Composite works contract cannot be split into a deemed sale without a distinct sale of specific goods for price.

A composite contract for installation work with supply and fixing of electrical goods could not be split into a separate sale for sales tax purposes unless there was a distinct contract for sale of specific goods for a price and property in those goods passed under that contract. Materials consumed in execution of work did not become taxable as a sale merely because they were supplied and used. The authorities had no finding of a separate sale contract and could not reconstruct one from a consolidated works contract. On that basis, the attempted separation was held invalid, the assessment orders were set aside, and the deposited amounts were refundable.

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Issues: Whether a composite contract for installation work with supply and fixing of electrical goods could be split into a separate sale of goods for sales tax purposes, and whether such a reconstructed sale was sustainable in the absence of a finding of a contract for sale of specific goods for a price.

Analysis: A contract for execution of work which involves supply of materials consumed in the course of performance cannot be treated as a sale merely because materials were supplied and used in the work. A sale can be sustained only where there is a contract for sale of specific goods for a price and the property in those goods passes pursuant to that contract. On the facts found, the authorities below recorded no finding of such a distinct contract of sale, but proceeded to reconstruct one from a composite works contract carrying a consolidated payment. That approach was impermissible.

Conclusion: The attempted separation of the contract into a works contract and a sale contract was invalid, and the orders based on that approach could not be sustained.

Final Conclusion: The revision petitions succeeded, the impugned assessment orders were set aside, and the petitioner obtained refund of the amounts deposited.

Ratio Decidendi: In a composite works contract involving supply and consumption of materials, sales tax can be imposed only if there is a distinct contract for sale of specific goods for a price and a passing of property in those goods under that contract; such a sale cannot be artificially reconstructed from the works contract itself.

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