Sale versus work contract: finished bus bodies made from own materials were treated as taxable sales of completed goods.

Construction of bus bodies on customer-supplied chassis was treated as a sale where the dealer used its own materials to produce a completed chattel and transferred the finished bus body to the customer. The governing distinction was between a transfer of property in completed goods and a contract for work and labour; because the sale element predominated, the transaction was not treated as a separate labour-only contract or as sale of components individually. The entire cost of the ready-made bus bodies was therefore taxable under the U.P. Sales Tax Act, rather than only the value of materials used in manufacture.

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Issues: Whether the construction of bus bodies on chassis supplied by customers constituted a sale of ready-made bus bodies taxable on the entire turnover, or only a contract for work and labour taxable on the value of materials used.

Analysis: The decisive test was whether the substance of the transaction was transfer of property in a completed chattel or performance of work with materials incidentally used. The bodies were constructed by the assessee with its own materials, the completed body was delivered and fixed on the customer's chassis, and the customer acquired the finished bus body as the subject-matter of the transaction. The contract was not treated as one for the sale of each component separately, nor as an indivisible building-type contract where labour predominated. Applying the distinction between a contract of sale and a contract for work and labour, the element of sale was held to predominate.

Conclusion: The transaction was a sale of bus bodies and the entire cost of the ready-made bus bodies was taxable under the U.P. Sales Tax Act, not merely the cost of materials used in manufacture.

Ratio Decidendi: Where a dealer constructs a finished chattel from its own materials and transfers the completed article to the customer, the transaction is a sale if the transfer of property in the completed goods is the predominant element, even though labour and skill are involved in making and fixing the goods.

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