JUDGMENT K. SREEDHARAN, J. The Revenue is the petitioner. The respondent is an assessee on the files of the Sales Tax Officer, 2nd Circle, Mattancherry. They were engaged in building boats and selling them When they produced their books of accounts for verification for the purpose of assessment for the year 1973-74, the assessing authority found that they had built 22 hulls as per agreement executed with the Director General of Supplies and Disposals, Government of India, and sold them to the Indian Navy for a sum of Rs. 5,55,000. The assessing authority sought to assess the said turnover to tax under the Central Sales Tax Act. The assessee objected to the said assessment contending that the agreement entered into with the Director General of Supplies and Disposals was in the nature of a contract for work and labour and did not evidence a contract for sale of goods. The objection raised by the assessee was overruled and assessment was made on the said turnover. On appeal, the Additional Appellate Assistant Commissioner of Agricultural Income-tax and Sales Tax, Ernakulam, agreed with the assessing authority and dismissed the appeal filed by the assessee. The assessee took up the matter in second appeal before the Sales Tax Appellate Tribunal. The Tribunal by its order dated 25th September, 1982 took the view that the contract entered into between the assessee and the Director General of Supplies and Disposals, Government of India, cannot be held to be a contract of sale. Accordingly it directed the assessing authority to delete the disputed turnover and to give them appropriate reliefs including refund of excess tax if any paid. This order of the Sales Tax Appellate Tribunal is under challenge. 2. We heard learned counsel appearing for the Revenue, Sri T. Karunakaran Nambiar. The assessee-respondent is not represented in this Court. 3. The short question that arises for consideration is whether the contract entered into between the assessee-respondent on the one hand and the Director General of Supplies and Disposals, Government of India, on the other was a contract for work and labour or whether it was a contract for sale of goods. 4. In Chandra Bhan Gosain v. State of Orissa [1963] 14 STC 766 the Supreme Court considered the difference between a contract of sale and a contract for work. 4. In Chandra Bhan Gosain v. State of Orissa [1963] 14 STC 766 the Supreme Court considered the difference between a contract of sale and a contract for work. In that case, the land belonging to the Hindustan Steel Private Ltd., was given free to the appellant-company for making bricks by appropriating the earth dug from that land. The appellant made bricks using the earth from that land and sold it to the company. As per the terms of the agreement the bricks so manufactured were to remain at the appellant's risk till delivery to the company. The contention raised by the company was that the contract was not one for sale but was one for work. Repelling that contention, their Lordships found the contract to be a contract of sale on the ground that it was a contract for the transfer of chattels qua chattels since the essence of the contract was the delivery of bricks. Again in Patnaik and Company v. State of Orissa [1965] 16 STC 364, a Constitution Bench of the Supreme Court had considered the question whether the contract entered into between the appellant and the State was one for work and labour or whether it was a contract for sale of goods. In that case the appellant was to build bus bodies on chassis supplied to it by the Government. Sikri, J., speaking for the majority, observed that the vital question to be gone into for ascertaining the true nature of the contract, one has to examine who the owner of the chattel is ? His Lordship observed : "Suppose a fire were to take place on the premises of the appellant and before delivery the bus bodies were destroyed or spoilt. On whom would the loss fall ? There can only be one answer to this question and that is that the loss would fall on the appellant. Clause 1 of the agreement provides for insurance of the chassis but there is no provision regarding insurance of bus bodies. Therefore, it follows that till delivery is made, the bus bodies remain the property of the appellant. It could, if it chose to do so, replace parts or whole of the body at any time before delivery. It seems to us that this is an important indication of the intention of the parties." 5. Therefore, it follows that till delivery is made, the bus bodies remain the property of the appellant. It could, if it chose to do so, replace parts or whole of the body at any time before delivery. It seems to us that this is an important indication of the intention of the parties." 5. The relevant clauses in the contract entered into between the assessee and the Director General of Supplies and Disposals, Government of India, are extracted in extenso in the order of the Tribunal. In the contract the Government of India has been described as the "purchaser" and the assessee as the "contractor". The construction of hull is to be carried out under the strict supervision of the Inspector of Shipping. He had the power to instruct the contractor to make variations during the execution of the contract. The contractor was obliged to provide adequate opportunity to the Inspector of Shipping to supervise the execution of the contract at all stages of the work. If the Inspector finds any work to be defective, the purchaser had the right to reject the same and to get it substituted at the cost of the contractor. The contract further enabled the purchaser to declare the same to have come to an end in case it is found that the contractor is unable to perform the work. Clause 18 of the contract enjoined the contractor to take insurance in the name of the purchaser. Under clause 19, the contractor is bound to provide for the care and protection of the work, machineries, etc. As per clause 20, after the completion of the work the purchaser is to take over the craft on issue of a taking over certificate. Clause 22 related to the ownership of materials on payment of first instalment, etc. After considering these clauses in the contract, the Tribunal came to the following conclusion : "When we analyse the terms and conditions of the agreement executed between the original assessee and the Director General of Supplies and Disposals, we have to come to the conclusion that here also, the principal object is to construct the crafts under the direct control and supervision of the authorities concerned and even the raw materials and part of manufactured craft have been remaining the property of the Government of India and not the contractor. So, the principles laid down in Patnaik and Company's decision [1965] 16 STC 364 (SC) has little application here while the other rulings especially the Hindustan Aeronautics' case [1984] 55 STC 314 (SC) and Variety Body Builders' case [1976] 38 STC 176 (SC) (quoted above) are applicable to the facts of the case before us. The Supreme Court itself has distinguished and has summed up the difference in their observations in Variety Body Builders' case [1976] 38 STC 176 (SC) quoted above. So, we have to come to the conclusion that the nature of the contract is one of work and labour. The other terms and conditions are only ancillary to the main object of the contract and as such the transactions are not exigible to tax under the Central Sales Tax Act, even though there is movement of goods from one State to another." We are unable to agree with the above conclusions for the following reasons. 6. As per the terms of the contract entered into between the parties, payments were to be made by the purchaser at various stages of the construction. The first instalment, 15 per cent of the value is to be paid when keel is laid. As the work progresses further instalments are to be paid. The entire amount is thus divided into five or six instalment depending on the nature of the craft. As per clause 18 of the contract, the contractor has to get the vessel insured in the name of the purchaser, before the payment of the first instalment is actually effected. As the work progresses further instalments are to be paid. The entire amount is thus divided into five or six instalment depending on the nature of the craft. As per clause 18 of the contract, the contractor has to get the vessel insured in the name of the purchaser, before the payment of the first instalment is actually effected. The relevant provision is : "The contractor shall immediately upon the granting by the Inspector of his certificate that the contractor is entitled to the first instalment and before payment by the purchaser of the first instalment of the contract sum, at his own cost and expense insure (in a company approved by the Inspector) against loss or damage by fire and accident, in the name of the purchaser the vessel and also the engines, boilers, machinery, and fitting thereof for the full term of the contract, and until delivery at institution, one of work of the most respectable officers in India to be approved of by the purchaser to the full value thereof, and when as the work shall be so advanced as to entitle the contractor to payment of the subsequent instalments then and previously to receiving each such instalments the contractor shall insure in like manner the works, and materials for the full term of the contract on the additional amount of each such instalment." This provision has been construed by the Tribunal as one making the Government of India the owner of the materials and of the part of the manufactured craft. According to us the above provision of the contract, only provides for protecting the amounts advanced by the purchaser towards part payments made for the value of the craft. As and when instalments are paid, the purchaser wanted to have those amounts protected by the contractor taking insurance to the extent of the amounts received by him against loss. This insurance cover of the amounts advanced to the contractor, will not in any way go to make the purchaser the owner of the craft or machinery which is in the course of construction. This insurance cover of the amounts advanced to the contractor, will not in any way go to make the purchaser the owner of the craft or machinery which is in the course of construction. Clause 19, inter alia, provided that the contractor shall be in charge of and entirely responsible for the care and efficient protection and working of the vessel, and all the machinery and things supplied and connected with it, until the said vessel and machinery, boilers and other things have been tried and accepted by the purchaser as satisfactory under the conditions of the order. This provision makes it abundantly clear that the contractor continues to be the owner of the craft and all the articles attached to it. It is further provided in unmistakable terms, that in case the vessel or part thereof is destroyed or damaged by fire or otherwise, the contractor has to rebuild or repair the same at his cost. For the said purpose it is provided that he may make use of the money that is received from the insurance company. Clause 22 dealing with the ownership of materials on payment of first instalment reads as follows : "Upon payment of the first instalment of the contract price, the vessel so far as then constructed and all machinery and materials either wholly or partially constructed or in preparation and set apart from time to time for the purpose of the contract shall become and shall, with all additions thereto, respectively continue to be the property of the purchaser subject to the purposes of the contract; but the purchaser shall not be liable for any loss or damage by theft, fire, stress of weather or otherwise howsoever. Upon the due completion of contract all such materials which have not been actually used for the purpose of contract shall become the property of and be relinquished to the contractor." According to us, this provision is to the effect that the craft under construction will continue to be the property of the purchaser on payment of the first instalment subject to the other provisions in the contract. As stated earlier the moment instalment are paid, the contractor is obliged to take insurance cover for that amount to safeguard the interest of the purchaser. That will not in any way make the purchaser the owner of the craft. As stated earlier the moment instalment are paid, the contractor is obliged to take insurance cover for that amount to safeguard the interest of the purchaser. That will not in any way make the purchaser the owner of the craft. This is further clear from clause 22 itself which states that the purchaser shall not be liable for any loss or damage by theft, fire, stress of weather or otherwise howsoever, since the contract provides that the loss or damage on account of theft, fire, stress of weather or otherwise is to be borne by the contractor himself. We have no hesitation in holding that the contract was one for sale of the vessel. This view is further strengthened by the fact that the purchaser was not supplying any material for the construction of the craft. In these circumstances, we hold that the contract entered into between the assessee-respondent and the Director General of Supplies and Disposals, Government of India, was one for a contract of sale of hulls. The contrary view taken by the Tribunal is illegal and we reverse the same. In the result, the tax revision case is allowed, the order of the Sales Tax Appellate Tribunal dated 25th September, 1982 is reversed and the order of the assessing authority as confirmed by the Additional Appellate Assistant Commissioner in S.T.A. No. 596 of 1978 is restored. We make no order as to costs. Petition allowed.