Property in goods must pass for price before a supply is treated as a taxable sale.

Supply of raw materials by an assessee to its constituent units for making shoes and boots was analysed as a transaction for sales tax purposes under the U.P. Sales Tax Act. The arrangement showed that the assessee controlled the supply, retained the materials' ownership, and received no price at the time of transfer; surplus materials could be returned or dealt with as directed, and the members were paid only manufacturing value after deducting material cost. Mere book entries describing the arrangement as a sale did not alter its true legal character. On these facts, property in the raw materials did not pass to the members, so the supply was not a taxable sale.

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Issues: Whether the supply of raw materials by the assessee to its constituent units for manufacture of shoes and boots constituted a sale liable to sales tax under the U.P. Sales Tax Act.

Analysis: The arrangement showed that the assessee bought the materials, supplied them to its members under its own direction, and no price was actually paid at the time of supply. The materials, when surplus, were returned or transferred as directed by the assessee, and the finished shoes were not found to be independently sold by the members in the market. The assessee made no profit on the supply of raw materials, while the members were paid only the manufacturing value after deducting the cost of materials. Mere book entries describing the transaction as a sale did not determine its legal character. On these facts, the property in the raw materials did not pass to the members.

Conclusion: The supply of materials was not a sale and was not liable to sales tax under the U.P. Sales Tax Act.

Ratio Decidendi: A transaction is not a sale for sales tax purposes unless property in the goods passes for price, and book entries or labels used by the parties cannot override the true legal character of the arrangement.

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