Composite plant contract treated as works contract where installation was integral and no sale turnover tax applied.

A composite agreement for design, manufacture, fabrication and installation of a complete electrode plant was treated as a works contract rather than a contract for sale. The decisive feature was that installation was fundamental to the arrangement and the plant came into existence only upon fabrication and installation at the customer's site. The consolidated price, payment method, and testing or return clause for defective plant did not change the real character of the transaction. Applying the test whether property in a chattel passed as such or whether the contract was essentially for work by labour and skill, the receipt was held not liable to tax as sale turnover.

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Issues: Whether the agreement for design, manufacture, fabrication and installation of a complete electrode plant was a works contract or a contract for sale liable to sales tax.

Analysis: The agreement contemplated a single composite arrangement for design, manufacture, fabrication and installation of the complete plant for a consolidated price. The obligation to install the plant was not incidental, but fundamental to the contract, because the electrode plant came into existence only upon fabrication and installation at the customer's site. The mode of payment and the clause regarding testing or taking back defective plant did not alter the real character of the transaction. On the principles governing the distinction between a sale and a works contract, the decisive question was whether property in a chattel passed as such or whether the contract was essentially for carrying out work by labour and skill.

Conclusion: The contract was a works contract and not a contract for sale; the amount received was not liable to tax as sale turnover.

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