Works contract classification turns on dominant intention where coach construction and material transfer are merely incidental.

Contracts for construction of railway coaches on underframes supplied by the railway administration were treated as works contracts, not sales of goods. The decisive test was the true intention gathered from the contract as a whole: the railway supplied underframes and some materials, retained close supervision and control, required progress certificates, running bills, security deposit, and completion within a fixed period, and the contractor's interest on insolvency or death was limited to payment for work already done. These features showed that execution of work and labour was dominant, while any transfer of property in materials was only incidental. Mere use of materials and delivery of finished coaches did not convert the arrangement into a sale.

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Issues: Whether the contracts for construction of railway coaches on underframes supplied by the railway administration were contracts for sale of goods or works contracts.

Analysis: The decisive inquiry was the true intention gathered from the contract as a whole. The railway supplied underframes, some materials and labour, retained close supervision and control over the work, required progress certificates, running bills, security deposit, and completion within a stipulated period, and the contractor's interest on insolvency or death was limited to payment for work already done. These features showed that the dominant element was execution of work and labour, while any transfer of property in materials was only incidental. Mere use of materials and eventual handing over of the finished coaches did not make the transaction a sale of goods.

Conclusion: The contracts were works contracts and not contracts for sale of goods; the finding was against the Revenue and in favour of the assessee.

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