Composite construction contract without separate sale of materials cannot attract sales tax on goods used in the work.

A composite road construction contract did not amount to a separate sale of materials because the references to supply, stacking, spreading and laying of stones, gravel, metal and morrum showed only their use in execution of the work. No independent agreement for sale of the materials was proved, and the materials formed an integral part of the completed immovable property. Sales tax could not therefore be levied on the goods used in the construction, and the assessment was unsustainable. The assessment and appellate orders were quashed and the tax collected was directed to be refunded.

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Issues: Whether the construction contract involved a separate sale of materials so as to attract sales tax on the goods supplied in connection with the road construction.

Analysis: The agreement was for construction of a dual carriage way and the references to supply, stacking, spreading and laying of stones, gravel, metal and morrum showed only that those materials were to be used as part of the construction. There was no independent agreement for the sale of materials apart from the execution of the road work. The materials formed an integral component of the completed road, and the title to them passed only as part of the immovable property constructed.

Conclusion: No separate sale of materials was established and the assessment to sales tax on the goods used in the construction was unsustainable, in favour of the assessee.

Final Conclusion: The assessment and appellate orders were quashed and the tax collected was directed to be refunded.

Ratio Decidendi: Where materials are supplied only as an integral part of a composite construction contract and no independent sale of those materials is proved, sales tax cannot be levied on such materials.

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