# fl79 C. B. GOSAIN v. STATE OF ORISSA

- **Citation:** [1964] 2 S.C.R. 879
- **Court:** Supreme Court of India
- **Decided:** 1964
- **Case number:** CIVIL APPELLATEJURISDICTION : Civil Appeals Nos. 41 to 49 of 1962
- **Bench:** S.K. Das, A.K. Sarkar, M. HrnAYATULLAH
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/fl79-c-b-gosain-v-state-of-orissa-2847
- **Pages:** 7

## Headnote

· Bales
Tax-Contract for Manufacture and· supply of
bricks-Brick. manufactured and supplied according to contract
and payment received-Contractor whether .liable to sales tax on
brick• •upplied-Transfer of property in the bricks-What constitut~• sal<-:-Orissa Sales Tax Act, 1947 (Ori.,a U of 1947).
The appellant manufactured and supplied a large quantity
of bricks to a company under a contract according to the
specifications contained in it. The
contract provided thac
land would. be given by the company fo the appellant free for
providing earth for the manufacture of the bricks.
Held that ·the supplies -constituted
a sale of goods and
were liable to be subjected to sales tax.
The proper interpretation of the contract w"s that the earth supplied by the
company to the appellan! became the latter's property and that
the bricks that the appellant manufactured were also his
property and these bfick< were what ho sold to the company
under the contract and the cop.tract was
not, therefore, one
_only for labour supplied or wprk done.
P. A. Raju Chettiar v. The State of Madra•, [19.55]
fiS. T. C. 131, distinguished.
Nor \Vas the contract one of work done and materials
found.
Whether a contract is one of work done and materials
found or orie for sale of goods depr-nds on .its essence.
If not
of its essence that a cha~tel should be produced and transferred
~s a chattel, thr.n it may be a contract for work done and
materials found and not a contract for sale of goods.
The
contracc in this ca:se n9 douht required the appellant to b~stow
a 'certain amount of skill and lab'lur in
the manufacture of
........,
b.ricks but the object of tht:: contract
nevertheless
remained·
the delivery of brick!\ manufactured, as chattel.
,
P. A. Raju Oheitiar v. The Stale of Madra•, [1955) 6 S.T.
C .. }31, Olay v.
Yates (1856)
I H & N. 73, Robin.•on v.
Graves, (1935] ·I K. B. 579, Grafton v. Armitage, [1845]
1963
April 5
1969
C. B. GOJ•bi
••
Stal1 •/ Oti.sS41
Sonar J.
.880
SUPREME COURT REPORTS [1964] VOL.
2 C. B.336 and J. Marul (Furriera) Lid. v. Tapper, (1953) I
All. E. R. 15, referred to.
CIVIL APPELLATEJURISDICTION : Civil Appeals
Nos. 41 to 49 of 1962.
Appeals by special leave from the judgment
and order dated July 23, 1959, of the Orissa High
Court in 0. J.C. No. 33 of 1959.
A. Ranganadham Chetty, B. D. Dhawan, S. K.
Mehta and K. L, Mehta, for the appellant.
C. K. Daphtary, Attorney-General for India,
R. Ganapathy Iyer and R. N. Sachlhey, for tbe
respondents.
1963.
April 5.
The Judgment of the Court
Ytas delivered by
SARKAR J .-The appellant had entered into a
contract with a company called the Hindustfian Steel
Private Ltd., for the manufacture and supply of
bricks at Rourkela in Orissa.
Large quantiues of
bricks were manufactured and supplied under the
contract and the appellant received payment for
them. The respondent State assessed the appellant
to sales tax under the Orissa Sales Tax Act, 194 7 on
these supplies on the basis that they were sales. The
appellant contended that the contract was only for
labour or for work done and material found, and
that there was really no sale of any goods on which
the tax could be levied.
He moved the High Court
of Orissa for a write of mandam'U8 directing the respondent State not to assess or levy tbe tax. The
application was rejected in limine by the High
Court. The appeltant has now come to this Court
in further appeal.
Now a sale which can be taxed under the Act
has been defined as "Any transfer of property in
••
2 s.e.R .• SUPREME COURT' REPORTS
881 ·'
goods· for cash or, deferred· payment·or other valuable '
consideration.'' The ·point at ·issue is whether the
contract. was for a transfer of property -in the bricks
from. the ·appellant to the Company for a consideration;
It is said that the bricks .were made out of.earth·
belonging to the Company and, .therefore, the bricks'
had all ·along been its property and there could be
'no transfer 0f property· in them to it.
This conten- ·
tion is founded on a cla

## Text

2 S.C,R.'
SUPREME COURT REPORTS
fl79
C. B. GOSAIN
v.
STATE OF ORISSA
(S.K. Das, A.K. SARKAR and M. HrnAYATULLAH JJ.)
· Bales
Tax-Contract for Manufacture and· supply of
bricks-Brick. manufactured and supplied according to contract
and payment received-Contractor whether .liable to sales tax on
brick• •upplied-Transfer of property in the bricks-What constitut~• sal<-:-Orissa Sales Tax Act, 1947 (Ori.,a U of 1947).
The appellant manufactured and supplied a large quantity
of bricks to a company under a contract according to the
specifications contained in it. The
contract provided thac
land would. be given by the company fo the appellant free for
providing earth for the manufacture of the bricks.
Held that ·the supplies -constituted
a sale of goods and
were liable to be subjected to sales tax.
The proper interpretation of the contract w"s that the earth supplied by the
company to the appellan! became the latter's property and that
the bricks that the appellant manufactured were also his
property and these bfick< were what ho sold to the company
under the contract and the cop.tract was
not, therefore, one
_only for labour supplied or wprk done.
P. A. Raju Chettiar v. The State of Madra•, [19.55]
fiS. T. C. 131, distinguished.
Nor \Vas the contract one of work done and materials
found.
Whether a contract is one of work done and materials
found or orie for sale of goods depr-nds on .its essence.
If not
of its essence that a cha~tel should be produced and transferred
~s a chattel, thr.n it may be a contract for work done and
materials found and not a contract for sale of goods.
The
contracc in this ca:se n9 douht required the appellant to b~stow
a 'certain amount of skill and lab'lur in
the manufacture of
........,
b.ricks but the object of tht:: contract
nevertheless
remained·
the delivery of brick!\ manufactured, as chattel.
,
P. A. Raju Oheitiar v. The Stale of Madra•, [1955) 6 S.T.
C .. }31, Olay v.
Yates (1856)
I H & N. 73, Robin.•on v.
Graves, (1935] ·I K. B. 579, Grafton v. Armitage, [1845]
1963
April 5
1969
C. B. GOJ•bi
••
Stal1 •/ Oti.sS41
Sonar J.
.880
SUPREME COURT REPORTS [1964] VOL.
2 C. B.336 and J. Marul (Furriera) Lid. v. Tapper, (1953) I
All. E. R. 15, referred to.
CIVIL APPELLATEJURISDICTION : Civil Appeals
Nos. 41 to 49 of 1962.
Appeals by special leave from the judgment
and order dated July 23, 1959, of the Orissa High
Court in 0. J.C. No. 33 of 1959.
A. Ranganadham Chetty, B. D. Dhawan, S. K.
Mehta and K. L, Mehta, for the appellant.
C. K. Daphtary, Attorney-General for India,
R. Ganapathy Iyer and R. N. Sachlhey, for tbe
respondents.
1963.
April 5.
The Judgment of the Court
Ytas delivered by
SARKAR J .-The appellant had entered into a
contract with a company called the Hindustfian Steel
Private Ltd., for the manufacture and supply of
bricks at Rourkela in Orissa.
Large quantiues of
bricks were manufactured and supplied under the
contract and the appellant received payment for
them. The respondent State assessed the appellant
to sales tax under the Orissa Sales Tax Act, 194 7 on
these supplies on the basis that they were sales. The
appellant contended that the contract was only for
labour or for work done and material found, and
that there was really no sale of any goods on which
the tax could be levied.
He moved the High Court
of Orissa for a write of mandam'U8 directing the respondent State not to assess or levy tbe tax. The
application was rejected in limine by the High
Court. The appeltant has now come to this Court
in further appeal.
Now a sale which can be taxed under the Act
has been defined as "Any transfer of property in
••
2 s.e.R .• SUPREME COURT' REPORTS
881 ·'
goods· for cash or, deferred· payment·or other valuable '
consideration.'' The ·point at ·issue is whether the
contract. was for a transfer of property -in the bricks
from. the ·appellant to the Company for a consideration;
It is said that the bricks .were made out of.earth·
belonging to the Company and, .therefore, the bricks'
had all ·along been its property and there could be
'no transfer 0f property· in them to it.
This conten- ·
tion is founded on a clause in the contract which says,
"land will be given free" and which was apparently
intended to make the earth available to the appellant ·
for making.,the bricks.
We are-unable. to agree that this clause proved
that.the earth. all .along continued to belong t<> the
Company .. It . seems . to us that when the clause
said, "land will be g.iven'', it meant that the· property
in• the earth to be dug out for making the ·bricks
would be transfered to. the appellant. It may be
presumed that it was undersood that in quoting
his rate., for the ·bricks, the appellant would take
into
account· the
free
supply
of earth for
making the bricks. · Again what was supplied to
the Company by the appellant was not the earth
which he got from it but bricks, which, we think, are
something entirely different. It could not have been
intended that the property in· the earth would
continue in the Company in spite of its conversion
into such a different thing as· bricks.
Further we
find that the contract provided that the bricks would
remain at the appellant's risk till delivery to the·
Company. Now, obviously bricks could not remain
at the appellant's risk unless !hey were his property.
Another clause provided that the appellant would
not be able to. sell the bricks to other parties
without the permission of the Company. Apperantlv,
it wa~ contemplated that without such a provision
the appellant could have sold the bricks to ·others .. ,
1963
C. B. Gw•in
..
Stole of Orisso
SaTkar I.
1963
C. D. G•s•in
••
Sl•'I •/ •risstJ
SmUr 1.
882 SUPREME COURT REPORTS [1964) VOL·
Now he could not sell tlie bricks at all unless they
belonged to him.
Then we find that in the tender
which the appellant submitted and the acceptance
of which made the contract, he stated, "l/we hereby
tender for the supply to the Hindusthan Steel Private
Ltd. of the materials described in the undermentioned memorandum". The memorandum described
the materials as bricks, and also stated the "Quantities to be delivered" and the "Rate at which
materiali are to be supplied". All these provisions
plainly show that the contract was for sale of bricks.
If it were so, the property in the bricks must
have been
in
the appellant and passed from
him
to
the Company.
The same
conclusion
follows from another provision in the contract which
states that if bricks are stacked in a specified manner
"'then 7;)% of the value of the bricks at kiln site will
be measured and paid....... The balance of 25 % ...
.. . will be paid finally when all the bricks have been
delivered... . . Only full bricks as finally delivered
...... will be taken into account. ..... "
Before we leave this part of the case we have
to notice the decision in P.A. Raju Chettiar v. 1'he
State of Madras ('}, to which learned counsel for
the appellant referred.
We do not think however
that 1t is of any assistance. That was a case in
which a merchant had delivered silver to workmen
for manufacture of utensils and the workmen returned
the manufactured utensils. It was held that there
was no sale of the silver by the merchant to the
workmen. It was so held because the weight of
the silver had been debited to the workmen on
deliverv and credited to them on the manufactured
goods being made over to the merchant and the price ·
of the silver had never been debited or credited to
them.
Furthermore, the workmen had been paid
only the charges for their labour. On these facts
it could not be said that the property in the silver
had ever. passed to the workmen.
The facts in the
(I) [19~] 6 S, T, C, 131,
..
2 S.C.R.
SUPREME COURT REPORTS
883
present case are different and for the reasons earlier
mentioned, justify the view . that here there was a
transfer of the property in the earth to the appellant
by the Company.
Learned counsel stressed · the fact that the
contract now here used the word sale in connection
with the supply of the bricks, in support of his
argument that there was no sale. But it is not
necessary that to constitute a sale, the word 'sale'
has to ·be 'used. We have said enough to show that
under the contract there was a transfer of property
in the bricks for consideration and, therefore, a
sale notwithstanding that the word 'sale' was not.
used.
The other argument of learned counsel for the
appellant was that even if the earth of which the
bricks had to be made be taken to have been transferred. under the contract to the appellant, this was
not a contract for sale of goods but one of
work done and materials found.
A
contract
of this kind is illustrated by the case of 01.ayv.
Yates (1). There tho contract was to print a book,
the printer to find the materials including the paper.
Robinson v. Graves ('), was also referred to. There
a person had commissioned an artist to paint the
. portrait of a lady and it was held that the contract
was not for sale of goods though the artist had to
sup.ply the paint and canvas and had to deliver the
completed picture. In these cases in arriving at the
view that the contract was not for sale of goods the
test that was applied is, what was the essence of the
·contract ? Was it the intention of the parties in
making
the contract that a chattel should be
produced and transferred as a chattel for a consideration ? This test has now been accepted as of
general application to decide whether a contract was
for sale of goods or for labour supplied and materials
found: see Benjamin on Sales (8th ed.) p. 161 ".nd
Halsbury's Laws of England (3rd ed.) vol. 34, I-· 6.
\I) (1856) I H & N 751
(2) (1935) I K1B, li7~
. 1963
C. B. Gorain
...
81411 ef OrislA
S.Ur /,
C. B. Goslin
...
Stot .. ef O.i#a
Sor/:w·J,
884·;•SUPREMECOURT.REPORTS [1964] vot.
It is true. that the .test. will :often .. be found to ,
be. difficult .of application. But. no such difficulty
arises· in the present c-ise. ,, Here the intention of.
the parties in making the contract . clr.arly was •
that the Company would obtain delivery of the bricks
to be made. by the appellant; it was a contract for
the.transfer of chattels qua chattels.
The essence
of the contract was the delivery of the bricks, though
no doubt they had to be manufactured to a ctrtain
specification.
It would be a0surd .to .suggrst that
the essence. of the contract was the work of manu·
facture and the delivery of the bricks was merely
ancillary to the work of manufacture, in the same
way as the delivery of the paint and the canvas were
held to be ancillary to the contract to paint the
portrait in Robi;1son v. Graves(').
The fact that under the contract the bricks had
to be manufactured according to certain specifications, and; therefore, the appellant had to bestow
a certain amount of skill and labour in the
manufacture of the bricks, does not
affect the
question.
That was
not the essence
of
the
contract. The object or. the contract nonetheless
remained the delivery of bricks. It has never been
doubted that "the claim of a tailor or a sho~maker
is for the price of goods when delivered, and not for
the work or labour bestowed by him in the fabrication of them" : see Gmfton v. Armit1Jge (') and
J. Marcel (Furriers) l.trl. v. T"ppcr ('). The present
case, therefore, must a fMtori be one of sale of
coods.
It remains now to notice a preliminary objection to this appeal raised by the respondent. It was
said that before the High Court was moved under
Art. 226 for the writ, the appellant had filed appeals
-.
against the orders of assessment to the Sales Tax
Appellate Tribunal. These appeals failed and the
appellant's application for an order on the Tribunal
(l) (!935) t K.B 579.
(2) (1845)·2 C.B. 356.
(3) (1953) I All. E.R. 15.
2 S.C.R.
SUPREME COURT REPORTS
to refer to the High Court the question of law raised
in this appeal was alsc1 rejected by the High Court.
It is, therefore, said that this appeal is concluded by
the order of the High Court last mentioned.
But it
appears that this Court had granted leave to appeal
from the High Court's order refusing to issue the writ
before the appeal to the tribunal had been dismissed.
The appellant could have appealed from the High
Court's order refusing to direct a reference of the
question but he chose to prosecute the appeal against
the order in the petition for the writ which wou Id
have given him the same relief. Either remedy was
open to him and neither can be said in the circumstances to be barred by the other.
The appeal however fails on the merits and it
is dismissed with costs.
Appeal dismissed.
CHANDER BHAN GOSAIN
v.
ST ATE OF ORISSA & ORS.
(S.K. DAS, A.K. SARKAR and M. HrnAYATULLAHJJ.)
Buprtm•
Court
Practict-Appwl-Court
Fee-One
petition fika under Art. 226 to challang• many assessmtnl
oraera-Appeal again1t one order of High Court-Court Jee
payahlt.
This appeal was against the order of the Deputy Registrar
directing the present case to be registered as nine appeals and
requiring the appellant to pay nine sets of court fees.
The
case originated out of one petition under
Art. 226 of the
Constition challenging the validity of various assessment orders.
The High Court passed one order on the petition and one
appeal was filed in this Court.
C. B. Gosain
••
St.if!!o/ Orissa
8rJrkt1r J,
196J
A;ril 5