Quarrying and delivery contract treated as service, not sale, while outside supplies required separate tax scrutiny.

A quarrying and delivery arrangement was treated as a contract of service, not a sale, because the contractor was engaged to quarry, transport and deliver limestone under the company's control over place, time, quantity and acceptance, with lump-sum consideration for work done. On that basis, receipts from limestone quarried under the contract were excluded from taxable turnover. Supplies sourced outside the leased mine stood on a different footing and could be treated as ordinary sales only if separately established. The court did not undertake factual segregation in writ jurisdiction and remitted that aspect for fresh examination by the assessing authority.

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Issues: (i) whether the quarrying and delivery arrangement was a contract of service or a sale attracting sales tax; (ii) whether the turnover relating to supplies made from sources other than the leased mine could be separated and assessed independently.

Issue (i): whether the quarrying and delivery arrangement was a contract of service or a sale attracting sales tax.

Analysis: The agreement, read as a whole, required the contractor to quarry, win, transport and deliver limestone from the mine leased to the company, with the company controlling the place, time, quantity and acceptance of the material. The consideration was a lump sum for labour and work done, and the arrangement did not create a sale of goods in respect of limestone quarried under the contract. In the absence of a sale, the receipts arising from performance of the contract could not form part of the taxable turnover.

Conclusion: The arrangement, to the extent it covered quarrying and delivery from the leased mine, was a contract of service and not a sale; the assessee succeeded on this issue.

Issue (ii): whether the turnover relating to supplies made from sources other than the leased mine could be separated and assessed independently.

Analysis: Supplies made from sources outside the subject-matter of the agreement stood on a different footing and bore the character of ordinary sales between seller and buyer. However, the court could not itself undertake the factual segregation of such transactions from the composite assessment orders in writ jurisdiction, and the proper course was a fresh scrutiny by the assessing authority.

Conclusion: The turnover attributable to outside supplies was liable to separate examination by the assessing authority, and the matter was remitted for that purpose.

Final Conclusion: The assessee obtained relief against inclusion of the contractual quarrying receipts in taxable turnover, but the assessments were sent back for fresh determination of the separable turnover in accordance with law.

Ratio Decidendi: Where an agreement is, in substance, for quarrying, transport and delivery of mineral produce for a lump-sum consideration under the buyer's control, the receipts are attributable to service and not to a sale of goods; only distinct non-contractual supplies may be treated as taxable sales if they are separately established.

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