Indian Kanoon - Search engine for Indian Law

both as regards materials and otherwise in every respect in strict compliance with the specifications and should deliver them to the Governor on or before the dates specified therein. The majority rejected the contention that that was a contract of work and labour and held that the transaction was one of sale. The question primarily was one of construction of the contract, and the majority held that both the agreement and the sale related to one kind of property, namely, the bus bodies. The reason for so. holding was stated to be that it was clear from the contract that the property in the bus bodies did not pass on their being constructed on the chassis, but only when the vehicles including the bus bodies were delivered. Such a contract was unlike a building contract or a contract under which a movable is to be fixed on to another chattel or on the land, where the intention plainly is not to sell that article but to improve the land or the other, chattel and the consideration is not for the transfer of the chattel but for the work and labour done and the materials furnished. The contract in question was to manufacture a bus body and fix it on the chassis supplied and transfer the bus body so constructed for consideration.

In Madras v. Gannon Dunkerley and Co. Ltd.(1) the main question was as regards the vires of the Madras General Sales. Tax Act, 1939, as amended by Madras Act XXV of 1947 which widened the definition of 'sale' by including, inter alia, in it a transfer of property in the goods involved in the execution of a works contract. Under this definition, the Sales Tax authority brought into chargeable turnover the materials used in the constructiOn works carried out by the company. This Court held that a power to enact a law with respect to tax on sale of goods under entry 48 of List 11 in the 1935 Constitution Act must, to be intra vires, be one relating in fact to a sale of goods and that a Provincial Legislature could not, in the purported exercise of its power, tax transactions which were not sales, by enacting that they should be deemed to sales, that to construe a transaction as sale there should be an agreement relating to goods to be supplied by passing title in those goods, and that it was of the essence of such a concept that both the, agreement and the sale should relate to one and the same subject matter. The conclusion arrived at was that in a building contract, even if it were to be disintegrated, there was no passing of title in the materials as movables in favour of the other party of the contract. The contract was one and indivisible, there was no sale of materials, and consequently, there was no question of title to the materials used by the builders passing to the other party to the contract. Even where the thing produced under a contract is movable property, the materials in- (1) [1959] S.C.R. 379.