1. The real question which arises to be considered in this reference is whether the repairing work done by the assessee-opponent M/s. Asha Watch Co., amounts to a works contract or a composite contract for doing labour work as well as supplying materials.
2. Short facts which give rise to this reference are as under : The opponent-assessee M/s. Asha Watch Co., is a firm registered under the Bombay Sales Tax Act, 1959 (hereinafter referred to as 'the Act'). It deals in watches, timepieces and clocks and also undertakes repairing works. On 27th September, 1957, the concerned Sales Tax Officer, on some information, seized the account books of the assessee and thereafter passed assessment orders enhancing the turnover of sales and purchases. He further found that during the assessment years 1954-55 and 1955-56, the assessee had undertaken repair works from different customers and during the course of these repair works, it had utilised certain spare parts for the purpose of carrying out the repairs. The bills, which were supplied by the assessee to these different customers, were composite bills for the labour work done as well as for the materials utilised, but these bills, admittedly, did not specifically state what were the labour charges and what were the charges for the spare parts, which were utilised in carrying out the repairs. So far as the assessment year 1954-55 is concerned, it is for the period from 1st April, 1954, to 31st March, 1953, and the aggregate amount of all the bills prepared by the assessee in this manner comes to Rs. 9,881. So far as the assessment year 1955-56 is concerned, it is from 1st April, 1955, to 31st March, 1956, and the aggregate amount of the bills supplied by the assessee to its different customers comes to Rs. 7,833.
3. The Sales Tax Officer sought to tax both these aggregate amounts which also included labour charges. But in the appeal preferred by the assessee the Assistant Commissioner of Sales Tax bifurcated the labour charges and the price of the materials used during the course of the repairs and charged only that price for the purpose of levying sales tax. This action of the Assistant Commissioner was confirmed by the Deputy Commissioner, Sales Tax, in revision.
4. The contention of the assessee is that the contracts in question being purely works contracts, it has not rendered itself liable to pay any tax on the price of the materials which were used during the course of the repairs because the passing of the property in the materials to different customers was only incidental to the execution of the works contracts. The assessee, therefore, approached the Tribunal in revision and became successful, because the Tribunal, basing its judgment upon the decision given by the Supreme Court in the Government of Andhra Pradesh v. Guntur Tobaccos Ltd. ( 16 S.T.C. 240 (S.C.)), allowed the revision application and held that the materials which were utilised by the assessee during the execution of the repair works were not sold and the property in these materials passed only incidentally.
5. Being aggrieved by this decision of the Tribunal, the department has preferred this reference. The Tribunal has referred to this court, the following two questions for opinion :-
'(1) Whether on the facts and in the circumstances of the case contracts evidenced by the various bills aggregating to Rs. 9,881 for the assessment period from 1st April, 1954, to 31st March, 1955, and Rs. 7,833 for the assessment period from 1st April, 1955, to 31st March, 1956, enumerating without price the items of spare parts of watches constitute one and indivisible contract of works and labour for repairing work or a composite contract of both labour and sales of aforesaid spare parts under the provisions of the Bombay Sales Tax Act, 1959.
(2) If the answer of the first question is that the contract is a composite contract of material and labour whether such sales are liable to tax at their estimated price.'
6. The first question is the only important question which requires to be decided. It refers to the aggregate amount of the bills prepared by the assessee during both the assessment years. But it is an admitted fact that for the assessment year 1954-55 the value of the materials used by the assessee in execution of the repairing works comes to Rs. 2,591 while for the assessment year 1955-56 the same comes to Rs. 2,727. The question to be considered is what is the real nature of the contracts undertaken by the assessee. Now on this question the Tribunal has explained in its judgment that the modus operandi of the assessee was that as a customer went to him with a watch for repair, the watch was examined and a receipt was given showing repairs to be made and the lump sum to be charged. After the watch was repaired and the same was delivered back to its owner, a bill was made out. In this bill names of spare parts were mentioned. But they were issued for one lump sum without any bifurcation for labour charges and the value of the spare parts utilised during the course of the execution of the work. These facts show very clearly that the contracts were purely for labour and that, if, during the execution of these contracts, any materials were utilised by the assessee, the supply of these materials was merely incidental to the execution of the work undertaken by the assessee. If this is so, it cannot be said that the materials which were utilised in carrying out the repair works were sold by the assessee as 'materials'. The case would in that case be completely covered by the ratio of the decision of the Supreme Court in Government of Andhra Pradesh v. Guntur Tobaccos Ltd. ( 16 S.T.C. 240 (S.C.)). We may here refer to our own recent decision given by us in Sales Tax Reference No. 5 of 1969 on 9th November, 1970 (Since reported as Variety Body Builders v. Commissioner of Sales Tax, Gujarat  28 S.T.C. 339), where we have discussed this aspect of the matter at some length by referring to various decisions of the Supreme Court as well as this court.
7. Shri Shah however contended that during the course of the investigation by the Sales Tax Officer it was noticed that in the counterfoils which were maintained by the assessee, the assessee had bifurcated the value of the materials utilised during the course of the repair works and stated them separately in the counterfoils. According to Shri Shah, therefore, this fact would go to show that though the contracts for repair works were composite, the assessee had sold the materials used during the course of repairs, qua materials and, therefore, there was a sale as contemplated by the Act. We are not impressed with this contention of Shri Shah for the simple reason that if once it is held that the essential nature of the contract undertaken by the assessee was that of a works contract, then any calculations jotted down by the assessee in the counterfoils of the bills would not change the real character of the contract. We further find that the facts of Sarvodaya Motor Works v. The State of Gujarat ( 17 S.T.C. 261), which was decided by a Division Bench of this Court, were rather more favourable to revenue than the facts of the case under our consideration so far as this point is concerned. In that case, the assessees were carrying on the business of body-builders of motor chassis supplied by the customers. They entered into a contract with a firm for the construction of a body of a truck belonging to that firm. After the work was over, the assessees prepared two bills, one in respect of materials used for building the body and another for labour charges. On these facts the assessees contended that the contract in question was not a contract for sale of goods but was either (1) a purely works contract or (2) a composite agreement consisting of two distinct and separate contracts one for supply of materials and the other for doing work. On the construction of the terms of agreement between the parties, this court held that the assessees' contract in that case was one and indivisible contract for sale of goods and not a contract for work and labour. On the second contention of the assessee, namely, that it was a composite agreement consisting of two distinct and separate contracts, this court has observed as under :
'It is true that the applicants made out two bills, one for Rs. 1,900 for the materials used by them in the construction of the body, and another for Rs. 1,245 for work and labour done. But the fact that the applicants made out two bills and split up their claim against the customer would make no difference because under the contract what was payable to them was the lump sum of Rs. 3,021. The assessees splitting up of that amount in two bills would be hardly relevant because by dividing that amount or making out two bills they would not be able to change the nature of the contract.'
Here the case of the assessee is on a stronger ground inasmuch as the splitting is done by the assessee for his own knowledge in the counterfoils of the bills which were in his possession and not in the original bills, which were supplied to its customers. We further find that the facts of this case are greatly similar to the facts of another decision of this court in A. A. Jariwala and Bros. v. State of Gujarat ( 16 S.T.C. 942). Since we have considered even this decision in the above-referred Sales Tax Reference No. 5 of 1969 (Since reported as Variety Body Builders v. Commissioner of Sales Tax, Gujarat  28 S.T.C. 339), we do not propose to discuss the facts of that case in detail.
8. In view of this, our answer to the first question is that the contracts in question are indivisible contracts for work and labour for repairing work and not a composite agreement in which two contracts, one of labour and the other of supplying of materials is contemplated. So far as the second question is concerned it does not arise in view of the answer given by us to the first question. We accordingly dispose of this reference. The applicant-Commissioner shall bear the costs of the opponent-assessee in this reference.
Reference answered accordingly.