M.H Kania, J.:— This is a reference under section 61(1) of the Bombay Sales Tax Act, 1959, made at the instance of the assessee. The question, which has been referred to us, for our consideration is as follows:

“Whether the claim of the applicant that the true nature of the contract between the applicant and the Western Railway was an indivisible works contract and not contract of sale of goods, has been rightly rejected?”

2. The facts giving rise to the reference are as follows:

The relevant period of assessment is 1st April, 1962, to 31st March, 1963. The assessees were contractors. By a contract dated 14th July, 1961, the assessees agreed to supply and lay two underground cables between Grant Road Sub-Station and Parel Meter House and one cable between Bandra Sub-Station and structure No. 12/12, as set out in the schedule to the contract upon general conditions of the contract and specifications of the Western Railway in conformity with the drawing annexed to the contract. The contract provided inter alia that the assessees would duly perform their works described in the schedule thereto and execute the same with great promptness, care and accuracy in a workman-like manner to the satisfaction of the railway and would complete the same in accordance with the said specifications and the said drawing and the said conditions of the said contract on or before 15th January, 1962, and would maintain the said works for a perid of twenty-four calendar months from the certified date of their completion. The contract further provided that if the assessees duly performed the said works in the manner aforesaid and observed and kept the said terms and conditions, the railway would pay or cause to be paid to the assessees for the work done on final completion thereof the amount due in respect thereof at the rates specified in the schedule annexed to the contract. The description of the items and particulars given in the schedule are as follows:

“Name of work: Supply and laying of 2 underground cables 22 KV grade making cable joints, sealing boxes, etc., between Grant Road Sub-Station to Parel Meter House and 1 cable between Bandra Sub-Station to structure No. 12/12.

Approximate cost Rs. 6,63,925. Chargeable to DRFH 4112

Sl. No. Schedule of work Approx. Qnty Unit Rate Rs. np. Amount Rs. np. Remarks 1. Supply of PILCSWA and S 22 KV grade cable— 3 core 0.2 sq. inch 12890 Yds. Per. Yd. 45 5,80,050 Japan make 2. Supply and commissioning of straight through joint box for one cable near structure No. 12/12 No. 1 Each 100 100 3. Terminating cables on existing OCBs at Bandra and Grant Road with existing sealing end box. Nos. 3 Each 175 525

4. Making loop connection of cables on existing OCBs at Parel Meter House and Bombay Central Transformer House with existing sealing end boxes. Nos. 4 Each 200 800 5. Supply of straight through joint box complete with joining work for item (1). Quantity to be filled in by the tenderer. Nos. 42 Each 310 13,020 6. Excavation of trench of adequate width and 3′-6″ deep laying of cables, protective tiles on cables refilling and remaking the surface including making holes in walls and floors when required. 7935 Yds. Per Yd. 5 39,675 (a) Excavation of all size trenches. 12890 Yds. Per Yd. 2 25,780 (b) Laying of cables. Grand Total 6,92,175 Less Sales Tax 28,250 Net amount payable 6,63,925

3. The conditions found at the foot of this schedule or accompaniment to the contract show, inter alia, that the assessees guaranteed the cable work, including joining, etc., for a period of 24 months from the date of commissioning of the cable and agreed that during the guarantee period the assessees would be responsible for any defect in the materials or in the workmanship and further agreed that in the event of any failure of the cable, the assessees would locate the faults and rectify the same with the least possible delay, free of cost to the railway. The conditions also provide that the prices quoted were firm and not subject to variation. The last material condition is that the payment for the work done by the assessees would be made after the inspection and test of installation by an authorised representative of the railway on completion of the work done by the assessees. Pursuant to this contract, the assessees imported cables on the strength of an actual user's licence granted to the railway and supplied and laid cables as provided in the contract. It has also been found by the Tribunal that there were about 300 yards of cables remaining unused and the said railway did not part with the same, having paid for the same. Both the Sales Tax Officer and the Assistant Commissioner of Sales Tax, on appeal, included the amount paid by the railway to the assessees for the supply of cables in the taxable turnover of the assessees. The assessees then went by way of second appeal to the Sales Tax Tribunal. The Tribunal came to the conclusion that the contract between the assessees and the Western Railway was clearly divisible, one part of the contract being for the supply of cables to the railway and the second part of the contract relating to the laying of the underground cables. The Tribunal observed that the fact that 300 yards of cables remaining unused were retained by the railway because it was their property showed that the contract was not merely a works contract. The Tribunal further observed that the charges for the work and labour involved were separately shown and worked out. On these conclusions the Tribunal held that the contract was clearly divisible and upheld the decision of the Assistant Commissioner. This reference has been preferred at the instance of the assessees against the decision of the Tribunal. The only question which arises for our consideration is whether the contract between the assessees and the railway was a severable or divisible contract as held by the Tribunal or whether it was an integrated works contract as contended by the assessees. In considering such matters, the question in each case is one about the true agreement between the parties and this contract or agreement must be deduced from a review of all the attendant circumstances. In the first place, we must naturally consider the terms of the contract dated 14th July, 1961. It is significant that in this contract, when read along with the schedule, rates for the supply of cables and for the work to be done in laying the same are mentioned separately and the contract is clearly a rate contract. The first item of this schedule, which we have already referred to earlier, shows that the rate of Rs. 45 per yard was specifically provided as the charge for the supply of the cables in question and the quantity mentioned was stated to be an approximate quantity. Moreover, item No. 6 sets out a separate rate per quantity for the work of excavation of the trenches required for the laying of cables and a separate rate for the laying of the cables. This shows that the assessees and the railway treated the item of supply of cables as a distinct item from the item relating to the work of excavation of trenches and laying of the cables and the contract itself refers separately to the supply and to the laying of the underground cables. There is a distinct guarantee given by the assessees to the railway regarding defects in the material and regarding defects in workmanship although both the guarantees are contained in a single condition. These terms, in our view, clearly indicate that the contract is a divisible contract and item No. 1 relating to the supply of cables can be severed from the rest of the contract. Apart from this, the very fact that 300 yards of excess cables were retained by the railway, is clearly inconsistent with the contract being an indivisible contract of works. Had this been so, then the excess quantity of cables would have been returned by the railway to the assessees. Although Mr. Trivedi, the learned counsel for the assessees, tried to urge that this excess quantity of cables might have been retained by the railway for some special reasons, there is nothing on the record to justify such a conclusion and hence the fact that the said excess quantity of cables has been retained by the railway, shows that the contract in question is a severable one in so far as the supply of the cables to the railway is concerned.

4. As against this, it was urged on behalf of the assessees that there were several factors in the contract which showed that the contract was an indivisible contract of work and labour or what is known as a “works contract”. Mr. Trivedi, the learned counsel for the assessees, emphasised that the contract provided that the work had to be done in a workman-like manner and in accordance with the drawing annexed to the contract. These terms, in our view, relate to the part of the contract regarding the laying of the cables and do not necessarily suggest that the contract was an indivisible works contract. The same can be said of the terms in the contract regarding inspection and testing of the installation on completion of the work. Mr. Trivedi emphasised that the contract enjoined a liability on the assessees to rectify the defects in the work. This again is not of much importance because, as we have already pointed out, there is also a distinct guarantee given whereby the assessees are responsible for any defect in the material. It was next emphasised that under the contract there was no provision for the passing of property before the completion of the work and that payment was to be made even in respect of cables only after completion of the contract. This circumstance, however, cannot be treated as in any manner decisive of the question and this circumstance is more overweighed by the other circumstances which we have referred to earlier.

5. It is of considerable importance in determining the question before us that the contract is not a lump sum contract and that the rates of payment for the various items and, in particular, the supply of cables has been distinctly and separately set out in the contract. In connection with this, Mr. Trivedi relied upon a decision of the Madras High Court in State of Madras v. Voltas Limited [1963] 14 S.T.C 446.. In that case, the assessees were given contract for providing an entire building, consisting of several flats and having a building space nearly 67,000 sq. ft. with a system of air-conditioning. The description of the work given in the contract clearly showed that the work was of a highly technical kind requiring special qualifications and the assessees had to supervise the construction of the building itself in order that the air-conditioning of the building as a whole could be efficiently designed and erected. It was held that, in the facts and circumstances of the case, there was no agreement between the contracting parties for the sale of any part of the machinery as such and the Tribunal was right in setting aside the assessment. It was pointed out by Mr. Trivedi that the contract in that case contained particulars of the things that had to be done by Voltas Limited, the assessees, under the contract and mentioned the value of the material that would be imported at Rs. 2,75,000 and that, in spite of this, the contract had been held to be indivisible. Mr. Trivedi relied on the observations in the judgment, which run as follows:

“…It seems to us to be clear in a contract of this description, where the overall price was fixed at very nearly Rs. 7 lakhs, the customer had at least a right to know what proportion of the price that he was paying would go towards the value of the materials supplied and what proportion towards the cost of labour, technical skill, etc. No contracting party would accept a quotation, which gave no particulars and, indeed, it is the invariable practice when tenders are called for to require such particulars to be furnished. The mere break-up of the figure in this manner does not lead to the conclusion that there was a stipulation of the sale of the machinery simpliciter.” In our view, this decision is not of much help in the case before us. In the first instance, there is nothing in the judgment to show that any specific amount was mentioned as being payable on account of the goods to be supplied. Moreover, the contract in question there was one which involved a very high degree of technical skill and competence, whereas in the case before us, although undoubtedly some skill might be required in the laying of cables there is nothing to show that this skill had to be of a very high kind. Apart from this, we must observe that although whether the contract is one for a lump sum payment or not may not be decisive of the question, as to whether the contract is indivisible or not, this factor would undoubtedly have great relevance in the decision of that question.

6. Mr. Trivedi then relied on the decision of the Supreme Court in State Of Rajasthan v. Man Industrial Corporation Ltd. . In that case, the assessee submitted its tender for fabricating and fixing certain windows in accordance with the specifications, designs, drawing and instructions. The work was to be completed within 6 months from the date of its acceptance and the windows were to be fixed to the building with rawl plugs in cut stone-works. The rate quoted by the assessee was based on the current price of mild steel billets and the price was to be revised if there was a change in the controlled price of billets supplied to the assessee. The question was whether the sum of Rs. 23,480 received under the contract could be included in the taxable turnover for the purpose of sales tax. It was held that there were not two contracts, one of sale and another of service. Fixing the windows to the building was also not incidental or subsidiary to the sale, but was an essential term of the contract. The window-leaves did not pass under the terms of the contract as window-leaves. Only on the fixing of the windows as stipulated could the contract be fully executed and the property in the windows passed on the completion of the work and not before. The contract was for execution of work not involving sale of goods. This decision is not of much assistance to Mr. Trivedi in the present case. The assessee there had not only to fix certain windows but had also to fabricate the same. The next important feature of that decision is that it relates to a lump sum contract which, as we have observed earlier, is a very important factor in determining the question as to whether the contract is severable. Moreover, in the case before the Supreme Court, the rate quoted by the assessee was based on the then current price of mild steel billets and the price was to be revised if there was a change in the controlled price of billets supplied to the assessee, whereas, in the present case, the rate for the supply of cables to the railway was a fixed rate, which is more consistent with a contract of sale. Mr. Trivedi next referred to us the decision of the Madras High Court in Deputy Commissioner, Coimbatore Division, Coimbatore v. Indian Refrigeration Industries Private Limited [1971] 27 S.T.C 427.. In that case, the assessee entered into a lump sum contract to fabricate and instal a humidifying plant and other accessories with air-ducts embedded in the building of a customer. Such installation had to be done along with the construction of the building with the assessee rendering technical assistance to the architects and other construction contractors during the course of the erection of the building. It was held that as the installation of the humidifying plant and the components which were to be supplied therefor under a composite contract with the customer necessarily involved the embedding of such a plant and its components in the structure, it could not be said that the plant and the parts could be viewed de hors the totality of the contract, which could be said to have been executed only after the completion thereof and after the machinery and plant were embedded in the structure as a whole. This case also turned on its own facts and is distinguishable from the case before us and we cannot derive much assistance from the decision therein. In the first place, it was a lump sum contract. Secondly, the work required to be done by the assessee in that case involved a much higher degree of skill and competence than the work to be done by the assessees in the present case. Moreover, in that case there is a finding that the property in the machinery and plant supplied by the assessee passed only when the same were embedded in the structure as a whole whereas there is no such finding given by the Tribunal in the case before us. This case also, therefore, is not of much assistance to Mr. Trivedi in his argument before us. We may mention that certain other cases have been cited before us but very little purpose would be served in discussing the same here because the facts in those cases are materially different from the facts in the present case. Moreover, the terms and conditions in the contracts in those cases are also quite different from the terms and conditions in the contract before us.

7. For the reasons, which we have already discussed, in our view, the contract in the case before us is a divisible contract and the Tribunal is right in its conclusion which it has reached in this regard.

8. It was next sought to be urged by Mr. Trivedi, the learned counsel for the assessees, that on a proper view of the matter, the assessees had merely acted as agents of the Western Railway in respect of the cables imported under the licence issued to the Western Railway. We are afraid, it is not open to Mr. Trivedi in this reference to raise this question at all. The assessees had applied to the Tribunal to refer this question to us. The Tribunal has, however, rejected that request and has pointed out that this question Was not argued before the Tribunal and was not discussed by them. In view of this, we fail to see how we can allow Mr. Trivedi to raise this question before us.

9. It was finally urged by Mr. Trivedi that on the facts and circumstances of the case, the property in the cables supplied by the assessees to the railway passed only when the cables had already been embedded in the earth and, hence, there was no sale of any movable property as such, which could attract the liability to sales tax. We are afraid that this contention is also not open to Mr. Trivedi. In the first place, this contention does not seem to have been raised before the Tribunal at all. The question as to when the property passed is not a pure question of law as such. Section 19 of the Sale of Goods Act, 1930, inter alia, provides that where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. sub-section (2) of the said section provides that for the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. It is quite clear that where there is a question of the property passing in movable property, the question of intention of the parties is most material. Had this question been raised before the Tribunal, evidence could have been led on the question of intention. No such evidence seems to have been led by either side in the present case. The judgment of the Tribunal shows that the only evidence, which appears to have been produced by the assessees, consisted of a supplementary paper book supplied by the assessees referring to the various terms and conditions in the contract and certain other documents, none of which throw light on this question. In view of this, it is not open to the assessees to take up this contention at this stage at all. In the result, the question referred to us must be answered in the affirmative and the assessees must pay the costs of the reference fixed at Rs. 250. The fee of Rs. 100 deposited by the assessees to be appropriated towards these costs.

10. Reference answered in the affirmative.