Quarry materials treated as sale where contractor acquired title on royalty payment and supplied goods as owner, not under a works contract.

On payment of royalty, a contractor who was permitted to work a State quarry, appropriate severed stones and chips, and supply them as owner acquired title before delivery; the transaction therefore answered the legal conception of a sale under section 2(g) and was exigible to tax. The contract was not a works contract because the arrangement was not mere labour or execution of work for the department: the contractor extracted and appropriated the goods, was not confined to supplying only to the department, and supplied them as owner. Both issues were decided in favour of the Revenue.

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Issues: (i) Whether the transaction between the assessee and the public works department constituted a sale exigible to tax; (ii) whether the contract for supply and stacking of stones and chips was a works contract.

Issue (i): Whether the transaction between the assessee and the public works department constituted a sale exigible to tax.

Analysis: The contract showed that the assessee was permitted to work the quarry belonging to the State, to appropriate the severed chips and stones, and to supply them for price. Royalty was payable for the right to exploit the quarry, and the Court treated royalty, in substance, as consideration for the goods obtained after severance and appropriation. On that footing, title to the chips and stones vested in the assessee before supply, so the transaction answered the legal conception of a sale under section 2(g) of the Act.

Conclusion: The transaction was a sale exigible to tax, in favour of the Revenue.

Issue (ii): Whether the contract for supply and stacking of stones and chips was a works contract.

Analysis: The Court held that the relevant contractual terms did not disclose a mere labour or works arrangement. The assessee was not simply executing work for the department; rather, he extracted and appropriated the goods on payment of royalty and then supplied them as owner. The contractual incidents, including the absence of any restriction on sale to others and the obligation to pay royalty, negatived the characterization of the arrangement as a works contract.

Conclusion: The contract was not a works contract, in favour of the Revenue.

Final Conclusion: The reference was answered by holding that the supply of stones and chips amounted to taxable sales and that the agreement was not a works contract.

Ratio Decidendi: Where a contractor, on payment of royalty, acquires title to severed quarry materials and supplies them as owner, the transaction is a sale and not a works contract.

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