Composite supply of ballast held to be a sale, not a works contract, because delivery of goods was the dominant object.

Contracts for supplying, cutting, transporting and stacking stone ballast were treated as composite supply arrangements whose dominant object was the delivery of ballast as goods. The court applied the real-intention test, looking to the contract terms, surrounding circumstances and nature of the operations, and held that work and labour were not the essence of the transaction. Stacking and cutting were only incidental to delivery, and the passing of title on delivery after stacking did not convert the arrangement into a works contract. The transactions were therefore sales of ballast and the turnover was liable to sales tax, not exempt as works contracts.

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Issues: Whether the contracts for supply, cutting, transporting and stacking of stone ballast for the railways were works contracts exempt from sales tax, or contracts of sale of ballast liable to tax.

Analysis: The governing test was the real intention and main object of the parties, gathered from the terms of the contract, the surrounding circumstances, and the nature of the operations. A works contract is ordinarily one in which work and labour are the essence of the transaction and any passing of property in materials is merely ancillary. A composite contract, however, may still be a sale if the dominant object is the transfer of a chattel as chattel, even though the goods are prepared, cut, arranged, or fixed in the course of performance. Applying those principles, the agreements here were found to be composite arrangements for supplying ballast of a specified size, with stacking only incidental to delivery. The value of material and labour was not separately dissected, but the primary undertaking remained supply of ballast; title passed only on delivery after stacking, and the labour involved in cutting and stacking did not convert the transaction into a works contract.

Conclusion: The contracts were held to be sales of ballast and not works contracts, so the turnover was liable to sales tax.

Final Conclusion: The writ petitions failed on the substantive tax issue, and the assessees were not entitled to treat the transactions as exempt works contracts.

Ratio Decidendi: Where the dominant object of a composite contract is the supply and delivery of goods as goods, and the work done in preparation, transportation or stacking is only incidental to that supply, the transaction is a sale liable to tax and not a works contract.

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