Employer-supplied materials for construction are not sales where ownership stays with the employer and no transfer passes to contractors.

Supply of building materials by an employer to contractors for execution of its own construction work was not a sale where ownership in the materials remained with the employer and did not pass to the contractors. Charges added for supervision, storage, or later account adjustment did not alter the essential character of the transaction. The same principle applied even where there was no written agreement, because the materials continued to belong to the employer and the arrangement remained incidental to construction. Accordingly, the supplies were not liable to sales tax and did not make the employer a dealer in respect of those materials.

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Issues: (i) Whether the supply of building materials by the assessee to its contractors under written agreements amounted to sales liable to sales tax. (ii) Whether the supply of building materials to the contractors without written agreements amounted to sales and rendered the assessee a dealer.

Issue (i): Whether the supply of building materials by the assessee to its contractors under written agreements amounted to sales liable to sales tax.

Analysis: The materials were procured by the assessee for use in constructing its own buildings and roads and were supplied to contractors only for execution of the construction work. The agreement made the materials the absolute property of the employer, and the ownership in the materials did not pass to the contractors. The additional 10 per cent charged over cost was only for supervision and storage and was later adjusted in accounts. These features showed that the transaction was not one of sale.

Conclusion: The supplies under the written agreements did not amount to sales and were not liable to sales tax.

Issue (ii): Whether the supply of building materials to the contractors without written agreements amounted to sales and rendered the assessee a dealer.

Analysis: The absence of written agreements did not alter the essential character of the transaction. The materials continued to belong to the assessee, and the clause dealing with unused materials only protected the assessee's interest and regulated account adjustment. Since there was no transfer of ownership to the contractors, the assessee was not carrying on a business of selling building materials and could not be treated as a dealer in respect of these supplies.

Conclusion: The supplies without written agreements did not amount to sales, and the assessee was not a dealer in respect of those supplies.

Final Conclusion: The judgment holds that mere supply of materials by an employer to contractors for use in constructing the employer's own works does not become a taxable sale where property does not pass and the transaction is only incidental to execution of the construction contract.

Ratio Decidendi: A supply of goods to a contractor is not a sale for sales tax purposes unless the property in the goods passes to the contractor; charges for supervision, storage, or account adjustment do not by themselves convert such a supply into a sale.

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