Bhagwati J. - (1.) This appeal by special leave raises the vexed question whether a particular contract is a contract of sale or a contract of work and labour. This has always been a difficult question, because most of the cases which come before the courts are border-line cases and the decisions given by courts are by no means uniform. But so far as the present case is concerned, it does not present any serious difficulty and is comparatively free from complexity or doubt, for there is a decision of this Court which is directly applicable and is determinative of the controversy between the parties.
(2.) The assessee who is the appellant before us is a private limited company carrying on business as engineers, contractors, manufacturers and fabricators and in the course of its business, it entered into a contract dated 28th June, 1972 with M/s C. M. Shah 7 Co. (P) Ltd. (hereinafter referred to as the Company) for fabrication, supply, erection and installation of Sentinel"s Pull Push type and reduction Gear Type Rolling Shutters in sheds Nos. 3 and 4 of the Sidheshwar Sahakari Sakar Karkhana belonging to the Company. The detailed specifications of the Rolling Shutters were given in the contract and the price was stipulated to be Rs. 7/- per sq. ft. and rft. for Pull and Push Type Rolling Shutters and Rs. 9/- per sq. ft. and rft. for the Reduction Gear Type Rolling Shutters, the price in both cases being inclusive of "erection at site". The contract was expressed to be subject to the terms and conditions set out in a printed form and there were also certain special terms and conditions which were specifically written out in the contract. Since considerable reliance was placed on behalf of the Revenue on some of the printed terms and conditions of the contract, we shall set them out in extenso: "2. Once the delivery of the goods is effected, rejection claims cannot be entertained. 4. All erection work shall be carried out at Customer"s own risk and no claim for incidental structural breakages, damages to the property of the customers or others shall be entertained. All masonry works required before and or after erection shall be carried out by customers at own cost. 10. All payment shall be on overall measurements only. Customer desiring to check the correctness of the overall measurements shall notify their intention in advance and shall get the measurements checked before installation. No dispute on this ground shall be entertained once the erection is completed. 12. Terms of Business:50% advance with the order and the balance against delivery of the goods ex-work prior to erection, or against through Banks." The special terms and conditions provided that the actual transportation charges would be in addition to the price stipulated in the contract and the delivery would be 6/8 weeks ex-works from the date of receipt of the final confirmation of the order. The terms of payment also formed part of the special terms and conditions and they provided "25% advance, 65% against delivery and remaining 10% after completion of erection and handing over of shutters to the satisfaction" of the Company. The assessee carried out its part of the contract and manufactured the two types of Rolling Shutters according to the specifications provided in the contract and erected and installed them in sheds Nos. 3 and 4 of the Sideswar Sahakari Sakar Karkhana. It does not appear from the record as to when the bill relating to the contract was submitted by the assessee to the Company, but it was dated 19th August, 1972 and presumably it was sent by the assessee after the fabrication of the two types of Rolling Shutters was completed, but before they were erected and installed at the premises of the Company. Since the assessee entertained doubt as to whether the contract was a contract for sale or a contract for work and labour, the assessee made an application dated 16th Sept. 1972 to the Commissioner of Sales Tax for determining this question, for on the answer to it, depended the taxability of the amount to be received by the assessee against fulfillment of the contract. The Deputy Commissioner of Sales Tax, who heard the application, took the view that the contract was a contract for sale of the two types of Rolling Shutters and the work of erection and installation was merely incidental to the sale and the assessee was, therefore, liable to pay sales tax on 95% of the amount receivable by it under the contract. Since that represented the sale price of the Rolling Shutters, the remaining 5% being attributable to the work and labour involved in erection and installation. The assessee, being aggrieved by the order passed by the Deputy Commissioner of Sales Tax, preferred an appeal to the Sales Tax Tribunal, but the Sales Tax Tribunal also took the same view and held that the transaction of supply of the two types of Rolling Shutters embodied in the contract amounted to a sale but so far as the price was concerned, the Sales Tax Tribunal observed that since 90% of the amount under the contract was payable at the stage of delivery, that should be taken to be the sale price and the balance of 10% should be held to be "the charges for the work." The contract was thus held by the Sales Tax Tribunal to be a composite contract consisting of two parts, one for sale of the two types of Rolling Shutters and the other for execution of the work of erection and installation. This led to an application for a reference by the assessee and on the application, the following question of law was referred for the opinion of the High Court: "Whether having regard to the facts and circumstances of the case the Tribunal was justified in law in coming to the conclusion that the contract in question essentially consisted of two contracts, one for supply of materials for money consideration and the other for service and labour done - The High Court made a detailed and exhaustive review of the decided cases and held, agreeing with the Sales Tax Tribunal, that the contract between the assessee and the Company "was a divisible contract which essentially consisted of two contracts, one for the supply of shutters of the aforesaid two types for money and the other for service and labour", and accordingly answered the question in favour of the Revenue and against the assessee. The assessee thereupon brought the present appeal with special leave obtained from this Court.
(3.) Now the question whether a particular contract is a contract for sale or for work and labour is always a difficult question and it is not surprising to find the taxing authorities divided on it. The difficulty, however, lies not in the formulation of the tests for determining when a contract can be said to be a contract for sale or a contract for work and labour, but in the application of the tests to the facts of the case before the Court. The distinction between a contract for sale and a contract for work and labour has been pointed out by this Court in a number of decisions and some tests have also been indicated by this Court, but it is necessary to point out that these tests are not exhaustive and do not lay down any rigid or inflexible rule applicable alike to all transactions. They do not give any magic formula by the application of which we can say in every case whether a contract is a contract for sale or a contract for work and labour. They merely focus on one or the other aspect of the transaction and afford some guidance in determining the question, but basically and primarily, whether a particular contract is one for sale of goods or for work and labour depends upon the main object of the parties gathered from the terms of the contract, the circumstances of the transaction and the custom of the trade.;