Purchase tax under A.P. sales tax law did not apply to building materials used by works contractors in construction.

Section 6-A of the A.P. General Sales Tax Act fastens tax on purchases from unregistered dealers only when the statutory conditions are met. In the case of works contractors using building materials in execution of construction work, the later view was followed that such materials are not consumed in the manufacture of other goods for sale, and the expression "consumed otherwise" does not extend to that use. Mere use of materials in construction was also held not to amount to disposal otherwise than by way of sale, because disposal requires parting with or transferring the goods to another. On that basis, the contractors were not liable to tax on the materials used.

---

---

Issues: Whether the petitioners, being works contractors purchasing materials from unregistered dealers, were liable to tax under section 6-A of the A.P. General Sales Tax Act on the footing that the goods were consumed otherwise or disposed of otherwise than by way of sale.

Analysis: Section 6-A fastens tax liability on a dealer who purchases taxable goods from an unregistered dealer if one of the stated conditions is satisfied. The clause relating to consumption covers goods consumed in the manufacture of other goods for sale or consumed otherwise. The Court followed the later view that, in the case of contractors using building materials in the execution of works, the materials are not consumed in the manufacture of other goods for sale and the expression does not extend to such use so as to attract liability. The Court also rejected the contention that mere use of materials in construction amounts to disposal of the goods otherwise than by way of sale, since disposal implies parting with the goods or transfer of the goods to another.

Conclusion: The petitioners were not liable to tax under section 6-A on the materials used by them in the construction work, and the third contention was accepted in their favour.

---