# STATE OF RAJASTHAN v. MAN INDUSTRIAL CORPORATION LTD. Februiuy 4, 1969

- **Citation:** [1969] 3 S.C.R. 505
- **Court:** Supreme Court of India
- **Decided:** 1969
- **Bench:** J. C. Shah, V. Ramaswami, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-rajasthan-v-man-industrial-corporation-ltd-februiuy-4-1969-4608
- **Pages:** 8

## Headnote

Sales Tax--Contract for providing and fixing goods in building-Whether sale of goods or for rendering service.
The respondent, a fabricator of steel windows, submitted a tender for
'providing and fixing' window leaves in a building. The window leaves
were to be fabricated according to the specifications in the contract and
were to be fixed within six months from the date of acceptance to the
building with rnwl plugs in cut stone work. The rate quoted by the respondent was based on the current price of mild steel billets and the price
was to be revised in the light elf cost revision of the controlled price of
steel.
The tender was accepted and the respondent carried out the contract. The Sales Tax Officer levied sales
tax on the amount received
under the contract holding that the contract was for sale of goods and to
promote its sale the respondent undertook to fix the windows without demanding any charge for that service. ·But in appeal the Deputy Commissioner &.cise & Taxation held that two contracts resulted : one for providing windows and the other for fixing them in the building, and that the
price of goods supplied, but not the charge for service was taxable. The
Board of Revenue confirmed the order passed by the Deputy Commissioner observing that the contract wa~ not a contract of service. On reference, the High Court held that it was a building contract and amount received was not taxabJe.
In appeal, this Court,
HElD : It was a contract for rendering service and the amount received by the respondent was not taxable.
Whether a particular contract is for sale of goods or is a contract for
service depends upon the main object of the parties gathered from the
terms of the contract, the circumstances of the transaction, and the custom
elf the trade, and no universal rule applicable to all transactions can be
evolved. [509 Al
In this case, the primary undertaking of the respondent was not merely
to supply the windows but to 'ftx' the windows. This
service waa not
rendered under a separate contract, nor was shown to be rendered customarily or normally as incidental to the sale by the person who supplied
window leaves. The fixing of the windows in the manner stipulated required special technical skill. If the windows were not properly 'fixed'
the contract would not be complete, and the respondent could not claim
the amount agreed to be paid to it. It was only upon the 'fixing' of the
window-leaves and when the window-leaves had
become a part of the
building construction that property in the goods passed under the terms
of the contract.
[512 E--GJ
The State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. 9·
S.T.C. 353; The Government of Andhra Pradesh v. Guntur Tobaccos Ltd.,
16 S.T.C. 240 (S.C.); Patnaik and Company v. State of Orissa, 16 S.T.C.
364 (S.C.); Mckenzies Ltd. v. The State of Maharashtra, 16 S.T.C. 518
(S.C.); Commissioner of Sales-tax, Maharashtra State, Bombay v.
Arun
506
SUPREME COURT REPORTS
[1969] 3 S.C.R.
Electrics, 16 S.T.C. 385; Arun Electrics, Bo1nbay v. Commissioner of Sales
A
Tux, Maharashtra State, 17 S.T.C. 576; The State of Madras v. Richardson
& Cruddas Ltd., 21 S.T.C. 245; Love v. Norman Wright (B11ilders) Ltd.,
{1944] I K.B. 484, referred to.
CIVIL APPELLATE JURISillCTION:
Civil Appeal No. 812 ()f
I 966.
Appeal by special leave from the judgment and order dated
B
May 13, 1965 of the Rajasthan High Court in D.B. Civil Ref. No.
I 8 of 1963.
M. C, Chagla and K. Baldev Mehta, for the appellants.
Sanpat P. Mehta, 0. P. Malhotra, J. B. Dadachanji and 0. C.
Mathur, for the respondent.
The Jmtgment of the Court was delivered by
Shah, J.
The respondent carries on the business of fabricating
"steel doors, windows, sashes and other goods".
On April 20,
1957, the resp<mdent -submitted in pursuance o! an invitation by
the Executive Engineer, Ajmer Central Division, its tender for
providing and fixing "S.H. Windows 'W' Type", "S.H. Windows
'WI' Type", "T.H. Windows" and "Composite Windows" of certain sizes "in

## Text

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STATE OF RAJASTHAN
v.
MAN INDUSTRIAL CORPORATION LTD.
Februiuy 4, 1969
(J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.)
Sales Tax--Contract for providing and fixing goods in building-Whether sale of goods or for rendering service.
The respondent, a fabricator of steel windows, submitted a tender for
'providing and fixing' window leaves in a building. The window leaves
were to be fabricated according to the specifications in the contract and
were to be fixed within six months from the date of acceptance to the
building with rnwl plugs in cut stone work. The rate quoted by the respondent was based on the current price of mild steel billets and the price
was to be revised in the light elf cost revision of the controlled price of
steel.
The tender was accepted and the respondent carried out the contract. The Sales Tax Officer levied sales
tax on the amount received
under the contract holding that the contract was for sale of goods and to
promote its sale the respondent undertook to fix the windows without demanding any charge for that service. ·But in appeal the Deputy Commissioner &.cise & Taxation held that two contracts resulted : one for providing windows and the other for fixing them in the building, and that the
price of goods supplied, but not the charge for service was taxable. The
Board of Revenue confirmed the order passed by the Deputy Commissioner observing that the contract wa~ not a contract of service. On reference, the High Court held that it was a building contract and amount received was not taxabJe.
In appeal, this Court,
HElD : It was a contract for rendering service and the amount received by the respondent was not taxable.
Whether a particular contract is for sale of goods or is a contract for
service depends upon the main object of the parties gathered from the
terms of the contract, the circumstances of the transaction, and the custom
elf the trade, and no universal rule applicable to all transactions can be
evolved. [509 Al
In this case, the primary undertaking of the respondent was not merely
to supply the windows but to 'ftx' the windows. This
service waa not
rendered under a separate contract, nor was shown to be rendered customarily or normally as incidental to the sale by the person who supplied
window leaves. The fixing of the windows in the manner stipulated required special technical skill. If the windows were not properly 'fixed'
the contract would not be complete, and the respondent could not claim
the amount agreed to be paid to it. It was only upon the 'fixing' of the
window-leaves and when the window-leaves had
become a part of the
building construction that property in the goods passed under the terms
of the contract.
[512 E--GJ
The State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. 9·
S.T.C. 353; The Government of Andhra Pradesh v. Guntur Tobaccos Ltd.,
16 S.T.C. 240 (S.C.); Patnaik and Company v. State of Orissa, 16 S.T.C.
364 (S.C.); Mckenzies Ltd. v. The State of Maharashtra, 16 S.T.C. 518
(S.C.); Commissioner of Sales-tax, Maharashtra State, Bombay v.
Arun
506
SUPREME COURT REPORTS
[1969] 3 S.C.R.
Electrics, 16 S.T.C. 385; Arun Electrics, Bo1nbay v. Commissioner of Sales
A
Tux, Maharashtra State, 17 S.T.C. 576; The State of Madras v. Richardson
& Cruddas Ltd., 21 S.T.C. 245; Love v. Norman Wright (B11ilders) Ltd.,
{1944] I K.B. 484, referred to.
CIVIL APPELLATE JURISillCTION:
Civil Appeal No. 812 ()f
I 966.
Appeal by special leave from the judgment and order dated
B
May 13, 1965 of the Rajasthan High Court in D.B. Civil Ref. No.
I 8 of 1963.
M. C, Chagla and K. Baldev Mehta, for the appellants.
Sanpat P. Mehta, 0. P. Malhotra, J. B. Dadachanji and 0. C.
Mathur, for the respondent.
The Jmtgment of the Court was delivered by
Shah, J.
The respondent carries on the business of fabricating
"steel doors, windows, sashes and other goods".
On April 20,
1957, the resp<mdent -submitted in pursuance o! an invitation by
the Executive Engineer, Ajmer Central Division, its tender for
providing and fixing "S.H. Windows 'W' Type", "S.H. Windows
'WI' Type", "T.H. Windows" and "Composite Windows" of certain sizes "in accordance with the specifications, designs, drawing and instructions". The tender was accepted and the respondent carried out the contract.
The Sales Tax Officer 'B' Circle, Jaipur City included in the
taxable turnover of the respoodent Rs. 23,480/- received under
the contract. He held that · the contract with the Executive
Engineer was one of sale of goods and the respondent had with
a view to promote sales of goods manufactured by it "voluntarily
offered to fit" the goods and had made no separate charge for
that service.
The Deputy CommissiOltl.er Excise & Taxation in
appeal held that from the acceptance of the tender, two contracts
resulted . one for providing doors and windows and another for
"fixing" those doors and windows in a specified building,
and
that the price of the goods supplied, but not the charge for service,
was taxable. He accordingly remanded the case with a direction
to assess tax on the price for sale of materials <>nly.
The Board
of Revenue exercising revisional p<Jwer confirmed the order passed by the Deputy Commissioner observing that the contract undertaken by the respondent was not ~ contract of service.
The following question was referred by the Board of Revenue
to the High Court of Rajasthan :
"Whether on the proper interpretation of the contract between the applicant and the Executive Engineer,
C.P.W.D., Ajmer, regarding the providing amd fixing
of the steel windows to the Accountant General's
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RAJASTHAN v. MAN INDST. CORP. (Shah,/.)
507
Office, Jaipur, and looking to the terms of the transaction of the type undertaken by the applicant the Board
were justified in holding that the contract was divisible
between two parts representing the sale of the windows
and the Jabour charges in fixing the same and thus
partly liable to sales-tax ?"
The High Court held that the _contract between the respondent
and the Executive Engineer was a "building contract" and the
amount received by the respondent was not taxable.
The relevant terms of the tender which was accepted by the
Exeoutive Engineer were :
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"Item Rate-tender for Works
I/We hereby tender for the execution for the President
of India of the work specified in the under-written
memorandum within the time specified in such memorandum at the rates specified therein, ·and in accordance
in all respects with the specifications, designs, drawing,
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and instructions in writing referred to in Rule 1 hereof
and in Class II of the conditions of contract and with
such materials as are provided for by and in all other
·respects in accordance with such conditions so far as
applicable."
This recital was followed by a memorandum setting out the
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"general description" of the building in respect of which the
window-leaves were to be supplied, the estimated cost of the contract and the description and the ammber of items of w0rk offered
to be done. The items of work offered to be done were "providing and 6xing" four different types of windows.
The relevant
conditions were--
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"l. The wark shall be executed as per the specifications attached.
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2. The work is to be completed in 6 mQllths from
the date of award of works.
3.
4. The windows are to be fitted with raw! plugs m
cut stoneworks.
5. Work will be executed either by plain glass or
~und glass as may be decided by the Engineer
in Charge.
Note:-
1.
2. We are offering windows which will be glazed
with plain glass only.
If at a later date it is
508
SUPREME COURT ltEPOllTS
(1969] 3 S.C.R.
desired to have windows glazed with ground glass,
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the difference in cost of glass will have to be paid
3.
4.
by you.
5. The quotation is based on the current prices ot
mild steel billets fixed by the Government. Should
there be any change in the cqntrolled price of
billets supplied to us, proportionate revision in
the cost of rolled sections used in the fabrication
will be made i,n the quotation.
6. Sales Tax or any other tax is applicable will be
extra.
7. Work will be completed in 6 months from the date
of order."
These were followed by specifications relating to the steel to be
used in the fabrication, glazing, fittings and finish of the windows.
The respondent offered to execute and complete the "work"
m~tioned in the written memorandum according to the specifications and conditions.
In the view of the High Court the contract was for work, in the execution of which some movabre property vassed : it was not a contract for sale of windows and for
rendenng service in connection with the fixing of those windows.
Counsel for the State of Rajasthan contends that the respeadent carried on the business of fabricating and selling wind&w
and door leaves and sashes etc. and entered into a contract for "sale
of windows", and to promote sale of its manufactured goods,
undertook to fix the windows without demanding any charge for
that service, and the High Court was in error in holding that the
contract was one of service in the execution of which property
in the materials supplied by the respondent passed. Counsel urged
that the terms of the tender were not decisive and the Court was
entitled to ascertain the true effect of .the cootract as disclosed
by the nature of the work, and the "invoice" for payment made out
by the respondent.
Counsel submitted that it is usual for manufacturers or dealers in specialized articles to arrange to "fix and
"service" the articles sold by them and on that account the contract does not acquire the character of a contract of_ service. He
gave instances of sale of motor-tyres, luggage carriers,
air-conditioning ooits, refrigerators and contended that in undertaking
to instal or fix these units or articles the sellers do not enter into
a works contract merely because they undertake to instal or for
the articles sold so as to make them fit for immediate service.
But whether a particular contract is one for sale of goodi; or is
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RAJASTHAN V. MAN !NDST. ·CQRi'. (Shoh, J.)
509
a contract for service d!Jpends 'upon the main object of the parties
gathered from the terms of the co,ntract, the circumstances of t11:e
transaction, and custom of the trade, and no universal rule applicable to all transacllons may be evolved.
As observed in Halsbury's Laws of England, 3rd Edn., Vol.
34 Art. 3 at p. 6 :
.. A contract of sale of goods must be distinguished
trom a contract for work and labour.
A CQ!ltract of
sale is a contract whose main object is the transfer of
the property in, and the delivery of the possession of,
a chattel as a chattel to the buyer.
Where the main
object of work undertaken by the payee of the price !s
not the transfer of a chattel qua chattel, the contract 1s
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 determining, 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."
What did the respondent agree to do whf<n it offered its tender?
Did the respondent agree to sell the window-leaves as described
in the tender or did it, as part of a works contract, agree to "fix"
windows of certain specifications in the building intended to be
used for the offices of the Accountant-General ? On a c01IJSideration of all the circumstances, we are of the view that the object
of the respondent was to enter into a works contract. That clearly
appears from the terms of the tender and its acceptance.
The
windows were to be fabricated according to the specifications
with glass-plain or ground as decided by the Engineer in Charge,
and were to be "fixed" within six months from the date of its ·
acceptance "to the building with raw! plugs in cut stone-work."
The rate quoted by the respondent was based on the current price
of mild steel billets, and the price was to be revised in the light
of cost revision of the controlled price of steel supplied to the respondent.
The contract undertaken by the respondent was to prepare the
window-leaves according to the specifications and to fix them to
the buildin~. There were not two contracts--0ne c.f
sale
and
another o( service.
"Fixing" the wi1ndows to the building was
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also not incidental or subsidiary to the sale, but was an essential
term of the contract. The window-leaves did not pass
to the
Union of India umder the terms of the contact as window-leaves.
Only on the fixing of the windows as
stipulated, the contract
8Sup. CT/69-1~'
510
SUPREME COURT REPORTS
[1969] 3 S.C.R.
could be fully executed. and the property in the windows passed
on the completion of the work and not before.
It was said by this Court iJO The State of Madras v. Gannon
Dunkerley & Co. (Madras) Ltd.(') that in a building contract
which is one, entire and indivisible, there is no sale of goods.
In the case of a building contract the property in materials used
does not pass to the other party to the cO!lltract as movable property. In the absence of an agreement to the cQJitrary, the materials in the construction of a building become the property of the
other party to the contract only on the theory of accretion.
In The Government of Andhra Pradesh v. Guntur Tobaccos
Ltd.(2 ) this Court pointed out (at p. 255):
"A contract for work in the execution of which
goods are used •may take one of three forms. The con·
tract may be for work to be done for remuneration
and for supply of materials used in the execution of the
works for a price; it may be a contract for work in which
the use of materials is accessory or inddental to the
execution of the work; or it may be a contract for work
and use or supply of materials though not accessory to
the execution of the contract is voluntary or gratuitdus.
In the last class there is no sale because though property passes it does no~ pass for a price. Whether a contract is of the first or the second class must depend
upon the circumstances; if it is of the first, it is a composite contract for work and sale of goods; where it is of the
second category, it is a contract for execution of work
not involving s·ale of goods."
. The contract in questiO!ll in this case is of the second variety.
Counsel relied upon Patnaik and Company v.
State of
Orissa(') and Mckenzies Ltd. v. The State of Maharashtra.(')
But in both these cases the Court held on a consideration of the
teims of the contract and the circumst11111Ces that the assessees had
agreed to and did supply "motor-bus· bodies" and the contract
being one for sale of chattels, !hey were liable to pay sales-tax.
Our attention was also invited to Commissioner of Sales Tax,
Maharashtra State, Bombay v. Arun Electrics.(')
In that case
a firm of electrical contractors undertook the job of ~n5talling
electrical fittings in the houses of their customers, which involved
the supply and fixing of goods, such as wire, brass clips, wall
brackets and tube lights with accessories.
The assessees charged
. (1) 9 S.T.C. 353.
(3) 16 S.T.C. 364 (S.C.).
(5) 16 S.T.C. 385.
(2) l6S.T.C. 240(S.C.) .
(4) 16 S.T.C. 518 (S.C,),
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RAJASTHAN v. MAN INDST. CORP. (Shah, J.)
5 ! l
their customers consolidated rates for the materials consumed and
labour involved, in carrying out the contracts.
The Sales Tax
Officer charged to tax under the Bombay Sales Tax Act, 1959,
the value of materials supplied in carrying out the contracts. It
was held by the High Court of Bombay that the transaction of the
assessees with their customers was not a pure works contract, but
a combination of two distinct and separute- contracts, one for the
supply or the sale of goods for consideration, and the other for
the supply of work and labour, and only that part of the contract, which consisted of supply of goods for consideration, was
liable to tax under the Sales Tax Act. That case was brought in
appeal to this Court at the instance of the assessees. This Court in
Arun Electrics, Bombay v. Commissioner of Sales Tax, Maharashtra State(') discharged the answer recorded by the
High
Court, holding that the conclusion recorded by the Deputy Commissioner and the Tribunal were based on no evidence, and the
High Court could not record, on the facts found, an answer to
the question referred. The Deputy Commissioner had proceeded
only upon the terms of the invoice in which a charge was made
for supplying and "fixing" the materials
and
providing
light
points complete with 1 /8 CTS wire, brass clips, tapes and
alJ
approved accessories. The conclusion of the departmental authorities was not based on any intention of the parties as disclosed by
the evidence, but plainly on the terms of the bill which was
,ambiguous.
In The State of Madras v. Richardson & Cruddas Ltd.(') the
assessees without a formal contract agreed to supply fabricate and
erect steel structures for a sugar factory. The assessees completed
the contract. A bill was submitted by the assessees for charges
for fabrication, supply and erection of steel structures at certain
rates. The High Court of Madras on a consideration of the evidence held that there was a stipulation for a consolidated lumpsum payment of Rs. 1,160/- per ton for fabricating, supplying
and erecting at site all steel work etc; there was no stipulation
for passing of property in the goods to the factory before actual
compktion of the erection work; there the contract did not contemplate dissecting the value of the goods supplied and the value
of work and labour bestowed i,n the execution of the work; and
the predominant idea underlying the contract was the bestowing
of special skill and labour by the experienced engineers and
mechanics of the assessees.
This Court agreed with the High
Court and held that the contract was a works contract and not a
contract for sale.
Our attention was invited to a judgment of the Court of Appeal
in Love v. Norman Wright (Builders) Ltd.(8 )
In that case the
(!) 17 S.T.C. 576.
(2) 21 S.T.C. 245.
(3) [1944] 1K.B.484.
I
SU'.PltEME COU'!i.T 1lBl'OR TS
fr%9] 3 S.C.R.
respondents co_ntracted -with the ·~ecretary of 'State tor ·War to do
ll.
the work and supply the l'llaterial mentioned iin the Schedliles ·to
the contract, including the supply of black-out curtains, curtain
rails and battens ·and their· erection at a number of police stations.
It was held by the ·court of Appeal that tlle respondents were
liable to pay purchase-tax. kel:iance was placed upon the observations made ·by Goddard, L.J. at p. 482 :
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"If one orders another to •make and fix curtains
at his house the contract is one of sale though .work
and labour are involved in the making and fixing, nor
does it matter that ultimately the property was to pass to
the War Office under the head contract. As between
the plaintiff and the defendants the former passed
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the property in the goods to the defendants who passed
it on to the War Office."
We do not think that these observations furnish a universal test
that whenever there is a contract to "fix" certain articles made
by a manufacturer the contract must be deemed one for sale and
not of service. The test in each case is whether the object of -the
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party sought to be taxed is that the chattel as chattel passes to the
other party and the services rendered in
connection with the
installation are under a separate contract or are incidental to the
execution of the contract of sale.
In the present case, the specificatio;!l!l of the windows were set
'£
out in the contract. The primary undertaking of the respondent
was not merely to supply the windows but to "fix" the windows.
The service is not rendered under a separate contract nor is the
service sho\Wl to be rendered oustomarily or normally as incidental
to the sale by the person who supplies window leaves. The ''fix.
in~" of windows in the manner stipulated required spedal technical
skill. If the windows were not properly "fixed", the contract
would not be complete, and the respondeint could not claim the
amolljllt agreed to be paid to it. We agree with the High Court
that it was only upon the "fixing" of the window-leaves and when
the window"leaves had become a part of the building construction
that the property in the goods passed under the terms of the contract.
The appeal fails and is dismissed with costs.
Y.P.
Appeal dismissed.
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