The Judgment of the Court was delivered by

Srinivasan, J.:— During the year 1958-59, the assessee supplied blue granite jelly (building or road material) to the Neyveli Lignite Corporation. The value thereof was computed at Rs. 2,06,195. The inclusion of this amount in the other turnover of the assessee as a dealer in hardware was objected to on the ground that he had quarried the jelly in his own lands and the supply thereof to the Lignite Corporation did not involve a sale but was in the execution of a works contract which he had entered into. This contention was rejected, it being held that the contract which the assessee had with the Corporation called for the supply of material and was not a works contract.

2. In the appeal against this assessment before the Appellate Assistant Commissioner, the case of the assessee was advanced on the basis that the contract called for the performance of certain services by the assessee, that is to say, the quarrying and the conveyance of the material, that there was no supply of material for any stipulated price and that there was no element of sale in the transaction. The Appellate Assistant Commissioner examined the contract and some further correspondence with the officials of the Corporation. He came to the conclusion that the transaction should be viewed in its entirety and should not be broken up into its component parts such as labour involved for quarrying, the transport of the material to the spot, etc. In his view, in so far as the purchaser, the Lignite Corporation is concerned, it was not interested in the break-up of the contract into such component parts. Though the assessee might have to perform these functions in order to enable him to supply the material, that was not relevant for the purpose of construing the contract in question. He accordingly rejected the appeal. The further appeal to the Tribunal shared the same fate. The Tribunal however took note of a Government notification which exempted from the levy of sales tax gravel, even though it involved a sale, and to that extent, the assessment of the assessee was directed to be re-examined.

3. It is against this order of the Tribunal rejecting the claim of the assessee with regard to the supply made under the contract that the present revision petition has been filed.

4. The principal contention of Mr. Chandrasekhara Sastri on behalf of the petitioner-assessee is that the Tribunal has erred in attaching undue importance to the expression “supply” found in the contract documents and has ignored the other vital parts of the contract which, according to learned counsel, would reveal that the substance of the agreement was the execution of work and supply of labour. Nextly, it was urged that the transactions in question are covered by an exemption notification issued by the State of Madras. In amplification of these arguments, learned counsel claims, that the other contracting party, the Corporation, insisted upon the quarrying of the materials from certain quarries indicated in the contract and that it was not open to the assessee to produce material quarried from any other place. It was no doubt conceded that the quarries wherefrom the materials were to be collected were quarries which belonged to the assessee himself; but, nevertheless, since the contract contains certain specific terms, it should be construed, so it was argued, that it was a contract for the supply of labour and execution of certain works.

5. The agreement between the Lignite Corporation and the assessee has been placed before us. The tender notice starts by saying:

“A list of materials proposed to be supplied………..and the places where and the prices at which they are proposed to be supplied is given at the end of the schedule accompanying the tender notice………. Tenderers must accept these materials at the specified prices and quote for finished work accordingly. Notwithstanding any subsequent change in the market value for those materials, the charge to the party executing the work will remain as originally entered in the agreement……….”

6. Clause 5 of the notice contains the following provisions:

“Every tenderer is expected before quoting his rates to inspect the site of the proposed work. He should also inspect the quarries, satisfy himself about the quantity, quality and availability of the materials. The names of quarries………..wherefrom certain materials are to be obtained will be given in the descriptive specification sheet……………In every case, materials must comply with the relevant standard specification………… samples of materials………………shall be submitted for the approval of……….before supply to the site of work is begun.”

7. Clause 6:

“The tenderer should quote specific rates for each item in the schedule.”

8. The form signed by the contracting parties is styled “Tender for Piece Work” and the assessee accepted the conditions covered by the rules set out in Schedule B for the quantities of work executed at the rates specified in Schedule A.

9. In the agreement, the name of the work is styled: “Collection of laterite metal 1½″ to 3″ size, unscreened gravel 1 ½“granite metal, river sand.

10. Estimate: Rs. 4,70,000 gross”.

11. Beneath this followed the various items headed and described thus:

No. of item Class and description of work to be executed MDSS No. Unit of calculation Rates of payment Rs. nP. 1. Supply of hard laterite 1½″ to 3″ size at site of work shown by the Corporation Officers along the road margin in and around blocks 24 and 25 of Neyveli Township including stacking for pre-measurement. S.S 96 100 C. ft. 12.50 2. * * * 3. * * * 4. * * * 5. * * * 6. * * *

12. At the end of these items, specifications are given indicating the nature of the material to be supplied.

13. It is principally upon the expression “collection of laterite metal” used in describing the work and the further fact that the tenderer was compelled to quarry the material from certain selected quarries, the further use of the expression “piece work”, and the requirement that samples should be furnished to the other party to the agreement that reliance has been placed by the learned counsel in support of his contention that what the assessee was called upon to do was only quarrying and transport. It is also pointed out that in calculating the rates of payment, the other contracting party took note of the fact that the quarry from which the material had to be taken was situated at certain distances from the places where the material was to be delivered. From this learned counsel seeks to argue that the cost of transport was separately taken note of in arriving at the rates of payment fixed. From these incidents the argument is advanced that the amount paid to the assessee was in respect of the labour involved in quarrying the material and in incurring the cost of the transport of the material to the work spots. The question is whether this interpretation is correct.

14. The tender notice and the forms appear to be one designed to meet more than one class of tender. What the tender in effect called upon the assessee to perform was to produce certain quantities of certain specified materials of a specified quality at particular places and the rates of payment were fixed at so much per 100 c.f.t of the material. These rates did in fact vary according as the place of delivery was place A or place B. The assessee was not called upon to do any work for the Corporation in the status of a sub-contractor as it were. The indication of the quarries was only to ensure the quality of the material supplied, for, a clause in the agreement also provided that if the quarry could not supply the material in adequate quantity, the assessee could approach the Corporation and take their permission to secure the material from other quarries. The work, if it can be so called, was, according to the terms of the agreement, only the supply of the material at a pre-determined spot. It is impossible to say on the terms of the contract that it is a contract for labour wholly and purely.

15. It has been argued that the expression “collection” used in the agreement form has been defined in a particular manner in the. Madras Detailed Standard Specifications. It is set out thus:

“Collection of materials and stacking—(a) Definition: This operation shall consist of quarrying or collecting the material, breaking, screening, conveyance from quarry and stacking at the side of the road where it is to be used in the manner defined in this specification or as may be ordered by the Executive Engineer………..”

16. It does not seem to us that anything germane to the contention of the assessee can possibly be extracted from this definition. It is true that the assessee does collect the materials at a particular spot specified in the agreement and on his making that supply he is paid on the quantity supplied. On the other hand, if the contention of the assessee that it is a composite contract for doing the labour of quarrying and for transporting the material to a pre-determined spot is correct, the assessee should be entitled, under the terms of the agreement, to the payment for the quarrying alone, if he could not, for some reason or other, undertake the transport of the material to the spot indicated. That is clearly not the case. It seems to us that the contract only called upon the assessee to produce certain materials at a particular spot. The mere fact that he had to quarry the material from certain indicated quarries does not alter the situation in any way.

17. Reliance was placed upon a notification of the State of Madras, which is in these terms:

“In exercise of the powers conferred by section 6(1) of the Madras General Sales Tax Act, 1939, His Excellency the Governor of Madras hereby exempts earth-work, laterite metal, sand, jelly and gravel quarrying contracts from tax payable under section 3(1) of the said Act.”

18. We are exceedingly doubtful whether this notification of exemption will cover the incidents of the present transaction. What a quarrying contract is, in so far as the notification purported to exempt it, is not quite clear. If a person was employed on a quarrying contract, that is to say, to do the work of quarrying only and produce metal or gravel that would appear to be indubitably a contract for work and labour. If the quarrying was to be done by A in certain quarries belonging to B and the quantity quarried was supplied to B as a result of the contract, obviously there would be no transfer of property at all involved in the transaction and it seems doubtful if the notification would have any application in such a case. The notification only purports to exempt quarrying contracts wherein a transfer of property is involved. If A takes a lease of quarrying rights from the owner of the quarry B and quarries metal as a result of that contract and takes it away, it might, in a manner of speaking, be said that the lease itself involves the transfer of property in the quantity so quarried. It is quite possible that the notification may apply to such a case. It does not seem to us that this notification would apply where a person engages himself to supply a certain material, material which has necessarily to be quarried. That is a contract for supply and not a contract for quarrying. In the light of our construction of the terms of the contract in the present case, we are led to the conclusion that this is a case merely of supply of material and not one of a contract for quarrying.

19. Reliance that has been placed by the learned counsel upon the distances of the quarries from the spot where the material was to be delivered has again no effect upon the relationship between the contracting parties. That was only intended to serve the purpose of fixing the price of the material as delivered at the spot indicated. That does not alter the nature of the contract in any way. In a decision of the Andhra Pradesh High Court in State of Andhra Pradesh v. Kalva Suryanarayana [1962] 13 S.T.C 317., the case of a contract for the collection and supply of gulmohva flower used for the preparation of alcohol to the Government distillery was in question. The contract required the assessee to collect the flower, store it in his godown, and transport it to the distillery at his expense. He was to be paid for all of these functions at a particular rate for each grade of flower supplied. The question that had to be considered by the learned Judges was whether it was a contract merely for work and labour or it was one for sale. The learned Judges pointed out that one has to look at the real nature of the transaction on an examination of the entirety of the contract and not place undue emphasis on anyone aspect of the matter. They examined the terms and pointed out that if the assessee failed to supply the flower, or if the flower was destroyed before it was picked or damaged after it was stored, the assessee was not entitled to payment of any kind. It was only on the supply being made in fulfilment of the terms of the contract that he was entitled to payment. The fact that he had to collect or that he had to store or that he had to transport were all subsidiary incidents leading to the actual supply and sale of the goods. It was only the final incident, viz., the supply, that entitled the assessee to payment. From these terms, the learned Judges concluded that it was a sale transaction.

20. It seems to us that the principle of that decision is no less applicable to the facts of this case. We are accordingly satisfied that the Tribunal reached the correct conclusion in the matter. The petition fails and is dismissed with costs. Counsel's fee Rs. 100.

21. Petition dismissed.