A contract for construction and supply of harbour ferry constitutes a contract for sale.

SEETHARAM REDDY, J.

( 1 ) THE sole, but important question is whether a contract for construction and supply of harbour ferry, constitutes a contract for sale or a contract for work and labour. The question of this nature has been defying easy adjudication since long by the courts of judicature of this country as well as abroad. The search and research in the forensic laboratory has not hitherto discovered a pigeon hole, fixing the given material into one or the other by a strait jacket formula. This search however will continue with the sanguineness that one day a solution will emerge, saving or smashing the sales tax payer.

( 2 ) NOW the facts : The assessee-petitioner carrying on the business of builder and repairer of ships and ferries at Visakhapatnam, entered into an agreement with the Government of India for the "construction and supply of harbour ferry" capable of carrying 200 day passengers as per the specifications and technical particulars of tender at a cost of Rs. 30,60,000 as per the conditions set out in annexure-A of the agreement coupled with conditions of the contract as contained in form No. D. G. S. and D - 68 (Revised) including clause 24 thereof and D. G. S. and D - 72 as modified up to date will apply.

( 3 ) DATE of delivery : 18 months from the date of order.

( 4 ) TERMS of delivery : Free delivery to consignee at Port Blair.

( 5 ) SPECIAL instructions : (a) Terms of payment : (i) 15 per cent when keel is laid. (ii) 15 per cent when vessel is framed. (iii) 15 per cent when hull is completed. (iv) 20 per cent when vessel is launched. (v) 25 per cent when vessel is completed and accepted after final inspection for trial. (vi) 10 per cent on the expiry of guarantee period of six months. N. B. (i) For the above stage payments you shall have to furnish bank guarantee in the form enclosed as annexure "vi" and comprehensive insurance policy duly assigned to the President of India. (ii) The ferry will be delivered afloat at your yard in Visakhapatnam and will be accepted by consignees after inspection and trials at Visakhapatnam and for the same provisional acceptance certificate will be issued so as to enable you to claim (v) stage payment of 25 per cent after provisional acceptance by the consignee at your yard but the final acceptance will be at consignees end, i. e. , at Port Blair. This will facilitate the consignee to get the rectifications or any improvement completed early if required. It will be very convenient to carry out the rectifications or any improvement that may be suggested by the consignee. (iii) You are, however, responsible for delivery the craft to the consignee at Port Blair at an additional cost of Rs. 60,000 as already mentioned. This includes voyage insurance. Any damage incurred in transit will be rectified by you at your cost and guarantee period will commence from the date of physical delivery of craft to the consignee at Port Blair. (b) Sales tax and excise duty : Sales tax and excise duty on completed ferry will be paid extra if legally payable. (c ). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (d ). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (e) The petitioner will have to take out a comprehensive insurance policy from United India Fire and General Insurance Company Limited, Indian Overseas Bank Building, 151, Mount Road, Madras-2, which should be assigned in favour of the President of India. The assignment should be by endorsement on the policy. (f) Guarantee : The complete vessel with its fittings should be guaranteed for a period of six months from the date of handing over to the consignee against all defects due to inferior material/workmanship. Repairs of all defects under the guarantee clause will have to be rectified at whatsoever place the vessel may be stationed and the supplier will have to guarantee the repairs so carr

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