# RAM SINGH & SONS ENG. WORKS v. COMMISSIONER OF SALES TAX, U.P

- **Citation:** [1979] 2 S.C.R. 621
- **Court:** Supreme Court of India
- **Decided:** 1978-12-07
- **Case number:** Civil Appeal No. 1314 of 1975
- **Bench:** P. N. Bhagwati, R. S. Pathak
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ram-singh-sons-eng-works-v-commissioner-of-sales-tax-u-p-7618
- **Pages:** 12

## Headnote

Contract of sale and contract for work and labour, distinction and test a/-
Whether a contract for fabrication and erection of 3-motion electrical overhead
B
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(travelling cranes) is a contract of sale or contract for work and labour.
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The appellant <issessee was a p<i!rtnership firm carrying on business inter alia
of manufacture and erection of cranes. During the assessment year 1965-66,
C
the assessee entered into two contracts for supply and erection of 3-motion electrical overhead travelling cranes. The assessee carried out both the contracts
and fabricated and erected 3-motion electrical overhead travelling cranes according to the contract specifications. A question arose in the assessment of the
assessee to sa•les tax for the assessment year 1965-66 whether the an1ount of
Rs. 1,34,500/- received by the assessee under the contract with M/s. Kamlapati
Motilal Sugar Mills and the amount of Rs. 2,38,000/ • received under the contract
D
\Vith M/s. Upper Doab Sugar Mills Ltd., formed part of the turnover of the
a.ssessee and was liable to sales tax. The Sales Tax Officer took the view th3.t
the contracts were essentially contracts of sale of ready made cranes and the
erection of the era nes at the factory site was merely incidental to the sales Md
the amounts of Rs. 1,34,500/- and Rs. 2,38,000/- received under the contracts
were, therefore taxable. This view was upheld by the Assistant Commissioner
in appeal, but in revision the Additional Judge (Revisions) held that each of
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the two contracts was a works contract not involving any sale of goods and
hence the amounts were not exigible to sales tax.
On a reference to the l-Iigh
Court at the instance of the Cornntissioner of Sales Tax, the High Court took
the view that each of the two contracts was for supply of 3-motion electrical
overhead travelling cranes as a complete unit acd "the predominant object
was supply <;f crane as complete unit" and "the bestowing of labour and skill
in the execution of the contract" appeared to have been incidental to the supply
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of the machine." The High Court observed that in its view parties "intended
the property to pat1s in the subject matter of the contract, namely, the completed
crane as movable property" and concluded that it was a contract of sale of
goods and not a contract for work and labour. The High Court accordingly
answered both the questions referred to it against the assessee a·nd in favour
of the Revenue.
Allowing the appeal by special leave the Court,
HELD : 1. The primary test to find out whether a contract is a contract of
sale or a contract for work and labour is ·whether the contract is one whose
ma.in object is transfer of property in a chattel as a chattel to the buyer, thougb
some \\'Ork may be requ'ired to be done under the contract as ancillary or
incidental to the sale or it is carrying out of work by bestowal of labour and
service and materials are used in execution of such work.
The Court's have
evolved some subsidiary tests to resolve the difficulty arising in the applicooon
of this prim3ry test ~ there are a large number of cases which are on the
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622
SUPREME COURT REPORTS
[1979] 2 s.c.R.
A
border line and fall within what may be called "grey area".
One such test
formulated by the Supreme Court in
Con1missioncr of Sales Tax, A1adhya
Pradesh v. Purshottam Pnemji, 26 STC 38 is :
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"The primary difference between a contract for work or service and a con~
tract for sale of goods is that in the former there is in the person performing
work or rendering service no property in the thing produced as a whole ..... .
In the case of a contract for sale, the thing produced as ai whole bas individual
existence as the sole property of the party who produced it (at some time before
delivery, and the property therein passes only under the contract relating thereto
to the other party for price." [628 C-G]
Com1nissioner of Sales Tax, M.P. v. Purshottani Pren1ji, 26 STC 38; State
of Rajasthan v. Man industri

## Text

621
RAM SINGH & SONS ENG. WORKS
v.
COMMISSIONER OF SALES TAX, U.P.
December 7, 1978
(P. N. BHAGWATI AND R. S. PATHAK, JJ.]
Contract of sale and contract for work and labour, distinction and test a/-
Whether a contract for fabrication and erection of 3-motion electrical overhead
B
~-
(travelling cranes) is a contract of sale or contract for work and labour.
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The appellant <issessee was a p<i!rtnership firm carrying on business inter alia
of manufacture and erection of cranes. During the assessment year 1965-66,
C
the assessee entered into two contracts for supply and erection of 3-motion electrical overhead travelling cranes. The assessee carried out both the contracts
and fabricated and erected 3-motion electrical overhead travelling cranes according to the contract specifications. A question arose in the assessment of the
assessee to sa•les tax for the assessment year 1965-66 whether the an1ount of
Rs. 1,34,500/- received by the assessee under the contract with M/s. Kamlapati
Motilal Sugar Mills and the amount of Rs. 2,38,000/ • received under the contract
D
\Vith M/s. Upper Doab Sugar Mills Ltd., formed part of the turnover of the
a.ssessee and was liable to sales tax. The Sales Tax Officer took the view th3.t
the contracts were essentially contracts of sale of ready made cranes and the
erection of the era nes at the factory site was merely incidental to the sales Md
the amounts of Rs. 1,34,500/- and Rs. 2,38,000/- received under the contracts
were, therefore taxable. This view was upheld by the Assistant Commissioner
in appeal, but in revision the Additional Judge (Revisions) held that each of
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the two contracts was a works contract not involving any sale of goods and
hence the amounts were not exigible to sales tax.
On a reference to the l-Iigh
Court at the instance of the Cornntissioner of Sales Tax, the High Court took
the view that each of the two contracts was for supply of 3-motion electrical
overhead travelling cranes as a complete unit acd "the predominant object
was supply <;f crane as complete unit" and "the bestowing of labour and skill
in the execution of the contract" appeared to have been incidental to the supply
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of the machine." The High Court observed that in its view parties "intended
the property to pat1s in the subject matter of the contract, namely, the completed
crane as movable property" and concluded that it was a contract of sale of
goods and not a contract for work and labour. The High Court accordingly
answered both the questions referred to it against the assessee a·nd in favour
of the Revenue.
Allowing the appeal by special leave the Court,
HELD : 1. The primary test to find out whether a contract is a contract of
sale or a contract for work and labour is ·whether the contract is one whose
ma.in object is transfer of property in a chattel as a chattel to the buyer, thougb
some \\'Ork may be requ'ired to be done under the contract as ancillary or
incidental to the sale or it is carrying out of work by bestowal of labour and
service and materials are used in execution of such work.
The Court's have
evolved some subsidiary tests to resolve the difficulty arising in the applicooon
of this prim3ry test ~ there are a large number of cases which are on the
G
622
SUPREME COURT REPORTS
[1979] 2 s.c.R.
A
border line and fall within what may be called "grey area".
One such test
formulated by the Supreme Court in
Con1missioncr of Sales Tax, A1adhya
Pradesh v. Purshottam Pnemji, 26 STC 38 is :
B
c
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F
"The primary difference between a contract for work or service and a con~
tract for sale of goods is that in the former there is in the person performing
work or rendering service no property in the thing produced as a whole ..... .
In the case of a contract for sale, the thing produced as ai whole bas individual
existence as the sole property of the party who produced it (at some time before
delivery, and the property therein passes only under the contract relating thereto
to the other party for price." [628 C-G]
Com1nissioner of Sales Tax, M.P. v. Purshottani Pren1ji, 26 STC 38; State
of Rajasthan v. Man industrial Corporation 24 STC 349; Sentinel Rolling Shutters
& Engineering Co. (P) Ltd.
v.
Commissioner of Sales Tax, .f.\,faharashtra,
[1979] I SCR 644; applied.
2. Each of the two contracts for fabrication and erection of a 3-motion
electrical overhead tr.welling crane is not a contract for sale but a contract for
work and labour, (a) It is essentially a transaction for fabricating component
parts and putting them together and erecting them at the site. so as to constitute
a 3-motion electrical overhead travelling crane.
The transaction is no different
than one for fabrication and erection of an open godown or shed with asbestos
or tin sheets fixed on columns, (b) It is not as if a 3-motion electrical overhead
travelling crane is fabricated by the manufacturer and then sold and delivered
to the customer as a chattel, (c) The fabrication and erection of a
3-motion
electrical overhead travelling crane is a highly skilled and specialised job and
the component parts have to be taken to the site and they are assembled and
erected there and it is only when this process is· complete, then a 3-motion
electrical overhead travelling crane comes into being. The process of assembling
and erection requires a high degree of skill and it is not possible to say that
the erection of a 3-motion electrical overhead travelling cra'lle at the site is
merely incidental to its manufacture and supply. The fabrication and erection
is one single indivisible process and a 3-rnotion electrical overhead travelling
crane comes into existence only when the erection is complete.
The erection
is thus a fundamenfa.l and integral part of the contract, because without it the
3-motion electrical overhead travelling crane does not come into being. The
manufacturer would undoubtedly be the owner of the component parts wherl
he fabricated them but at no stage does he become the owner of 3-motion,
electrical overhead travelling crane as a unit so 36 to transfer the property in
it to the customer. The 3-motion electrical overhead travelling crane comes
into existence only when the component parts are fixed in position and erected
at the site, but at that stage it becomes the property of the customer because
it is permanently embedded in the land belonging to the customer. The result
is that as soon as 3-motion electrical overhead travelling crane comes into being,
it is the property of the customer and there is, therefore, no transfer of property
in it by the manufacturer to the customer as a chattel. [630 C-D, 631 E-H632 Al
.5enfinel Rolling Shutters & Engineering Co. (P) Ltd. v. Commissioner of
Sales Tax, Mqharashtra. [1979] I SCR page 644 : followed.
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1314 of 1975.
Appeal by Special Leave from the Judgment and Order dated
29-1-1975 of the Allahabad High Court in S.T.R. No. 771of1972.
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RAM SINGH v. C.S.T. (Bhagwati, !.)
623
S. C. Manchanda, Mrs. Urmila Kapoor and Miss Kamlesh Bansal
fot the Appellant.
G. N. Dikshit and .0. P. Rana for the Respondent.
The Judgment of the Court was delivered by
BHAGWATI, J.
The short question that arises for determination in
this appeal by special leave is whether a contract for fabrication and
erection of a 3-motion electrical overhead travelling crane is a contract
of sale or a contract for work and labour. The question is fortunately
not beset with much difficulty since there is a recent decision of this
Court in Sentinel Rolling Shutters &
Engineering Co. (P) Ltd. v.
Commissioner of Sales Tax, Maharashtra (') which affords considerable guidance and almost concludes the determination of the question
in favour of the assessee,
The assessee, who is the appellant before us, is a partnership firm
carrying on the business inter alia of manufacturing and erection of
cranes.
During the assessment year 1965-66, the assessee entered into
two contracts for supply and erection of 3-motion electrical overhead
travelling cranes, one with M/ s Kamlapat Moti Lal Sugar Mills
and the other with M/ s Upper Doab Sugar Mills Ltd. The contract
with M/s Kamlapat Moti Lal Sugar Mills provided for supply and
erection of one 3-motion electrical overhead travelling crane at the
price of Rs. 1,34,500/- and on the terms and conditions set out in a
letter addressed by M/ s Kamlapat Moti Lal Sugar Mills to be assessee :
"We confirm all the specifications given in your above
referred quotation with the following changes :
1. Structural capacity will be suitable for safeload of two
unloading crabs, i.e. 10 tons.
2. Span of the long gantry which is given 50' will be confirmed shortly.
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3. Your supply will also include gantry of 35' x 50' to
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make the crane three-motions .
4. We shall not be required to give any material except
electric line up to the crane.
5. You will be supplying crane-drivers cabin with auto'
matic control panel free provided its trial is successful.
(!) [1979] I S.C.R P.644
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SUPREME COURT REPORTS
(1979] 2 s.c.R.
6. The minimum number of operations will be 30 per hour
approx.
7. You will give us working trial of the equipment at least
by 30th September, 1965.
8. The price of the above equipment will be Rs.l,34,500/-
f.o.r. Khatauli, sales tax, excise duty will be extra, if
payable.
This price includes erection charges.
9. Terms of payment
40% advance with the order
10% after one month from the date of the order
25 % after the erection of bridge and columns
15% after trial
10%after one month's satisfactory performance.
A penalty of 1 /2 % will be payable per week by you in
case of delay per week after 30th September, 1965, and to
a maximum of 5 % of the total value.
You will send your
staff for erecting the unloader and we shall be providing you
necessary tools and tackles and welding set when required.
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Available accommodation will also be provided."
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The contract between Upper Doab Sugar Mills Ltd. was for supply and
erection of two 3-motiou electrical overhead travelling cranes with two
crabs each at the price of Rs. 1,19,000/- for each crane and it was on
the following terms and conditions :
"That the contractor will supply the company two cranes
with two crabs each as under :-
(i) Crane bridge : The structural design of the crane
bridge will be in accordance with the structural specifications of B.S.S. 466 for electric overhead travelling
crane. The structural parts will be fabricated from
good quality Tata tested steel sections. The girders
for the main bridge will be of lattice construction type
heavy duty.
(ii) Drivers cabin : The driver's cabin will be of weather
proof outdoor construction. It will be with material in
a position that the operator's view is not obstructed
....
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RAM SINGH v. C.S.T. (Bhagwati, J.)
625
during the load handling and will travel along with the
crane crab.
(iii) Electrical equipment for driver's cabin : The driver's
cabin will be provided with the following eltctrical
equipment and other necessary fittings :-
1. One protective paner for electncal equipment.
2. Drum controllers for all the motors.
3. Plug and sockets for hand lamp.
4. One electric light point.
5. One alarm bell and all other necessary fittings.
Steps ladders will be provided from the crane bridge for easy
llccess to the cabins.
(iv) Wiring: Wiring with V.I.R. Wrain steel conduit pipes
will be provided between individual motors and controllers, current collectors and resistances in the cabin.
For connection of current to the trolley, a set of bars
copper conductors complete with insulators and strainers
mounted on the bridge will be provided. A set of
current collectors will be mounted on the trolley, containing renewable graphitic carbon collectors.
PRICE: That for two complete cranes of the above mentioned
specifications with two crabs each including erection, the company will
pay to the contractor at the rate of Rs.l,19,000/- per crane with two
crabs each including erection complete in all respects with necessary
equipment.
Mode of Payment:
1. 30% with the order
2. 20% after two months of the actual commencement of work
3. 25% after the completion of erection of columns and bridge.
4. 15% after completion and giving satisfactory trials .
5. 10% after one month's satisfactory work.
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That the contractor will execute the entire work i.e. fabrication,
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erection and construction latest by 30th day of September, 1964 so
that the trials can begin on the 1st October, 1964. The defects will be
626
SUPREME COURT REPORTS
[1979] 2 s.c.R.
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rectified by the 10th October, 1964. If the. work is not completed by
the 30th September, 1964, a penalty of Rs. 400/- per day from the
lit October, 1964 will be paid by the contractor to the company till
the date of completion and satisfactory operation of the cranes.
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That all such items which are considered defective by the company
will be replaced at the contractor's cost within the above specified date
to the company's entire satisfaction so that regular working of the
cranes is ensured.
That all materials will be provided by the contractor and electricity
will be charged at cost if consumed by the contractor. Only such
tools which are available in the stores of the Co., will be given to the
contractor on loan on retnrnable basis and the contractor will pay to the
company the cost of such material which are not returned to the company.
The final payment of the bills of the contractor will be made
on his getting NOTHING DUE clearance certificate from the Stores
Department of the Company.
That there will be no liability and responsibility of the company
whatsoever besides payment of price of the cranes.
That sales tax or excise duty and other government duty, if any,
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will be extra. . Packing and forwarding charges will also be extra."
The assessee carried out both these contracts and fabricated and
erected one 3-motion electrical overhead travelling crane at the factory _ _yof M/s K'amlapati Moti Lal Sugar Mills and two 3-motion electrical
overhead travelling cranes at the factory of M/s Upper Doab Sugar
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Mills Ltd. according to the contracts specifications.
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The question arose in the assessment of the assessee to sales tax
for the assessment year 1965-66 whether the amount of Rs. 1,34,500/-
received by the assessee under the contract with MI s Kamlapati Moti
Lal Sugar Mills and the amowJt of Rs. 2,38,000/- received under the
contract with M/s Upper Doab Sugar Mills Ltd. formed part of the
turnover of the assessee and liable to sales tax. The answer to this
question depended upon whether the contracts with Ml s Kamlapati
Moti Lal Sugar Mills and M/s Upper Doab Sugar Mills Ltd.
were
contracts of sale or contracts for work and labour. If they were
contracts of sale, the amounts of Rs.1,34,500/- and Rs. 2,38,000/-
would be taxable as sale price forming part of the turnover, but not
so, if they were contracts for work and labour.
The Sales Tax Officer
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RAM SINGH v. C.S.T. (Bhagwati, !.)
627
took the view that the contracts were essentially contracts of sale of
ready made cranes and the erection of the cranes at the factory site
was merely incidental to the sale and the amounts of Rs.1,34,500/-
and Rs. 2,38,000/- received under the contracts were, therefore, taxable.
This view was upheld by the Assistant Commissioner in appeal,
but on an application for revision being filed by the assessee, the Additional Judge (Revisions) held that each of the two contracts was a
works contract not involving any sale of goods and hence the amounts
of Rs. 1,34,500/- and Rs. 2,38,000/- were not exigible to sales tax.
The Commissioner of Sales Tax thereupon applied for a reference and
on his application, the following two questions of law were referred for
the opinion of the High Court :
1. Whether in the facts and circumstances of the case the turnover of Rs. 1,34,500 /- made by the assessee in respect of
Kamlapati Motilal Sugar Mills amounts to a works contract
or sale of goods? If so, to what extent?
2. Whether in the facts and circumstances of the case the turnover of Rs. 2,38.000 made by the assessee in respect of the
Upper Doab Sugar Mills amount to a works contract or sale of
goods? If so, to what extent?
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The High Court took the view that each of the two contracts was
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for supply of 3-motion electrical overhead travelling crane as a complete unit and "the predominent object was supply of crane as a complete unit" and "the bestowing of labour and skill in the execution of
the contract" appeared "to have been incidental to the Supply of the
machine".
The High Court obsereved that in its view the parties
"intended the property to pass in the subject matter of the contract,
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namely. the completed crane as movable property" and concluded that
it was a contract of sale of goods and not a contract for work · and
labour. The High Court accordingly answered
both the questions
referred to it in favour of the Revenue and against the assessee.
The
assessee thereupon brought the present appeal with specia) leave obtained from this Court.
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Now, the distinction between a contract of sale and a contract for
work and labour has been pointed out in Halsbury's Laws of England,
3 ed., volume 34, para 3 at page 6 in the following words :
"A contract of sale is a contract whose main
object is
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the transfer of the property in, and the delivery of the possession of, a chattel as a chattel to the buyer. Where the main
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628
SUPREME COURT REPORTS
[1979] 2 S.~.R.
object of work undertaken by the payee of the price is not
the transfer of a chattel qua chattel. the contract is one for
work and labour. The test is whether or not the work and
labour bestowed and in anything that can properly become
the subject of sale; neither the ownership of the materials,
nor the value of the skill and labour as compared with the
value of the materials, is conclusive, although such matters
may be taken into consideration in determinating,
in the
circumstances of a particular case, whether the contract is
in substance one for work and labour or one for the sale of
a chattel."
The primary test is whether the contract is one whose main object
is transfer of property in a chattel as a chattel to the buyer, though
some work may be required to be done under the contract as ancillary
or incidental to the sale or it is carrying out of work by bestowal of
labour and service and materials are used in execution of such work.
This test has been recognised and approved in a number of decisions
of this Court and it may now be regarded as beyond controversy, but
the real difficulty arises in its application as there are a large number
of cases which are on the border line and fall within what may be
called grey area. To resolve this difficulty, the courts have evolved
some subsidiary tests and one of such tests is that formulated by this
Court in Commissioner of Sales Tax, Madhya Pradesh v. Purshottam
Premji(I) where it has been said :
The primary dillerence between a contract for work or
service and a contract for sale of goods is that in the former
there is in the person performing work or rendering service
no property in the thing produced as a whole. . . In the case
of a contract for sale, the thing produced as a whole has
individual existence as the sole property of the party who
produced it. at some time before delivery, and the property
therein passes only under the contract relating thereto to the
other party for price."
This was the test applied by this Court iu the State of Rajasthan v.
Man Industrial Corporation (') for holding that a contract for providing
and fixing four different types of windows of certain sizes according
to "specifications, designs, drawings and instructions" set out in the
contract was a contract for work and labour and not a contract for
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sale.
Shah, J., speaking on behalf of the Court, analysed the nature
(I) 26 S.T.C. 38
(2) 24 S.T.C. 349
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RAM SINGH v. C.S.T. (Bhagwati, !.)
629
of the contract and pointed ont that "The window-leaves did not pass
to the Union of India nnder the terms of the contract as window-leaves.
Only on the fixing of the windows as stipulated, the contract could be
fully executed and the property in the windows passed on the completion of the work and not before''. The contract was not for transfer of property in the window leaves as window leaves.
It was
a
contract for providing and fixing windows and windows could come
into existence only when the window-leaves were fixea to the building
by bestowing labour and skill and it was for this reason that it was
held to be a works contract.
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The same test reasoning was applied by this Court in Sentinel
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Rolling Shutters & Engineering Co. (P) Ltd. v. Commissioner of Sales
Tqx. Maharashtra (supra). There the question was whether a contract
for fabrication, supply and erection of certain types of rolling shutters
was a contract of sale or a contract for work and labour.
This Court
analysed the nature of the contract and pointed out that "not only are
the Rolling Shutters to be manufactured according to the specifications,
designs, drawings and instructions provided in the contract, but tl1ey
are u.lso to be erected and installed at the premises of the company.
The price stipulated in the contract is inclusive of erection and installation charges and the contract does not recognise any dichotomy between fabrication and supply of the Ro1J4ig Shutters and their erection
and installation so far as the price is concerned. The erection and
installation of the Rolling Shutters is as much an essential part of the
contract as the fabrication and supply and it is only on the erection
and installation of the Rolling Shutters that the contract would be
fully executed." 'This Court then proceeded to examine what is a rolling shutter and how it is erected and installed in the premises and
observed that a rolling shutter consists of several component parts and
'the component parts do not cons!itute a rolling shutter until they are
fixed and erected on th~ premises.
It is only when the component
parts are fixed on the premises and fitted into one another that they
constitute a rolling shutter as a commercial article and till then they
are merely component parts and cannot be said to consitute a rolling
shutter. The erection and installation of the rolling shutter cannot,
therefore, be said to be incidental to its manufacture and supply. It is
a fundamental and integral part of the contract, because without it the
rollini; shutter does not come into being. The manufacturer would
un<!oubtedly be the owner of the component parts when he fabricates
them. but at no stage does he become the owner of the rolling shutter
as a unit so as to transfer the property in it to the customer.
The
rolling shutter comes into existence as a unit when the component•
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sunEME COURT REPORTS
[ 1979] 2 s.c.R.
parts are fixed in position on the premises and it, therefore, becomes
the property of the customer as soon as it comes into being.
There
1s no transfer of property in the rolling shutter by the manufacturer to
the custpmer as a chattel. It is essentially a transection for fabricating
component parts and fixing them on the premises so as to constitute a
rolLng shutter."
The contract for fabrication, supply and erection of
the rolling shutters was, on this reasoning, held by the Court to be a
contract for work and labour and not a contract for sale.
If we consider what is a 3-motion electrical overhead
travelling
crane and how it is fabricated, erected and j.nstalled, it will become
ilnmediately clear that the analogy of the decision in Sentinel Rolling
Shutters & Engineering Co. (P) Ltd.'s case (supra) to the present case
is striking and it must lead us to the conclusion that each of the two
contracts with which we are concerned here is not a ~ontract for sale
but a contract for work and labour.
The publication of the Indian
Standards, Institution which lays down the Code of Practice for Design
of Overhead Travelling Crane_s_ and Gantry Cranes clearly shows that
a 3-motion electrical overhead travelling crane consists of 44 main component parts and it is only when they are put together and assembled
at the site that they assume the shape of a crane. It is not as . if a
3-motion electrical overhead travelling crane is fabricated by the manufacturer and then sold and delivered to the customer as a chattel. One
singic 3-motion electrical overhead travelling crane covers an area of
10,549 Square Feat at the site.
When an order for fabrication and
erection of 3-month electrical overhead travelling crane is received
by the manufacturer from the customer alongwith the specific'11'ions of
the size and the materials, the manufacturer design; the machine according to the specifications and prepares the necessary drawings for its
fabrication and manufacture and two copies of the drawings are sent to
the customer for preparing the foundation at the site for erection of the
columns which are ten in number along with four supporting columns.
Each column has to be placed on a grouted foundation which is 7
feet deep and is securely bolted with foundation bolts, 5 on each side,
which arc grouted so as to be able to support the weight of the columns.
The columns thus become permanent fixtures on the land of the customer and they constitute a permanent foundation for the 3-motion
ckctrical overhead travelling crane. The detailed specifications of the
foundatiQn bolts and the c
0
olumns are given in the publication of the
Indian Standards Institution. It may be noted that evt'n su far as the
columns are concerned, they are not fabricatetd by the manufacturer
in his factory and then taken to the site. Each column has a height
of about 40 feet and it is made in three or four pieces and these pieces
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RAM SINGH v. C.S.T. (Bhagwati, !.)
631
<ire joined together with bolts and welded at the time of erection at the
site.
Thereafter a 120 feet long gantry is assembled by tl;e manufacturer in eight pieces and each piece is placed on two colunrns and the
erection of the gantry on both sides i~ completed after bolting and
wciding the gantry with the columns. Then about 60 pieces are fixed
<Jn to the gantry on both sides to form a platform to facilitate the
<iperation and maintenance of the crane and the component parts of the
railings are assembled at the site with bolts and welded to, the gantry.
Two distance pieces assembled out of diverse component parts are then
fixed between both ends of the gantry to ensure stability.
The manufacturer has to examine and ensure the levelling and alignment of the
gantry and then the component parts of the rails are [1ssembled and
fixed on hoth sides of the gantry by means of M.S. cleats and bolts.
The bridge which is fabricated out of numerous component parts at the
site, is then put on the rails so that it can run on the gantry and travel
.about 180 feet from one end of the gantry to another. Then rails are
fixed on the bridge and the trolley is uut or, the rails.
The trolley
.consists of several component parts which are b10ught and assembled
.at the site.
There is also a platform erected on the bridge for maintenance of the bridge and trolley and lastly, tli~re is a lifting wab
which is made of 36 pieces assembled at the site and this grab is iitted
on to th<: trolley.
It would thus be seen that the fabrication and erection of a 3-motion electrical overhead travelling crane is a highly skilled and specialised job and the component parts have to be taken to
the site and they are assembled and erected there and it is only when
this process is complete then a 3-motion electrical overhead travelling
.crane comes into being. The process of assembling and erection, requires
a high degree of skill and it is not possible to say that the erection of
.a 3-motion electrical overhead travelling crane at the site is
merely
incidental to its manufacture and supply.
The fabrication and erection
is one single indivisible process and a 3-motion electrical overhead
travelling· crane comes into existence only when the erection is complete.
The erection is
thus a fundamental and
integral
part
of the
contract, because
without it
the
3-motion electrical
·overhead travelling crane does not come into being.
The manufacturer would undoubtedly be the owner of the cornp011ent part; when
be fabricated them but at no stage does he become the c,wner of the
3-motion electrical overhead travelling crone as a unit so as to transfer
the property in it to the customer.
The 3-motion electrical overhead
travelling crane comes into existence as a unit only when the component
parts are fixed in position and erected at the site, but at that stage it
becomes the property of the customer because it is permanently embedded in the land belonging to the customer. The result is that as
A
B
CJ
D
E
F
G
H
; A
B
c
D
632
SUPR.EMB COURT RBPORTS
(1979] 2 s.c.R.
soon as 3·motion electrical overhead travelling crane comes into being
it is the property of the customer and there is, therefore, no transfer
of property in it by the manufacturer to the customer as a chattel. It
is essentially a transaction for fabricating component parts and putting
them together and erecting them at the site so as to constitute a 3motion electrical overhead travelling crane. The transaction is no
different than one for fabrication and ereztion of an open godcwn or
shed with asbestos or tin sheets fixed on columns. There can, therefore, be no doubt that the contract in the present case was a contract
for work and labour and not a contract for sale.
This view which we
are taking is completely supported by the decision of this Court in the
Sentinel Rolling Shutters & Engineering Co. (P) Ltd. v. Commissioner
of Sales Tax, Maharashtra (supra).
We accordingly alloaj the appeal, set aside the judgment of the·
High Court and hold that the contract in the present case was a cont~act for work and labour and not a contract for sale and comformably
with this view, we answer the question referred by the Sales Tax 'fribm1al in favour of the assessee and against the Revenue.
The State·
will pay the costs of the assessee throughout.
V.D.K.
Appeal allowed-
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