Divisible contract treatment prevails where supply of goods and ancillary services are separately priced and separately charged.

A contract for the design, manufacture and supply of titanium anodes, with separate supervision of installation, commissioning and recoating maintenance charges, was held to be a divisible contract rather than a single works contract. The court treated the separately fixed price for the anodes, together with the contractual stipulation that excise duty and sales tax were extra, as indicating that the parties intended distinct consideration for supply of goods and for ancillary services. On that reading, the supply element could not be merged into one composite works arrangement. The revision was therefore allowed in favour of the State.

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Issues: Whether the contract for design, manufacture and supply of titanium anodes, together with supervision of installation and recoating maintenance, was a works contract or a divisible contract involving sale of goods.

Analysis: The contract fixed a separate price for the titanium anodes, made excise duty and sales tax payable extra, and separately provided charges for supervision of installation and commissioning as well as recoating maintenance. The arrangement showed distinct consideration for supply and for ancillary services, indicating that the parties treated the supply of goods separately from the other obligations. On a proper reading of the contractual clauses, the arrangement could not be treated as a single composite works contract.

Conclusion: The contract was a divisible contract and not a works contract; the revision was allowed in favour of the State.

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