Contractual supply of construction materials can be taxable sale where true terms show independent transfer for consideration.

Supply of steel, cement and similar materials to contractors was treated as a taxable sale where the contract, properly construed, showed a distinct sale for consideration rather than mere departmental use of materials in works execution. Clauses requiring economical use, return of surplus material, or recovery at agreed rates did not, by themselves, negate sale when the goods were appropriated against contractor bills. The tax revisions before the Andhra Pradesh High Court therefore failed on merits. In the U.P. Sales Tax matter, the remand order was upheld because the revised proceedings were not shown to be illegal, and the matter was sent back for fresh decision on the contractual terms and evidence after notice.

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Issues: (i) Whether supply of steel, cement and other materials by the employer to contractors under the terms of the construction contracts constituted a sale exigible to sales tax; (ii) whether the revisional and remand proceedings in the U.P. Sales Tax matter were valid and whether the Tribunal's remand direction could be interfered with.

Issue (i): Whether supply of steel, cement and other materials by the employer to contractors under the terms of the construction contracts constituted a sale exigible to sales tax.

Analysis: The turnover becomes taxable only if the contract, on true construction, contains a distinct stipulation for sale of the very goods supplied for monetary consideration. The presence of clauses requiring economical use, accounting, return of surplus or unserviceable material, and recovery at agreed rates did not, on the facts found, prevent the transactions from being treated as sales where the materials were supplied against deduction or adjustment from contractor bills and the contract showed appropriation of goods for the works. The contractual terms were held materially similar to those considered in the earlier controlling decision, and the distinctions suggested by the assessees were rejected.

Conclusion: The supply of materials to the contractors was held to constitute a sale and was held exigible to sales tax; the tax revision cases were dismissed.

Issue (ii): Whether the revisional and remand proceedings in the U.P. Sales Tax matter were valid and whether the Tribunal's remand direction could be interfered with.

Analysis: The controversy turned on whether materials supplied by the Commission to contractors retained the character of stock held for the Commission or amounted to sale, and whether the additional material relied upon in revision could be examined with due notice. The order of remand was not found illegal, but the substantive question of taxability had to be decided on the contractual terms and the governing legal principles. On those terms, the materials were treated as supplied for execution of works and not as passing by way of taxable sale on the facts established before final reconsideration.

Conclusion: The remand direction was sustained, but the matter was sent back for fresh decision in accordance with law and after notice to the parties.

Final Conclusion: The judgment disposed of the batch of matters in two ways: the Andhra Pradesh tax revisions failed on merits, while the U.P. revision was remitted for reconsideration on the contractual and evidentiary material, with the legal test turning on the true nature of the supply arrangement rather than mere recovery entries or return clauses.

Ratio Decidendi: Supply of materials to a contractor is taxable as a sale only when the contract, properly construed, shows an independent sale for consideration and not merely a bailment or incidental use of departmental materials in execution of works.

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