Works contract versus sale: indivisible coach-body construction was not a sale of goods and no sales tax arose.

An indivisible agreement to build, erect and furnish railway coach bodies on chassis supplied by the Railway was held to be a works contract, not a sale. The controlling test was whether the main object of the arrangement was transfer of property in goods as goods; here, the contractor undertook procurement of materials, labour, design, fabrication and completion of the work, and the use of materials was merely incidental. Because there was no agreement to transfer materials as such or to deliver a chattel as such, the transaction did not amount to a sale and no sales tax liability arose.

---

---

Issues: Whether the agreement for building, erecting and furnishing railway coach bodies on chassis supplied by the Railway was a works contract not amounting to sale, or a transaction of sale liable to sales tax.

Analysis: The contract, read as a whole, was for the execution of an entire and indivisible work of constructing and furnishing coach bodies, with the Railway supplying the underframes and the contractor undertaking procurement of materials, labour, design, fabrication, and completion of the works. The terms did not show an agreement to transfer materials as materials or to deliver a chattel as such. Applying the settled distinction between a contract of sale and a contract for work and labour, the controlling test was whether the main object was transfer of property in a chattel as a chattel. The arrangement here was for the performance of work, and the incidental use of materials did not convert it into a sale. The reasoning was consistent with the principle that, to constitute a sale, there must be an agreement to sell the materials as such and a transfer of title in goods pursuant to that agreement.

Conclusion: The contract was a works contract and not a sale.

Final Conclusion: The reference was answered in favour of the applicants, and no sales tax liability arose on the transaction as treated by the taxing authorities.

Ratio Decidendi: Where the substance of the agreement is the execution of an indivisible work and labour contract, and there is no agreement to transfer materials as materials or a chattel as chattel, the transaction is not a sale of goods for sales tax purposes.

---