Composite works contract test applied to machinery supply with erection, commissioning and trial installation; not a sale of chattels.

Where supply, erection, commissioning and trial production of machinery are covered by one consolidated and indivisible contract, the transaction is treated as a works contract rather than a sale of chattels. The court applied the settled test of whether the main object is transfer of property in goods as goods, or an undertaking for work and labour with materials and services used incidentally. On the Tribunal's findings, the contract and invoices showed a single composite price with no separate break-up, and site erection and commissioning were essential terms. C forms did not change the true character of the transaction. The reference was answered against the Revenue and in favour of the assessee.

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Issues: Whether the transaction of supply, erection, commissioning and trial production of pulverisers under the composite invoices was a works contract or a sale of chattels exigible to sales tax.

Analysis: The determining test is whether the main object of the contract is transfer of property in a chattel as a chattel, or whether the undertaking is essentially for work and labour with materials and services used incidentally or as part of an indivisible arrangement. Applying that test, the contract records and invoices showed a consolidated price for supply, erection, commissioning and trial production, with no separate break-up for the goods and the ancillary work. The factual findings of the Tribunal established that the contracts were composite and indivisible, that erection and commissioning at the customer's site were essential terms, and that the equipment had to be put to trial after installation. The presence of C forms did not alter the true character of the contracts, since the nature of the transaction had to be gathered from the surrounding circumstances and the contractual arrangement as a whole.

Conclusion: The transaction was a composite works contract and not a sale of chattels; the reference was answered against the Revenue and in favour of the assessee.

Ratio Decidendi: Where supply, erection, commissioning and trial of machinery are undertaken under one indivisible consolidated contract, the transaction is a works contract and not a sale of goods as chattel, and therefore is not taxable as a sale on that footing.

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