Deemed sale under works contract law applies only when property in goods is transferred, not when consumables are used up in performance.

Chemicals used in cleaning work were held not to attract sales tax as a deemed sale because the charging fiction under Explanation (3A) to section 2(xxi) operates only where property in goods is transferred in execution of a works contract. Where consumable materials are merely used up or extinguished in performing the work, no transfer of property occurs and the transaction remains labour-oriented rather than a works contract involving taxable sale of goods. On that footing, the cleaning chemicals were not treated as goods sold in any form, and the work was held not exigible to tax under the Act.

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Issues: Whether the chemicals used in the execution of the cleaning work, being consumed in the process and not transferred to the customer, attracted levy of sales tax as a deemed sale under Explanation (3A) to section 2(xxi) of the Kerala General Sales Tax Act, 1963.

Analysis: Explanation (3A) applies only where there is a transfer of property in goods involved in the execution of a works contract. Mere execution of a works contract is not enough; the taxable event is the transfer of property in goods. Where chemicals are used only as aids in performing the work and are consumed or extinguished in the process, no property in those goods passes to the other side. In such a situation, the work assumes the character of a labour-oriented contract rather than a contract involving transfer of goods. The statutory fiction of a deemed sale therefore does not operate.

Conclusion: The chemicals used for cleaning the boilers were not transferred as goods or in any other form, and the transaction did not amount to a sale liable to tax under the Act.

Final Conclusion: The writ petition succeeded, and the works undertaken by the petitioner were declared not exigible to tax under the Act.

Ratio Decidendi: Liability under the works contract deeming provision arises only when property in goods is transferred in the execution of the contract; consumable materials used up in performance without such transfer are outside the charging fiction.

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