Judgment ( 1. ) THE decision rendered in this case shall govern disposal of other connected case being M. C. C. No. 571 of 1998 because both these cases involve same point and secondly both these cases arise between the same parties. ( 2. ) THIS is a sales tax reference made Under Section 44 (1) of the M. P. General Sales Tax Act, 1958 (since repealed) at the instance of Revenue (Commissioner of Sales Tax) to this Court in Reference Case No. 38-PBR/91 and 39-PBR/91 which arise out of an order dated November 26, 1990 passed by the Division Bench of the Tribunal (Board of Revenue) in Appeal Nos. 98 and 99/111/1987 to answer following question of law arising out of the decision rendered by Board/tribunal in aforementioned two appeals: "whether, under the facts of the case, the Tribunal is right in holding that the transaction of supply, erection, commissioning and trial production undertaken by the dealer was a composite works contract but not a sale as chattel as a chattel?" ( 3. ) IN order to appreciate the question involved and referred few relevant facts need mention from the statement of case drawn by the Tribunal to this Court. ( 4. ) THE respondent is an assessee (dealer ). They are engaged in the business of manufacture and sale of what is called "pulverisers and separators". In the financial year 1982-83, the assessee supplied three pulverisers to three different parties, namely (i) Harish Limpo Cement Products--Dalauda, for Rs. 30,600; (ii) Padmanibha Mineral Industries, Ramganj Mandi, Rajasthan, for Rs. 35,000 and (iii) Godavari Minerals and Chemicals, Andhra Pradesh, for Rs. 30,421. The composite price mentioned in the respective invoices included its erection and commissioning charges at the site of customers plant/unit. ( 5. ) THE question arose before the taxing authorities (assessing officer) about the taxability of these three transactions. According to assessee all the three transactions referred supra were of the nature of composite works contract and hence, did not amount to sale thereby not attracting any liability to pay sales tax on any of the transactions in question. ( 5. ) THE question arose before the taxing authorities (assessing officer) about the taxability of these three transactions. According to assessee all the three transactions referred supra were of the nature of composite works contract and hence, did not amount to sale thereby not attracting any liability to pay sales tax on any of the transactions in question. However, the contention of the Revenue, i. e. , taxing authorities was that the three contracts in question being essentially in the nature of sale of chattel (pulverisers and separators) by an assessee to its customers, the same amounts to sale and hence, attracts the liability to pay sales tax under the Act. It is essentially this question which was gone into before the taxing authorities. ( 6. ) THE assessing officer rejected the contention of the assessee A and by order (annexure-B) held that transaction in question amounts to sale and hence, attracts liability to payment of sales tax. This view was upheld by the appellate authority by order (annexures C-l/c-2 ). However, in second appeal filed by an assessee to Tribunal (Board of Revenue), their contention was accepted and accordingly, the Tribunal allowed the appeal. It was held that the contracts in question being composite contract for supply, erection and commissioning of pulverisers including its trial after commissioning, the same do not result in sale of chattels and hence, there arise no liability on assessee to pay any sales tax on these transactions. It is against this view, the Revenue felt aggrieved and prayed for reference to this Court. The Tribunal (Board of Revenue) accepted the prayer made by the Revenue and accordingly made reference to this Court Under Section 44 (1) ibid, on the question referred supra. This is how this question has been referred to this Court for answer by this Court. ( 7. ) HEARD Shri Amit Agrawal, learned Government Advocate, for the Revenue and Shri P. M. Choudhary, learned Counsel for the assessee. ( 8. ) SUBMISSION of learned Counsel for the Revenue in substance was that the view taken by Board does not appear to be correct. ( 7. ) HEARD Shri Amit Agrawal, learned Government Advocate, for the Revenue and Shri P. M. Choudhary, learned Counsel for the assessee. ( 8. ) SUBMISSION of learned Counsel for the Revenue in substance was that the view taken by Board does not appear to be correct. According to learned Counsel, if the nature of contract, and its terms are considered in its right perspective and in the light of the law laid down by the Supreme Court in the case reported in [1978] 42 STC 409 (Sentinel Rolling Shutters and Engineering Company Pvt. Ltd. v. Commissioner of Sales Tax) then the question has to be answered in favour of Revenue rather than in favour of assessee. In other words, the submission was that it is a contract of sale of chattel and not a works contract and hence attracts payment of sales tax by an assessee. In reply, learned Counsel for the assessee supported the view taken by the Board and urged for answering the question against the Revenue and in favour of the assessee. ( 9. ) HAVING heard learned Counsel for the parties and having perused record of the case, we are inclined to answer the question against the Revenue and in favour of the assessee/dealer. In other words, we are inclined to uphold the reasoning/view taken by the Board as in our opinion it is in accord with the test laid down by the Supreme Court in decided cases. ( 10. ) THE question, as to whether particular contract is a contract of sale or a contract of work and labour, i. e. , works contract is always considered to be a vexed one. Indeed, it is so observed by their Lordships of the Supreme Court in one of its classic decision rendered in the case of Sentinel Rolling Shutters and Engineering Company Pvt. Ltd. v. Commissioner of Sales Tax [1978] 42 STC 409. It is in this case, their Lordships examined the legal issue and laid down certain guidelines as to how and in what way, the issue of this nature should be examined by all courts in country. It is in this case, their Lordships examined the legal issue and laid down certain guidelines as to how and in what way, the issue of this nature should be examined by all courts in country. It is useful to quote in extenso the test laid down by the Supreme Court while deciding the nature of contract and its taxability in the hands of assesses/dealer: It may be pointed out that a contract where not only work is to be done but the execution of such work requires goods to be used may take one of three forms. The contract may be for work to be done for remuneration and for supply of materials used in the execution of the work for a price; it may be a contract for work in which the use of materials is accessory or incidental to the execution of the work; or it may be a contract for supply of goods where some work is required to be done as incidental to the sale. Where a contract is of the first type, it is a composite contract consisting essentially of two contracts, one for the sale of goods and the other for work and labour. The second type of contract is clearly a contract for work and labour not involving sale of goods, while the third type is a contract for sale where the goods are sold as chattels and some work is undoubtedly done, but it is done only as incidental to the sale. No difficulty arises where a contract is of the first type, because it is divisible and the contract for sale can be separated from the contract for work and labour and the amount payable under the composite contract can be apportioned between the two. The real difficulty arises where the contract is of the second or third type, because in such a case it is always a difficult and intriguing problem to decide in which category the contract falls. The dividing line between the two types of contracts is somewhat hazy and thin partitions do their bounds divide. But even so the distinction is there and it is very much real and the court has to perform at times the ingenious exercise of distinguishing one from the other. The dividing line between the two types of contracts is somewhat hazy and thin partitions do their bounds divide. But even so the distinction is there and it is very much real and the court has to perform at times the ingenious exercise of distinguishing one from the other. The distinction between a contract for sale and a contract for work and labour has been pointed out in Halsburys Laws of England, Third Edition, Volume 34, Article 3, at page 6, in the following words: A contract of sale is a contract whose main object is the transfer of the property in, and the delivery of the possession of, a chattel as a chattel to the buyer. Where the main object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one for work and labour. The test is whether or not the work and labour bestowed end in anything that can properly become the subject of sale; neither the ownership of the materials, nor the value of the skill and labour as compared with the value of A the materials is conclusive, although such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract is in substance one for work and labour or one for the sale of a chattel. The primary test is whether the contract is one whose main object is transfer of property in a chattel as a chattel to the buyer, though some work may be required to be done under the contract as ancillary or incidental to the sale or it is carrying out of work by bestowal of labour and service and materials are used in execution of such work. A clear case of the former category would be a contract for supply of air-conditioner where the contract may provide that the supplier will fix up the air-conditioner in the premises. Ordinarily a separate charge is provided in such contract for the work of fixing up but in a given case it may be included in the total price. Such a contract would plainly be a contract for sale because the work of fixing up the air-conditioner would be incidental to the sale. Ordinarily a separate charge is provided in such contract for the work of fixing up but in a given case it may be included in the total price. Such a contract would plainly be a contract for sale because the work of fixing up the air-conditioner would be incidental to the sale. Then take a contract for constructing a building where considerable quantity of materials is required to be used in the execution of the work. This would clearly be a contract for work and labour and fall within the latter category. But, as we pointed out earlier, there may be, and indeed as the decided cases show, there are a large number of cases which are on the border-line and it is here that difficulty is often experienced in the application of this primary test. To resolve this difficulty, the courts have evolved some subsidiary tests. One such test is that formulated by this Court in Commissioner of Sales Tax, Madhya Pradesh v. Purshottam Premji [1970] 26 STC 38 where it has been said: 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 property in the thing produced as a whole. . . . 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 relating thereto to the other party for price. This was the test applied by this Court in State of Rajasthan v. Man Industrial Corporation [1969] 24 STC 349 for holding that a contract for providing and fixing four different types of windows of certain sizes according to specifications, designs, drawings and instructions set out in the contract was a contract for work and labour and not a contract for sale. This Court, speaking through Shah, J. , analysed the nature of the contract and pointed out: A The contract undertaken by the respondent was to prepare the window leaves according to the specifications and to fix them to the building. There were not two contracts--one of sale and another of service. This Court, speaking through Shah, J. , analysed the nature of the contract and pointed out: A The contract undertaken by the respondent was to prepare the window leaves according to the specifications and to fix them to the building. There were not two contracts--one of sale and another of service. "fixing" the windows to the buildings was also not incidental or subsidiary to the sale, but was an essential term of the contract. The window-leaves did not pass to the Union of India under the terms of the contract as window-leaves. Only on the fixing of the windows as stipulated, the contract could be fully executed and the property in the windows passed on the completion of the work and not before. The contract was not for transfer of property in the window-leaves as window-leaves. It was a contract for providing and fixing windows and windows could come into existence only when the window-leaves were fixed to the building by bestowing labour and skill. It was, therefore, held to be a works contract. The same reasoning was applied by this Court in State of Rajasthan v. Nenu Ram [1970] 26 STC 268 (SC), for holding that a contract for supply and fixing or wooden doors and windows with sashes and frames and wooden chawkhats in the Police Lines building was a contract for work and labour. Let us, therefore, apply this test in order to determine what is the nature of the contract in the present case: is it a contact for sale or a contract for work and labour? ( 11. ) INDEED, it is this test which was applied by their Lordships in the facts of the case involved before them in Sentinels case AIR1978 SC 1747 , (1978 )4 SCC260 , [1979 ]1 SCR644 , [1978 ]42 STC409 (SC ), 1978 (10 )UJ766 (SC ), and it was accordingly, held by their Lordships that the contract in question that fell for consideration before them is a contract for work/labour, i. e. , it is a works contract. As a matter of fact, the Board too in this case rightly applied this very test in finding out the true nature of contract of supply which is subject-matter of this case and accordingly, returned a finding of fact in favour of assessee holding that the contracts in question are indivisible in nature and being a works contract do not amount to sale of chattel as such. ( 12. ) IT is clear from the order passed by Tribunal in second appeal that it has recorded a finding in clear terms that the contracts in question (3 in number) are composite in nature, that all the three contracts are indivisible, that they are executed for commissioning and erection of machines at the site of customer and that liability of assessee is also to ensure that equipment is put to trial after erection at the site. In other words, the Tribunal examined in detail, the nature of contracts entered into between the parties with a view to ascertain the intention of the parties for implementing the contracts in question. It is then the finding was returned that the contracts in A question are of a nature which can be styled as composite contract for supply, erection and commissioning of pulverisers. ( 13. ) IN our considered view, the reasoning assigned by the Tribunal cannot be faulted with as it is in accord with the test laid down by the Supreme Court in the case of Sentinels case [1978] 42 STC 409. When the contracts in question do not mention the break up of pricing, when it charges composite and/or consolidated sum for the whole work, when it is not for supply/sale of goods only but it is also for commissioning, erection as also for operation of the unit sold then in our opinion, such contract cannot be regarded as one only for c sale of chattel. In other words, in such state of affair, it becomes a works contract and hence, cannot be subjected to payment of sales tax at the hands of assessee/dealer. ( 14. ) LEARNED Counsel for the Revenue next contended that since the assessee had obtained C forms in two contracts and hence, the contracts (2) in question be regarded as sale rather than the works contract. We do not agree to this submission. ( 14. ) LEARNED Counsel for the Revenue next contended that since the assessee had obtained C forms in two contracts and hence, the contracts (2) in question be regarded as sale rather than the works contract. We do not agree to this submission. In the first place, in order to examine the nature of contract, the intention of parties has to be gathered from all surrounding circumstances and not from one circumstance. Secondly, obtaining of C form in this case as rightly observed by Tribunal was for abundant caution and the same was not given effect to and lastly, all other circumstances appearing in the transactions do indicate that it was in the nature of works contract. ( 15. ) LEARNED Counsel for the Revenue as also assessee placed reliance on several decisions of the Supreme Court and High Court in support of their contentions. We have taken note of these decisions. In our opinion, it is not necessary to refer to any of them because the issue in question has to be decided on the basis of law laid down by the Supreme Court in the case of Sentinels case [1978] 42 STC 409. That apart, all the decisions relied on by the learned Counsel are already referred to and discussed by the Supreme Court in Sentinels case [1978] 42 STC 409. It is also for this reason we do not consider it necessary to refer to each case. ( 16. ) WE are however inclined to accept the submission of learned Counsel for the assessee when he contended that the question referred to this Court proceeds on the basis that factual findings are not assailed by the Revenue in so far as they relate to nature and composition of contracts in question. In other words, the Revenue has not made any attempt to question the correctness of the factual finding recorded by the Tribunal in favour of the assessee because no such question on that issue is referred to this Court. This Court, therefore, cannot examine de novo the nature of contract as such on facts/terms of contract but has to proceed on the basis of factual findings recorded by the Tribunal in assessees favour for answering the question referred. ( 17. This Court, therefore, cannot examine de novo the nature of contract as such on facts/terms of contract but has to proceed on the basis of factual findings recorded by the Tribunal in assessees favour for answering the question referred. ( 17. ) LEARNED Counsel for the Revenue then next contended that contracts in question were not reduced in writing and hence, it is difficult to hold as to whether it is a works contract. In any case, learned Counsel contended that from the documents (invoices/bills) brought on record and which were made basis for determining its nature, it is clear that it is a contract meant for sale of chattel and not a works contract. We do not agree to this submission. In the first place as observed supra, no question of law is referred to this Court on this issue for answer at the instance of the Revenue which would have enabled this Court to examine this question in detail. Secondly and assuming for the sake of argument, that this issue can be brought within the forecorners of question referred to this Court then in our opinion, we respectfully concur with the reasoning assigned by the Tribunal while interpreting the three invoices relied upon by the assessee. ( 18. ) IN our opinion, in order to discern the intention of the parties, it is not necessary to have the contract in writing. The intention can be gathered even from correspondence exchanged inter se parties which results in creation of concluded contract. In this case, the three invoices were made basis for interpreting the nature of contract. These three invoices did constitute the valid contract inter se parties and contained all necessary conditions for interpreting the nature of contract for deciding the question of taxability. Indeed, it was so made basis by the Tribunal for determining the question referred. ( 19. ) IN view of foregoing discussion, we answer the question referred to us against the Revenue and in favour of the assessee. In other words, we hold that Tribunal was right in holding that the transaction of supply, erection, commissioning and trial production undertaken by the dealer was a composite works contract but not a sale as chattel. No costs.