Sale versus works contract in pebble supply: seigniorage fee did not change the transaction's character.

A contract for supplying pebbles from Government land was treated as a sale rather than a works contract where the supplier was obliged to procure specified goods, subject to rejection of non-conforming material. The earlier ruling on a similar arrangement was stated to remain good law, while the later Supreme Court decision was read as fact-specific because payment of seigniorage fee there did not transfer ownership of quarry material. On that basis, the seigniorage fee did not alter the character of the present transaction, and the tax cases were allowed in favour of the Revenue.

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Issues: Whether the supply of pebbles under the contract amounted to a sale or a works contract, and whether the payment of seigniorage fee altered the character of the transaction in light of the later Supreme Court decision.

Analysis: The contract required the respondent to procure pebbles from Government land leased to the corporation and to supply pebbles of specified quality, with the corporation entitled to reject non-conforming goods. The earlier decision treating a similar arrangement as a sale was held to remain good law. The subsequent Supreme Court ruling was read as turning on its own facts, where payment of seigniorage fee did not transfer ownership because the quarry material continued to belong to the railway; that principle was not treated as displacing the earlier view in the present setting.

Conclusion: The transaction was held to be a sale and not a works contract, and the tax cases were allowed in favour of the Revenue.

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