TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Contracts for work & labor upheld over sale of goods in recent court ruling</h1> The court upheld that the contract between the respondents and the Trustees of the Bombay Port Trust was an indivisible contract of work and labor, ... - Issues Involved:1. Nature of the contract between the respondents and the Trustees of the Bombay Port Trust.2. Nature of the contract between the respondents and Century Rayon.Issue-wise Detailed Analysis:1. Nature of the Contract with the Trustees of the Bombay Port Trust:The primary issue was whether the contract between the respondents and the Trustees of the Bombay Port Trust was an indivisible contract of work and labour or a sale of goods. The contract, dated 28th March 1955, involved the respondents supplying materials and fabricating and erecting structural steelwork for a transit shed at Princess Dock. The Tribunal meticulously analyzed the contract, which contained 43 clauses and two schedules, emphasizing the execution of work and proper workmanship.Clause 2 described the work to be done, including supplying necessary materials and fabricating and erecting steelwork. Clause 4 stipulated a lump sum payment subject to additions or deductions based on additional work or variations in steel prices. Clause 5 included sales tax and octroi in the lump sum price, with adjustments for any changes in tax rates. Clause 6 allowed for rate variations based on changes in steel prices, with the respondents required to produce certified invoices for verification.The respondents were responsible for executing the work in a substantial and workmanlike manner (Clause 7), with the Chief Engineer having inspection rights (Clause 8). The contract emphasized the execution of work, with materials supplied by the Trustees for fabrication and erection, not for sale. The respondents' bill, submitted after completion, indicated fabrication and erection charges, with deductions for the value of steel supplied by the Trustees.The court concluded that the contract was a building contract, emphasizing work and labour rather than the sale of goods. The supply of steel by the Trustees was for executing the work, not for sale. The intention was to have work carried out at the jetty, not to manufacture and sell finished goods. The contract's emphasis on workmanship, maintenance, and removal of unused materials further supported this conclusion. Thus, the Tribunal's finding that it was an indivisible contract of work and labour was upheld.2. Nature of the Contract with Century Rayon:The second issue was whether the contract between the respondents and Century Rayon was a labour contract or a works contract. The contract was determined from correspondence, starting with an oral discussion about fabricating and supplying structural steelwork for a sub-station at Century Rayon's plant. The respondents' formal quotation mentioned that Century Rayon might supply steel, with the respondents giving a rebate for the supplied steel.The correspondence indicated that Century Rayon would supply all necessary steel, with the respondents responsible for incidental work like galvanizing and using bolts and nuts. The final bill showed that Century Rayon supplied all the steel, with the respondents performing fabrication work on the supplied materials.The department contended that it was an indivisible contract for the sale of goods. However, the court distinguished this case from others cited by the department, noting that the principal materials were supplied by Century Rayon. The work carried out by the respondents was on materials supplied by Century Rayon, making it a contract for work and labour, not a sale of goods.The court referred to legal principles stating that a contract involving work on materials supplied by the employer is a contract for work and labour. The Supreme Court's elucidation in Guntur Tobaccos Ltd. supported this view, emphasizing that using materials in executing a contract does not necessarily make it a sale of goods. The circumstances showed that the contract was for work, with materials supplied by Century Rayon, and incidental materials used by the respondents were not intended for sale. Thus, the Tribunal's finding that it was a contract for work and labour was upheld.Conclusion:Both questions were answered in the affirmative, affirming the Tribunal's findings. The applicants were ordered to pay the respondents' costs of the reference fixed at Rs. 250.
TaxTMI 
TaxTMI 
