  of the dispute between the\t parties  is
\nexecuted  on  behalf  of  the Governor\tof  Orissa  and\t the
\nappellants,  for  constructing “bus bodies” on\tthe  chassis
\nsupplied by the Governor of Orissa.  In the second paragraph
\nof the preamble it is recited that the Governor had accepted
\nthe   quotation\t and  had  decided  to\tplace\torders\t for
\nconstruction of “bus bodies” on the chassis supplied by\t the
\nGovernor   at  the  rates  specified  therein.\t The   third
\nparagraph   recites  that  the\tappellants  had\t agreed\t  to
\nconstruct  “bus bodies” at the rate quoted and on the  terms
\nand conditions recited therein.\t The agreement then proceeds
\nto  set\t out the conditions of the contract.  By  the  first
\ncondition  the\tappellants  are made  responsible  for\tsafe
\ncustody of the chassis from the date of receipt thereof from
\nthe  Governor  till delivery and are bound to  insure  their
\npremises  including the chassis against fire, theft,  damage
\nand  riot  at  their  own  cost.   By  that  condition\t the
\nappellants  are\t made  ” responsible  for  the\tchassis\t and
\nmaterials supplied” to them and have undertaken to indemnify
\nthe  Governor for any loss or damage to the  said  material.
\nThe  clause  also provides that the completed  “bus  bodies”
\nshall  be delivered to the Governor on or before  the  dates
\nspecified in the agreement.  By cl. 2 it is stipulated\tthat
\nthe   “bus  bodies”  shall  be\tconstructed  in\t  the\tmost
\nsubstantial   and  workmanlike\tmanner,\t both\tas   regards
\nmaterials   and\t otherwise  in\tevery  respect\t in   strict
\naccordance  with  the  specifications in Sch.\t‘B’  of\t the
\nagreement.   Clause  3 provides for payment  for  additional
\nwork as may be directed by the Transport Controller under an
\norder  in writing to that effect.  By cl. 4 it\tis  provided
\nthat  the appellants shall guarantee the durability  of\t the
\nbody  for  two years from the date of delivery\tand  if\t any
\nimperfection or
\n795<\/span>
\ndefective  material  becomes apparent within the  period  of
\nguarantee the appellants shall rectify the defects at  their
\nown cost.\n<\/p>\n
These four clauses do not indicate any clear intention as to
\nthe  nature of the contract : they are consistent  with\t the
\ncontract being one for sale of “bus bodies” belonging to the
\nappellants as well as to a contract for building bus  bodies
\non  chassis  supplied.\tLiability imposed  by  the  contract
\nrequiring the appellants to indemnify the Governor for\tloss
\nor damage to the chassis supplied and liability to carry out
\nthe work in the most substantial and workmanlike manner\t and
\nto  guarantee durability of the bodies are  consistent\twith
\nthe  contract  being  one of sale or of\t work  and  service.
\nClause 3 also does not indicate any definite intention.\t  If
\nthe contract is one for sale of a “bus body”, the  agreement
\nto pay extra payment for additional work to be done  thereon
\nis  not also indicative of any definite intention.   But  by
\ncls.  5\t & 6 of the contract a definite intention  that\t the
\ncontract  is one for work and not sale is, in  my  judgment,
\nindicated.  By the fifth clause it is, inter alia,  provided
\nthat the work shall throughout the stipulated period of\t the
\ncontract  be carried out with all due diligence, time  being
\ndeemed\tto be of the essence of the contract, and  that\t the
\nappellants  shall  be  liable  to pay  to  the\tGovernor  as
\nliquidated  damages an amount equal to 50% of the  estimated
\ncost  of the whole work as shown in the contract  for  every
\nday  that the work remains unfinished after the date  fixed.
\nIn a contract for sale of goods such a covenant is  unusual.
\nIf a party to a contract fails to carry out his part  within
\nthe  period  specified, unless the other  party\t waives\t the
\nbreach\tthe contract may be deemed to be broken.  The  other
\nparty is ordinarily not concerned with the method or  manner
\nof  producing  the  chattel  agreed  to\t be  sold,  if\t the
\nspecifications relating thereto are otherwise complied with.
\nImposition  of an obligation to carry out the work with\t due
\ndiligence is indicative of the contract being one for  work.
\nThis inference is strengthened by the proviso to cl. 5 which
\nimposes\t liability upon the appellants to pay damages  until
\nthe  defects detected on inspection are rectified.   By\t the
\nfirst  part  of cl. 6, all work under or in  the  course  of
\nexecution or executed in pursuance of the contract shall  at
\nall  times  be\topen  to inspection  by\t the  Controller  or
\nofficers  authorised  by him in that behalf  and  that\tthey
\nshall  have  the right to stop by a written order  any\twork
\nwhich  in  the opinion of the Controller has  been  executed
\nwith  unsound, imperfect, unskillful or bad  workmanship  or
\nwith  materials\t of  inferior quality.\t The  appellants  on
\nreceipt\t of  a\twritten order are obliged  to  dismantle  or
\nreplace such, defective work or material at their own  cost.
\nIf the appellants
\n796<\/span>
\nfail  to  comply with the order within seven days  from\t the
\ndate of receipt of the order, the Controller is free to\t get
\nthe  work  remaining to be done by any other agency  and  is
\nentitled  to  recover  the  difference\tin  cost  from\t the
\nappellants,  and  for  this purpose  the  Controller  is  at
\nliberty\t to  enter upon the premises of the  appellants\t and
\ntake delivery of the unfinished vehicles.  It is clear\tfrom
\nthe   terms  of\t cl.  6\t that  throughout  the\tprocess\t  of
\nconstruction the appellants are under the supervision of the
\nController,  and  it is open to the Controller to  stop\t any
\nwork which is in progress and to call upon the appellants to
\nrectify\t the work by dismantling or replacing the  defective
\nwork.  If the appellants fail to carry out the order of\t the
\nController  it is open to the Controller to take  possession
\nof  the\t unfinished work and get the same done\tthrough\t any
\nother agency and to recover the difference in cost from\t the
\nappellants.   The Controller is also given liberty to  enter
\nupon  the  premises of the appellants and to take  over\t the
\nunfinished vehicles.  A party agreeing to purchase goods  of
\ncertain specifications or description is entitled to  insist
\nthat the specifications or the description shall be strictly
\ncarried out, but he has ordinarily no right to supervise the
\nproduction of the goods.  Again the right which is conferred
\nupon the Controller to take away the unfinished vehicles and
\nto  get\t them  completed  by some  other  agency  is  wholly
\ninconsistent  with the contract being one for purchasing  an
\narticle belonging to the appellants.  What one may ask would
\nbe the authority of the Controller under a contract of\tsale
\nto  take away unfinished vehicles from the person  who\towns
\nthem, have the work completed by another person and then  to
\nclaim  the  right  to  recover\tthe  difference\t in  cost  ?
\nParagraph   7\tdeals  with  the  right\t  to   recover\t the
\nconsideration  agreed to be paid to the appellants  and\t the
\ntime at which it is to be paid.\t Paragraph 8 deals with\t the
\nplace  at  which the completed vehicles\t with  bodies  built
\nthereon\t are  to  be  delivered and till  the  date  of\t the
\ndelivery the risk is with the appellants.  Paragraph 9 deals
\nwith  the settlement of any dispute which may arise  between
\nthe  parties on any question relating to the meaning of\t the
\nspecifications\tand  drawings or as to the  quality  of\t the
\nworkmanship  or\t materials used in the work.   Paragraph  10
\ndeals  with  the jurisdiction of courts in the\tevent  of  a
\ndispute\t between  the parties.\tParagraphs 7 to\t 10  are  in
\ntheir  content\tneutral\t and  may  be  consistent  with\t the
\nagreement being either one for sale or for work or service.
\nSchedule ‘B’ consists of the specifications for construction
\nof  the composite bodies.  They set out the designs and\t the
\nspecifications\tof  the underframe  and\t floor,\t frame-work,
\nroof, penelling, side
\n797<\/span>
\nwindows, doors, seats, driver’s can, roof lamps, grab rails,
\nwindow\tguard rails, wind screens, luggage carriers,  finish
\nand   miscellaneous   fittings.\t  It  is   true\t  that\t the
\nspecifications\tcontemplated  that  the\t appellants  had  to
\nsupply\tcertain\t goods\twhich  are not\tfixed  to  the\t“bus
\nbodies”.  There are also provisions for supply of additional
\nequipment such as wind screen wipers, locking  arrangements,
\never,the  case\tof the parties that the contract  is  a
\ncomposite contract. It\tis  part of a  single  contract
\nthat the “bus body” to be constructed has to conform to\t the
\nspecifications\tand in the manufacture of the completed\t bus
\nbody  the  equipment set out under the\thead  ‘miscellaneous
\nfittings’ and elsewhere has to be provided.
\nAn elaborate argument was advanced before us by counsel\t for
\nthe  State  of Orissa suggesting that the “bus\tbodies”\t are
\nseparately  built  and are thereafter fixed to\tthe  chassis
\nsupplied  by  the State.  The argument,\t however,  does\t not
\nappear to be correct in view of cls. 3, 4, 5, 6, 7, 8 & 9 of
\nthe  specifications.  Again the right which is conferred  by
\ncl. 6 of the main agreement which enables the Controller  to
\ntake  possession of the unfinished vehicles  indicates\tthat
\nthe  bodies  were to be built on the chassis  supplied.\t and
\nthey  were  not to be independently constructed.   But\tthis
\nhas,  in  my  view, no decisive bearing.   The\tparties\t may
\ncontract  that on the chassis supplied by the State  a\tbody
\nshall  be  built.  If the true intention of the\t parties  is
\nthat  a body is a chattel belonging to the builder  and\t the
\nproperty therein is to pass under a contract against  price,
\nit would be a contract for sale of the body  notwithstanding
\nthe fact that it is built on the chassis.\n<\/p>\n
Another question to which counsel devoted considerable argu-
\nment  was  whether the maxim ‘quicquid\tfixatur\t solo,\tsolo
\ncredit’\t which\tis a rule of the common law  of\t England  is
\napplicable   under  the\t Indian\t system\t to  accretions\t  to
\nmovables.   Under  the English common law a house  which  is
\nconstructed being embedded in the land becomes an  accretion
\nto  the land and (subject to a mass of exceptions in  favour
\nof  tenants and in favour of trade fixtures) belongs to\t the
\nperson to whom the land belongs.  But that rule has not been
\naccepted in India : Thakoor Chunder Poramanick v. Ram Dhonde
\nBhattacharji(1) and Narayan Das Khitty v. Jatindra Nath\t Roy
\nChowdhury(2).  It is unnecessary to advert to the contention
\nwhether\t the  rule applies to accretions  to  movables,\t for
\nultimately the true effect of an accretion made pursuant  to
\na contract has to be judged, not by any artificial rule that
\nthe  accretion may be presumed to have become by  virtue  of
\naffixing to a chattel
\n(1) 6 Suth Weekly Reports 228
\n(2) L. R. 54 I. A. 218
\n798<\/span>
\npart of that chattel, but from the intention of the  parties
\nto the contract.  In each case the Court must ascertain what
\nthe  intention\tof the parties was when\t property  in  goods
\nbelonging  to  one  person and affixed to  the\tproperty  of
\nanother\t person,  passed  to  that  other  person.   Whether
\npursuant  to  a\t contract, any moveables  fixed\t to  another
\nmoveable  the property passes immediately to the  person  to
\nwhom  the  primary  property belongs must  depend  upon\t the
\nintention of the parties.\n<\/p>\n
One strong test to ascertain whether a given contract is for
\nwork or for sale of goods is to ascertain whether the  thing
\nproduced  as  a whole had individual existence as  the\tsole
\nproperty  of the party who produced it at some\ttime  before
\ndelivery,  and\tthe property therein passes only  under\t the
\ncontract relating “hereto to the other party for price.\t  If
\nthe  thing has no individual existence as the sole  property
\nof the party producing it, the contract will be one for work
\nor for service.\n<\/p>\n
Under  condition 6 of the contract unfinished goods  may  be
\ntaken  possession of by the Controller and  appropriated  to
\nhimself notwithstanding the objections which the  appellants
\nmay  have to that course.  If the chassis and the body\twere
\ndestroyed  before delivery, as stipulated loss of  the\tbody
\nwould undoubtedly fall upon the appellants, for by cl. 1  of
\nthe  agreement\tthe appellants, are bound to  indemnify\t the
\nState  of  Orissa for any loss that may be suffered  by\t the
\nState.\tBut this covenant is not decisive of the true nature
\nof  the contract.  A bailee of goods under a works  contract
\nmay  undertake\ta  more\t onerous  liability  than  what\t  is
\nprescribed  by\tS.  151 of the Contract Act  :\tsee  S.\t 152
\nContract  Act.\t Undoubtedly before delivery of\t a  complete
\nchassis with “bus body” under the terms of the contract\t the
\nappellants  have no right to claim the consideration  agreed
\nto be paid to them.  If, because. of the loss of the chassis
\nand  the  “bus\tbody” constructed  by  the  appellants,\t the
\nappellants are unable to deliver the vehicle, the  liability
\nto  indemnify  the State for loss of the chassis  arises  by
\nexpress\t terms of the contract and their claim for  recovery
\nof  the\t value of the materials used  or  the  consideration
\nagreed\tto be paid would fail, because they have  failed  to
\ncarry out their part of the contract.\n<\/p>\n
It   is\t unnecessary  to  refer\t to  “he  large\t number\t  of
\nauthorities  to which our attention was invited\t by  counsel
\nThe question must be decided on a true interpretation of the
\nterms\tof  the\t contract  in  the  light   of\t surrounding
\ncircumstances.\tIf, on a review of all
\n\t\t\t    799<\/span>
\nthe terms of the contract, it appears that the intention  of
\nthe  parties  was  that the appellants\twere  to  sell\t“bus
\nbodies” to the State of Orissa the contract would clearly be
\none  for sale and consideration paid would be taxable  under
\nthe Orissa Sales Tax Act.  If, however, the contract is\t one
\nfor securing a certain result namely the building of a\tbody
\non  the\t chassis supplied by the State\twith  the  materials
\nbelonging to the appellants, the contract would. be one\t for
\nwork done and not liable to sales tax.\n<\/p>\n
In  my view the present contract is one for work and  not  a
\ncontract  for  sale, because the contract is  not  that\t the
\nparties\t agreed\t that  the “bus\t body”\tconstructed  by\t the
\nappellants  shall  be  sold to the  State  of  Orissa.\t The
\ncontract is one in which the appellants agreed to  construct
\n“bus  bodies” on the chasis supplied to them as bailees\t and
\nsuch  a contract being one for work, the consideration\tpaid
\nis not taxable under the Orissa Sales Tax Act.
\nIn my view, therefore, the appeal should be allowed.\n<\/p>\n
\t\t       ORDER BY COURT
\nIn  accordance\twith  the opinion  of  the  majority,  these
\nappeals are dismissed with costs.  One hearing fee.\n<\/p>\n
800<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Patnaik & Company vs State Of Orissa on 19 January, 1965 Equivalent citations: 1965 AIR 1655, 1965 SCR (2) 782 Author: S C. Bench: Gajendragadkar, P.B. (Cj), Hidayatullah, M., Shah, J.C., Sikri, S.M., Bachawat, R.S. PETITIONER: PATNAIK & COMPANY Vs. RESPONDENT: STATE OF ORISSA DATE OF JUDGMENT: 19\/01\/1965 BENCH: SHAH, J.C. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-135336","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nPatnaik & Company vs State Of Orissa on 19 January, 1965 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/patnaik-company-vs-state-of-orissa-on-19-january-1965\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Patnaik & Company vs State Of Orissa on 19 January, 1965 - 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