Sale of bus bodies on supplied chassis turns on parties' intention and transfer of property on delivery.

A contract for construction of bus bodies on customer-supplied chassis was treated as a sale of goods rather than a contract for work and labour because the true intention of the parties, seen from the agreement as a whole, was that the contractor would construct and deliver completed bus bodies with property passing only on delivery. Clauses on custody of the chassis, inspection, supervision, defect rectification, completion within time, and takeover of unfinished work supported the contractor's continuing responsibility, but did not change the essential character of the bargain. The completed bus body remained movable property until delivery, so the receipts were liable to sales tax under the Orissa Sales Tax Act.

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Issues: Whether the agreement for construction of bus bodies on chassis supplied by the customer was a contract of sale of goods or a contract for work and labour, and whether the consideration received under it was liable to sales tax.

Analysis: The decisive test was the true intention of the parties gathered from the contract as a whole and the surrounding circumstances. The agreement treated the bus body as the subject of the contract, but it also contained clauses requiring custody of the chassis, workmanlike construction, inspection and supervision by the Controller, rectification of defects, time-bound completion, and the right of the Controller to take over unfinished bodies and complete the work through another agency. These features were not decisive by themselves, but they showed that the contractor was to construct a body on the supplied chassis and remain responsible until delivery. At the same time, the bus body retained its character as movable property until delivery, and the property in the completed body passed only on delivery of the finished vehicle. On that construction, the agreement was for sale of the bus bodies and not merely for work or service.

Conclusion: The contract was held to be one for sale of goods, and the receipts were taxable under the Orissa Sales Tax Act. The finding was against the assessee.

Ratio Decidendi: Whether a contract is one of sale or of work and labour depends on the intention of the parties and on whether property in the very goods contracted for passes as goods under the agreement; where the completed article remains the contractor's property until delivery, the contract may still be one of sale.

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