Contract-use exemption limited to goods forming part of the work; machinery and a contractor under an indivisible works contract were excluded.

Goods qualify for the contract-use exemption only when they are actually used as materials in the work and form part of the contract itself; earth-moving machinery, trucks and allied consumables that merely facilitate performance do not meet that test, so tax-free purchase treatment was unavailable. A contractor executing an indivisible earthwork contract was also not a dealer for the claimed relief after the statutory definition was amended to omit persons executing contracts, and such a contract did not involve a sale of materials by the contractor. The exemption claim was therefore denied on both issues.

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Issues: (i) Whether earth-moving machineries, motor-trucks, spares, diesel oil, lubricants, tyres, tubes and flaps used to facilitate execution of an earthwork contract could be entered in the registration certificate for purchase free of tax under the Act. (ii) Whether a contractor executing an indivisible earthwork contract was a dealer entitled to claim the benefit of the exemption for goods used in execution of a contract.

Issue (i): Whether earth-moving machineries, motor-trucks, spares, diesel oil, lubricants, tyres, tubes and flaps used to facilitate execution of an earthwork contract could be entered in the registration certificate for purchase free of tax under the Act.

Analysis: The statutory scheme allowed tax-free purchase only of goods specified in the certificate as intended for resale or for use in the execution of a contract. The expression "for use in the execution of the contract" was held to contemplate goods that are actually used as materials in the work itself and form part of the contract work. Machinery, trucks and similar equipment, though essential for carrying on the contract and used to facilitate performance, remain the contractor's property and do not bodily go into the work. They are therefore outside the contemplated exemption.

Conclusion: The claim was not sustainable and the question was answered in the negative.

Issue (ii): Whether a contractor executing an indivisible earthwork contract was a dealer entitled to claim the benefit of the exemption for goods used in execution of a contract.

Analysis: The definition of "dealer" in the Act originally included a person who executes any contract, but the subsequent amendment by Orissa Act XVIII of 1959 omitted the words "executes any contract or" from section 2(c). In light of that legislative change, and the principle that an indivisible works contract does not involve a sale of materials by the contractor, the contractor was not within the statutory definition of dealer for the relevant relief.

Conclusion: The contractor was not a dealer for the purpose of the claimed benefit and the question was answered in the negative.

Final Conclusion: The reference was answered against the assessee on both questions, and the statutory exemption claimed for the machinery and allied goods was denied.

Ratio Decidendi: Goods qualify for the contract-use exemption only when they are actually used as materials in the work and form part of the contract itself; machinery and equipment that merely facilitate performance do not satisfy that test.

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