Works contract purchases attract purchase tax only when the goods are integral to business; capital assets do not automatically qualify.

A building contractor executing an indivisible works contract is not automatically a dealer in respect of every purchase made for that contract under section 2(11) of the Bombay Sales Tax Act, 1959. Purchase tax under section 13 applies only where the purchaser is a dealer buying goods in the course of business from a non-registered seller and the statutory conditions are met. Purchases that are indispensable and integral to the works activity may fall within the business of buying goods, but capital assets such as motor trucks used to carry materials do not, without more, satisfy that test. On that reasoning, no purchase tax was payable on the trucks.

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Issues: Whether a building contractor executing an indivisible works contract, with reference to purchases made for its execution, is a dealer carrying on the business of buying goods within the meaning of section 2(11) of the Bombay Sales Tax Act, 1959, and consequently liable to purchase tax under section 13.

Analysis: The statutory definition of dealer requires carrying on the business of buying or selling goods. The scheme of the Act shows that purchase tax under section 13 is attracted only when the purchaser is a dealer, is liable under section 3, buys from a non-registered dealer, and does not resell within the prescribed period. A works contract is itself a business activity, and purchases indispensable for its execution may form an integral part of that business. But that principle does not extend to every purchase made during the course of a works contract. Where the goods are of capital nature, such as motor trucks used as accessories for carrying materials, and are not shown to be purchased with the initial intention of being consumed as part of the business activity, they do not bear the necessary imprint of the business of buying goods for the purpose of section 2(11).

Conclusion: The contractor was not a dealer in respect of the purchase of the trucks, and no purchase tax was payable on those purchases.

Final Conclusion: Liability to purchase tax in a works contract depends on whether the particular purchase is indispensable and integral to the business activity; capital assets purchased for carrying on the contract do not, by that fact alone, make the contractor a dealer in the goods purchased.

Ratio Decidendi: For purchase tax to arise on purchases made in execution of a works contract, the goods must be indispensable to and integrated with the business activity so as to constitute buying in the course of business; mere purchase of capital assets or goods not intended for such integral consumption does not satisfy the definition of dealer.

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