Contract for manufacture and supply treated as a sale where property and risk stayed with the contractor until delivery.

A contract for manufacture and supply of kiln-burnt bricks was held to be a contract of sale, not a works contract, because its true construction showed transfer of finished bricks as goods for consideration. The contractor undertook manufacture and supply at agreed rates, retained property and risk until delivery, and bore the cost of removing rejected materials. Supervision, labour welfare, and manufacturing safeguards were treated as consistent with efficient production and not as negating sale. On that construction, the transaction attracted sales tax.

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Issues: Whether the contract for manufacture and supply of kiln-burnt bricks was a contract of sale or a works contract.

Analysis: The character of the transaction depended on the true construction of the contract and the intention of the parties as gathered from its terms. The material clauses showed that the contractor undertook to manufacture bricks and supply them at agreed rates, that the bricks remained at the contractor's risk until delivery, that rejected materials were to be removed at the contractor's cost, and that the property in the bricks was with the contractor until delivery. The additional conditions relating to supervision, labour welfare, and manufacturing safeguards did not alter the essential nature of the bargain, because they were consistent with efficient production and did not negate transfer of the finished bricks as goods.

Conclusion: The transaction was a contract of sale and not a works contract, and the assessee was liable to sales tax.

Ratio Decidendi: A contract for manufacture and supply is a contract of sale where, on a true construction of its terms, the finished goods are transferred as chattels for consideration and the contractor retains the property and risk until delivery.

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