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of <h1>Court rules contract divisible into sale of goods & installation services; assessees to bear reference costs.</h1> <h3>Sentinel Rolling Shutters and Engineering Co. Pvt. Ltd. Versus Commissioner of Sales Tax</h3> The court concluded that the contract between the assessees and Shah & Company was divisible into two separate contracts: one for the supply of ... - Issues Involved:1. Whether the contract in question was divisible into two separate contracts: one for the supply of materials and the other for service and labor.Detailed Analysis:1. Nature of the Contract:The primary issue was whether the contract between the assessees and Shah & Company was indivisible or divisible. The assessees argued that the contract was an indivisible contract of work and labor, while the department contended that it was divisible into two contracts: one for the supply of rolling shutters and the other for their installation.The court noted that the contract terms indicated a composite nature. The contract detailed the fabrication, supply, erection, and installation of rolling shutters, with a comprehensive price mentioned. The delivery terms, payment structure, and conditions indicated that the property in the shutters passed to the purchaser upon delivery at the factory, suggesting a sale of goods.2. Payment Structure:The payment terms were crucial in determining the nature of the contract. The contract stipulated 25% advance payment, 65% against delivery, and the remaining 10% after installation. The court found that 90% of the payment was related to the sale of shutters, while only 10% was for installation services, emphasizing the divisible nature of the contract.3. Delivery and Risk:The contract stated that delivery was to be effected at the factory of the assessees, and once delivery was taken, no claims for rejection could be entertained. This indicated that the property in the shutters passed to the purchaser upon delivery, supporting the view that the contract included a sale of goods.4. Installation Services:Although the contract included installation services, the court observed that these services were secondary to the supply of shutters. The installation involved tasks like marking walls, adjusting springs, and fixing channels, which, while requiring some skill, did not constitute a highly technical or complicated nature of work.5. Legal Precedents:The court referred to several legal precedents to support its decision. Key cases included:- State of Rajasthan v. Man Industrial Corporation Ltd.: Highlighted that the main object of the contract determines its nature.- State of Gujarat v. Variety Body Builders: Emphasized the absence of a standard formula to distinguish contracts of sale from contracts for work and labor.- Commissioner of Sales Tax v. Vanguard Rolling Shutters and Steel Works: Supported the view that a contract for supply and installation can be divisible.- T.V. Sundram Iyengar & Sons v. State of Madras: Reinforced that the property in goods passes upon delivery.6. Technical Skill Argument:The assessees argued that the contract's nature required significant technical skill, making it a contract for work and labor. The court, however, found that the skill involved in installing the shutters was not of a highly technical nature and did not change the contract's primary nature as a sale of goods.7. Distinguishing Other Cases:The court distinguished the present case from others cited by the assessees, such as:- State of Rajasthan v. Man Industrial Corporation Ltd.: Where the property passed only after installation.- State of Gujarat v. Variety Body Builders: Where the contract involved constant supervision by the purchaser.- Mather and Platt Ltd. v. State of Maharashtra: Involved highly technical installation work.- Otis Elevator Co. (India) Ltd. v. State of Maharashtra: Involved complicated and technical installation services.- Richardson and Cruddas Ltd. v. State of Madras: Where the property passed only after installation on the site.Conclusion:The court concluded that the contract between the assessees and Shah & Company was a divisible contract, consisting of two separate contracts: one for the supply of rolling shutters and the other for their installation. The primary nature of the contract was the sale of goods, with installation services being secondary. The question referred to the court was answered in the affirmative, supporting the view that the contract was divisible. The assessees were ordered to pay the costs of the reference fixed at Rs. 300.
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