Work and labour, not sale, governs customer-supplied yarn dyeing transactions and excludes sales tax.

Where a customer supplied yarn for dyeing and received the same yarn back on payment of charges, the Madhya Pradesh HC treated the arrangement as work and labour rather than a sale of goods. Because the principal materials remained the customer's property and the dyeing process merely added labour and materials by accession, no transfer of property in goods as such occurred. The relative proportion of material and labour did not change the legal character of the transaction. On that basis, the dyeing charges were not liable to sales tax, and the assessment treating the transactions as sales was set aside.

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Issues: Whether dyeing yarn supplied by customers and returning the dyed yarn on payment of charges constituted a sale liable to sales tax, or a contract of work outside the taxing provision.

Analysis: The yarn was supplied by the customer and returned in the same ownership, with colour imparted by the dyeing process. The dyeing materials became blended with the customer's goods, and the transaction was treated as one of work and labour rather than a sale of goods. The relative cost of materials and labour did not alter the legal character of the transaction, because no transfer of property in goods as such took place. The reasoning was reinforced by the principle that where the employer supplies the principal materials, the workman's additions vest in the employer by accession, not by sale.

Conclusion: The transaction was not a sale and was not chargeable to sales tax.

Final Conclusion: The revision applicant succeeded, and the assessment based on treating the dyeing transactions as sales was set aside.

Ratio Decidendi: Where a customer supplies the principal materials and the dealer merely applies work and materials to those goods, the transaction is a contract of work and labour and not a sale of goods.

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