K.B.Asthana, J. - (1.) In this reference under Section 11 of the U. P. Sales Tax Act at the instance of the Commissioner of Sales Tax, U. P., the following question has been referred for decision by the High Court: Whether in the circumstances of this case the entire cost of the ready-made bodies of the buses is liable to tax under the U. P. Sales Tax Act or only the cost of materials used in the manufacture thereof would be taxable.
(2.) M/s. Haji Abdul Majid and Sons (hereinafter referred to as the assessee) carry on the business of constructing bus bodies on the chassis supplied by the customers in the town of Meerut. For the year 1950-51 the Sales Tax Officer assessed the assessee on a total turnover of Rs. 82,800 in respect of thirty-six bodies on an average value of Rs. 2,300 each. It appears that due to certain reasons the assessee could not file an appeal against the assessment order in time and applied in revision before the learned Judge (Revisions) who by his order dated 23rd June, 1955, reduced the taxable turnover to Rs. 62,100 making an allowance of a sum of Rs. 20,700 as the labour charges involved in constructing the bus bodies. The learned Judge (Revisions) found that the bodies of the buses were not transferred in a ready-made form to the owner of the bus and the primary work of the assessee was to construct the body of the bus on the chassis. He held that the initial contract was not for the transfer of any ready-made bodies but only for the doing of the work of construction and that the mere fact that in executing the contract for the work of construction some materials were also to be used would not convert the nature of the initial contract for construction into a sale. Accordingly it was held by him that what was sold by the assessee to the customer was the material used in the execution of the work and the charges for the skill and labour for which the initial contract of work was made could (sic) be treated as a part of the sale. The contention on behalf of the tax authority that the assessee sold to the customer ready-made bus bodies and was liable to tax on the whole turnover of Rs. 82,800 as determined by the Sales Tax Officer was rejected. It is in these circumstances that at the instance of the Sales Tax Commissioner, U.P., the above-said question of lahas been referred for our opinion.
(3.) Sri Shanti Bhushan, Senior Standing Counsel, appearing for the Sales Tax Commissioner submitted that on the facts and circumstances established in the case, the transaction in reality between the assessee and his customer was one of sale of bus bodies in a ready-made form and not the sale of materials used in the manufacture thereof. It was urged that merely because the body is constructed part by part on the chassis supplied by the customer it would not change the real nature of the transaction, as the resultant product which ultimately is fixed to the chassis is a bus body which is "goods" or a "chattel" and thus the transaction is one of sale of goods or a chattel and liable to be taxed. In other words, the transaction in question is of the same nature as the customer selecting a ready-made body from the assessee and then asking him to fix it on the chassis. Sri K. C. Agarwal, the learned counsel for the assessee, submitted that on the facts of the case the real contract between the parties was a contract for work to be carried out by the assessee and no sale of any chattel or goods was involved. He urged that the transaction is of the same nature as that carried on by a building contractor according to specifications.;