Works contract in scrap conversion: entrusted metal returned as finished goods was held to be labour charges, not a sale.

Scrap metal entrusted by customers for melting and conversion into sheets and rings, with the finished goods returned in corresponding weight, was treated as a labour-and-workmanship arrangement rather than a sale. Because the assessee never acquired ownership in the scrap and there was no transfer of property from customer to assessee, no sale transaction arose on delivery of the converted goods. The amounts received were therefore conversion charges, not consideration for sale, and were not liable to sales tax. The suggested constitutional challenge to the definition of sale was unnecessary to decide.

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Issues: Whether the transaction under which the assessee received scrap metal from customers, converted it into sheets and rings, and returned the finished goods amounted to a sale or purchase liable to sales tax, or was merely a works contract for labour charges.

Analysis: The arrangement showed that the customer entrusted scrap metal to the assessee for melting and conversion into new sheets and rings, with the quantity of finished goods corresponding in weight to the scrap received. On those findings, there was no purchase of the scrap by the assessee and no transfer of property in the scrap from customer to assessee. Since the assessee never acquired ownership in the scrap, no sale could arise on delivery of the finished product. The amounts collected were, in substance, charges for conversion of old metal into new forms, and not consideration for a sale. The suggested constitutional challenge to the definition of sale was therefore unnecessary to decide.

Conclusion: The transaction did not amount to a sale and was not liable to sales tax.

Final Conclusion: The turnover representing the conversion charges was excluded from assessment, and the assessee obtained relief with costs.

Ratio Decidendi: Where scrap is entrusted by a customer to be converted into a finished article and the owner receives back the converted goods against the same quantity of material, the transaction is one of labour or workmanship and not a sale attracting sales tax.

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