Divisible contract treatment for cable supply and laying upheld; separate pricing and warranty terms showed sale and labour components.

A contract for supplying and laying underground cables was treated as divisible rather than an indivisible works contract because the schedule separately fixed rates for cable supply and for excavation and laying, indicating distinct sale and labour components. The agreement was not a lump sum contract, and the guarantee terms differentiated defects in material from defects in workmanship. The railway's retention of unused cable also pointed against a purely composite works arrangement. Authorities cited for the assessee were distinguished on their facts, including lump sum pricing and greater technical complexity. The referred question was answered in favour of the revenue, and the assessee's indivisible-contract argument was rejected.

---

---

Issues: Whether the contract for supply and laying of underground cables was an indivisible works contract or a severable contract involving a sale of goods.

Analysis: The contract and its schedule separately specified rates for supply of cables and for excavation and laying work, showing that the parties treated supply as a distinct item from the labour component. The contract was not for a lump sum price. The guarantee conditions also distinguished defects in material from defects in workmanship. Further, the railway retained unused cable, which was inconsistent with a purely indivisible works contract. The authorities relied on by the assessee were distinguishable because they involved materially different facts, including lump sum contracts and greater technical complexity. The question of the passing of property based on embedded installation was not open at this stage, as it had not been raised or examined below and depended on intention under the contract and surrounding circumstances.

Conclusion: The contract was rightly held to be divisible, and the assessee's claim that it was an indivisible works contract was rejected. The answer to the referred question was in the affirmative, in favour of the revenue.

---