A contract for fabrication and erection of steel structures on the premises of a customer, and a contract for supply and installation of bottle cooling units in the premises of a customer, are works contracts and not contracts for sale of goods, and are therefore not liable to sales tax under the Central Sales Tax Act, 1956.

JUDGMENT

The judgment of the Court was delivered by

SHAH, J.-The respondents carry on business as "engineers and contractors" and as dealers in iron and steel goods and refrigerating and cooling units etc. For the assessment year 1957-58 the assessing authority, Madras, included in the taxable turnover of the respondents for assessment TO Central sales tax the following two items received by the respondents Which they contended were not liable to be included :

(i) Rs. 3,26,075.20 under a contract for the fabrication, supply and erection of steel structures with a co-operative society which was setting up a sugar factory in the State of Mysore; and

(ii) Rs. 43,349.05 for the fabrication and installation of "bottle coolers" under orders from customers at different places.

The assessing authority rejected the claim of the respondents. In the view of the assessing authority under the terms of the contract with the co-operative society the respondents manufactured certain articles according to specifications and despatched them to Mysore State and there-after the articles were installed by the employees of the respondents at the site of the factory of the society, arid on that account the transaction was one primarily for sale of steel structures to the society, and the respondents had in addition thereto contracted to instal or erect the structures. The assessing authority in dealing with the second item held that the respondents had sold bottle cooling units to their customers and the contracts for sale of the units were not converted into works contracts merely because the respondents installed the units in the premises of the purchasers.

In appeal the Appellate Assistant Commissioner of Commercial Taxes held that the first item was one for execution of work, and was not assessable to sales tax. He agreed with the assessing authority that the turnover from the supply and installation of bottle cooling units was liable to sales tax. The Sales Tax Appellate Tribunal, Madras, held that the turnover from both the items was taxable.

The respondents moved the High Court of Madras in revision and submitted that since the two items were received as consideration under works contracts, no sales tax was payable thereon. The High Court upheld the plea raised by the respondents. With special leave, the State of Madras has appealed to this Court.

The turnover from the two items may be considered separately.

Under section 8 of the Central Sales Tax Act, every dealer is liable to pay tax on his turnover, in respect of sales in the course of inter-State trade or commerce, and at the rates prescribed by the Act. Turnover under the Act means the aggregate of the sale price received or receivable By the dealer in respect of sales of goods in the course of inter-State trade or commerce and "sale price" by section 2(h) means-omitting parts not material-"the amount payable to a dealer as consideration for the sale of any goods." Under the Act, turnover from sale of goods alone is chargeable to tax. To make the consideration received under the agreement between the respondents and the society it had to be established that the respondents had sold specific goods. It had therefore to be established 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 execution of the contract as accessory to "work and labour", the contract must be regarded as a works contract, and not a contract for sale, even if the property in the goods ultimately passes as a result of the contract.

The primary question therefore is whether there was a bargain between the respondents and the co-operative society under which the former undertook to manufacture certain goods and deliver them