Substance over form in sales tax: contract to collect and supply flower was treated as a sale, not work and labour.

The true character of a contract must be determined from the whole arrangement, not isolated clauses. Where the assessee was obliged to collect, store, grade, transport and supply specified quantities of Gulmohva flower at fixed rates, and to procure from other sources at its own risk if supply failed, the substance of the transaction was supply of goods for consideration. Those obligations were inconsistent with a pure contract for work and labour. The fact that the flower could be collected from Government land without separate payment did not alter the legal character of the arrangement. The turnover arising from the contract was therefore held exigible to sales tax.

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Issues: Whether the collection and supply of Gulmohva flower under the contract with the Government distilleries constituted a sale liable to sales tax or merely a contract for work and labour.

Analysis: The contract required the assessee to collect, store, grade, transport and supply specified quantities of flower at fixed rates, with liability to procure from other sources and bear the differential cost if supply failed. These obligations were inconsistent with a mere labour contract. The fact that the flower might be collected from Government land without separate payment did not alter the real character of the transaction, because the decisive test was the substance of the arrangement, not isolated expressions in the contract. The terms showed that the assessee dealt with the flower as property capable of being supplied for consideration, and the contractual allocation of risk and substitution in case of non-supply pointed to a transfer of goods rather than pure labour.

Conclusion: The transaction was a sale and not a contract for work and labour; the assessments were valid.

Final Conclusion: The tax revision petitions succeeded, and the turnover arising from the contract was held exigible to sales tax.

Ratio Decidendi: In determining taxability, the true character of the transaction must be gathered from the contractual obligations as a whole, and where the arrangement involves supply of goods for consideration with attendant obligations and risk of procurement from other sources, it is a sale rather than a contract for work and labour.

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