Real nature of contract controls tax treatment of stone ballast supply as sale, not quarrying work contract.

The real nature of the arrangement, rather than its label, determined whether the supply of stone ballast was a sale or a quarrying/work-and-labour contract. The assessees quarried the material on Government land, acquired property in the jelly when it was quarried, and title passed to the Railway only on delivery at the siding. The Railway had not taken the quarrying lease in its own name, and the permit conditions did not make the assessees its agents. On that substance, the exemption for quarrying contracts did not apply, and the turnover was liable to sales tax as a sale of goods.

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Issues: Whether the arrangement for collection, quarrying, transport and delivery of stone ballast was a contract of sale exigible to sales tax, or a mere quarrying contract / contract for work and labour eligible for exemption.

Analysis: The real nature of the transaction, and not its label, governed the character of the contract. The assessees quarried the jelly on land belonging to the Government, the material became their property when quarried, and property passed to the Railway only on delivery at the siding. The Railway had not taken the quarrying lease in its own name, and the permit conditions did not make the assessees agents of the Railway. The exemption notification for quarrying contracts did not apply to a transaction whose substance was supply of materials necessarily quarried and delivered for price.

Conclusion: The transaction was held to be a sale and not a quarrying contract or mere work-and-labour arrangement; the turnover was rightly assessed and the assessee's claim to exemption failed.

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