A contract for the supply of material and work is a works contract and not a contract for sale if the main object of the contract is the transfer of the property in, and the delivery of the possession of, a chattel as such to the buyer.

The Judgment of the Court was delivered by

SMT. SUJATA V. MANOHAR, J. - The applicants Uni Apex Alloy Products Ltd., Bombay, manufacture, inter alia, alloy castings and reformer tubes. They have a factory at Thane. The applicants entered into a contract dated 11th April, 1975, with Gujarat State Fertilizers Company Limited, for fabrication, supply and erection of 208 reformer tube assemblies for the conversion of the ammonia plant of the Gujarat State Fertilizers Company Limited at Baroda from a cold bottom system to a hot bottom system.

2. The applicants are holders of a registration certificate both under the Central Sales Tax Act as well as the Bombay Sales Tax Act. On 17th November, 1976, the applicants applied to the Deputy Commissioner of Sales Tax, Bombay, under section 52 of the Bombay Sales Tax Act seeking his determination as to the nature of the transaction represented by the said contract of 11th April, 1975. They annexed a provisional invoice dated 30th April, 1976, for Rs. 49,451.70. This invoice was in respect of one reformer tube assembly, exclusive of tube top assembly, catalyst support assembly and other fixtures to be supplied and billed later. It was charged for at the rate of Rs. 103.00 per kg. No sales tax was charged in the provisional invoice. The invoice, however, contains a printed certificate stating that the registration certificate under the Bombay Sales Tax Act is in force on the date on which the sale of the goods specified in the invoice is made, etc.

3. In respect of this application the Deputy Commissioner of Sales Tax by his order dated 31st December, 1976, held that the said agreement of 11th April, 1975, was a divisible contract, one for the sale of reformer tube assemblies and the other for the work of designing, drawing, erection and installation.

4. Against this decision the applicants preferred an appeal before the Tribunal. The Tribunal confirmed the finding of the Deputy Commissioner that the contract was a divisible contract, one for the sale of reformer tube assemblies and the other for work to be carried out.

5. In respect of this decision of the Tribunal the following question is referred to us for our determination :

Whether the agreement dated 11th April, 1975, entered into by the applicant with Gujarat State Fertilizers Company Limited, is a works contract or a divisible contract containing two agreements one for the sale of goods and the other for payment of remuneration for services and work done ?

The answer to this question depends on the terms and conditions of the contract and the intention of the parties. It is, therefore, necessary to analyse in the first place the terms of the contract entered into between the applicants and the Gujarat State Fertilizers Company Limited, which is dated 11th April, 1975. Under clauses 2.101 and 2.102 of the agreement it is provided as follows :

"2.101 : The SELLER shall engineer, fabricate and supply 208 Nos. of HK-40,25/20 Cr/NI cast alloy steel reformer tube assemblies, duly inspected and passed by the BUYER's inspection authorities before despatch and erect and install them at the BUYER's premises at Fertilizernagar, District Baroda, in Ammonia-I Plant in place of existing tubes therein.

2.102 : The SELLER shall prepare the detailed engineering and fabrication drawings for the reformer tubes for converting the cold bottom system to hot bottom system as suggested by the BUYER. The SELLER shall within four months from effective date of this agreement deliver to the BUYER a set of modified reformer tube drawings incorporating the said change from cold bottom to hot bottom system."

Under article I of this contract clause 1.30 defined reformer tubes as follows :

"1.30 : 'Reformer tubes' shall mean the reformer tube assembly from top flange up to bottom cast piece all welded together but excluding the inlet and outlet pigtails, manifolds, header, refractories and insulation."

The terms "erect and install" are defined in clause 1.5