Introduction

The case of ‘The Commissioner of commercial Taxes v. Hindustan Aeronautics

limited is a sales Tax case challenging the validity Of Madras Sales Act section 24. As per
that act anything which is done on sale in the execution of the works for a peice where the
materials may be used in though not accessory to the execution of the contract. The question
in the present case as to a contract is a contract of work or a contract of sale is the subject
matter on the precedents on the subject. The decided cases gave an authority for the subject
and gave a well-defined but the application of those principles to individual cases often
possess a difficulty. The object of the parties is of the necessity to be deduced from the terms
of contract.1

In the present case of the following points the courts has possessed for the
following points as to which a case to be determined by the works contract or a sale of goods
contract (i) Whether and if so to what extent the assesse has drawn advance payment from the
Railway Board in respect of the material utilized for completing the contracts in question; (ii)
Whether any material, in respect of which no advance have been drawn, has been utilized by
the assesse- for completing the contracts; and (iii) Whether the assesse has used for
completing the contracts any material not specifically procured for the, purposes of
completing the contracts."2

Standing Indemnity for advance payment against contract relating to Railway

Board's order for construction and delivery of all metal for the construction of the Railway
coaches was supplies by the Railways itself. Whether this situation as according to the
situation fall in the works contract and if it falls where is the distinction between the sales of
goods contract. The purpose of the pending and future contracts and the advances made and
to be made are without prejudice to the provisions of the contract.

The Court came to the conclusion that whether or not as per the invoice singed
between the parties as the case is to be followed in the works contract, the appeal is to be
dismissed on the grounds that the materials is to supplied by the railway company itself.

1 CONTRACT OF WORK Vs. A CONTRACT OF SALE By Mr. M. Govindrajan Available at

https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=893.
2 The Commissioner of commercial Taxes v. Hindustan Aeronautics limited 1972 AIR 744.