HINDUSTAN AERONAUTICS LIMITED vs STATE OF KARNATAKA

The Supreme Court held that contracts for servicing and reassembling I.A.F. planes, which included the supply of materials by the contractor only if not provided by the owner, do not constitute sales contracts under the Karnataka Sales Tax Act. The Court clarified that the distinction between a contract of service and a contract for sale hinges on the ownership of the materials used, emphasizing that in service contracts, the contractor does not retain property in the materials used. The appeal was allowed, overturning the lower courts' classification of the contracts as composite contracts attracting sales tax.