PATNAIK & COMPANY versus STATE OF ORISSA

Citation: [1965] 2 S.C.R. 782 · Decided: 19-01-1965 · Supreme Court of India · Bench: P.B. GAJENDRAGADKAR · Disposal: Dismissed

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

782 
PATNAIK & COMPANY 
v. 
STATE OF ORISSA 
January 19, 1965 
A 
[P. B. GAJENDRAGADKAR, C. J., M. HIDAYATULLAH, J.C. SHAH, B 
S. M. SIICRI AND R. S. BACHAWA'f, JJ.J 
Orissa Sales Tax Act, ( 14 of 1941)-Contract to build bus bodies 
•n chassis supplied by purchaser-If a contract for sale or for work. 
The appellant claimed to deduct from its gross turnover, amounts 
received from the State Government for buildiog bus bodies, on the chassia 
supplied by the Government under a contract. 
C 
Under the contract, the bus bodies were to be put on the chassis and 
the body consisted not only of things actually fixed .on the chassis but 
movable things like seat cushions and other !biogs which though fixed 
coold be easily detached, like roof-lamps etc. The chassis wi1h the bus 
body was to be delivered at the destination named within the stipulated 
tiine. If some work was not satisfactorily done the Government was 
entitled to seize the unfinished vehicle, get the work done by another 
D 
agency and recover the difference in cost from the appellant. While the 
appellant was required to protect the chassis by iosurance, there was no 
provision regardiog iosurance of bus bodies. The contract also provided 
that the process of manufacture was to be supervised on behalf of the 
Government, and that the work should be done with due deligence. There 
was also a provision for payment of damages until the defects detected 
on inspection were rectified. 
The Sales Tax Officer refused to allow the deduction. On appeal, the 
E 
·claim was allowed by the Collector, whose order was affirmed by the Sales 
Tax Tribunal, on appeal by the Department. On a reference to the High 
Court, the question, as to whether the amounts were not chargeable to 
sales tax, was answered against the appellant. 
In the appeal to the Supreme Court, on the question as to whether 
the contract was one for execution of work or for performance of service, 
or whether it was a contract for sale of goods. 
F 
HELD : (Per Gajendragadkar C.J., Hidayatullah, Sikri and Bachawat, 
JJ) : The contract as a whole was a contract for the sale of goods and 
the amounts were therefore chargeable to sales tax. [792 G] 
The answer to the question depended on the construction of the 
agreement regarding the building of bus bodies. On the terms of the 
contract the property in the bus body did not pass on its being placed 
or constructed on the chassis but when the whole 'l"'hicle iocluding the 
G 
bus body was delivered. The provision regarding insurance showed that 
till delivery was made, the bus bodies remained the property of the appel-
lant and unlike the case of a contract a construct a building, where the 
property does not pass in the materials as movables the bus body never 
lost its character as movable property and the property in it passed to 
Government as movable property. It is not the law, that whenever a 
contract provides for the fixing of a chattel to another chattel there is 
no sale of goods; and, a contract for the sale of goods to be manu-
H 
factured does not cease to be a contract for sale of goods, merel} 
because the process of manufacture is supervised by the purchaser. [785 C-D; 
788 F; 790 A-B; 791 A, D; 792 A] 
. 
PATNAIK & CO. V. STATE (Sikri, /.) 
783· 
A 
Gannon Dunkerley', Care, [1959) S.C.R. 379 and Carl Still v. State of 
Bihar, [1962) 2 S.C.R. 81, distinguished. 
Anglo-Egyptian Navigation Co. v. Rennie, (1875) L.R. 10 C.P. 271, 
explained. 
Per Shah, J. (dissenting) : The contract was one for work and not 
a contract for sale, because, the contract was not that the parties agreed 
that tho "bus body" constructed by the appellants should be sold to the 
B 
State. The contract was one in which the appellants agreed to construct 
"bus bodies" on the chassis supplied to them as liailees, and such a contract 
being one for work, the consideration paid was not taxable under the 
Sales Tax Act. 
The primary difference between a contract for work or service and a 
contract for sale of goods is that in the former there is in the person 
performing work or rendering service no poperty in the thing produced 
C 
as a whole notwithstanding that a part or even the whole of the materials 
used by him may have been his property. In the case of a contract for 
sale the thing produced as a whole has individual existence as the sole 
property of the party who produced it, at some time before delivery, and 
the property therein passes only under the contract re

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