Construction material supplies under contract treated as sales, and a purchase-tax exemption could not defeat sales tax liability.

Contractual supply of building materials to contractors and fabricators under agreed rates, with value adjusted against contract dues and ownership retained until use, constituted a sale under the Madhya Pradesh General Sales Tax Act, 1958. Applying the contractual terms and the governing sale definition, the Court held the assessee was a dealer and the transactions were taxable. The exemption notification in question applied only to purchase tax on specified goods used in construction for Government or public sector bodies; it did not extend to sales tax and could not be widened by implication. The assessee was therefore not entitled to exemption, and the tax liability on the disputed supplies was upheld.

---

---

Issues: (i) Whether the supply of building materials by the assessee to contractors and fabricators for construction of buildings amounted to a sale liable to tax under the Madhya Pradesh General Sales Tax Act, 1958. (ii) Whether the assessee could claim exemption under Notification No. 2990-3935-V-ST dated 17 September 1977 in respect of such supplies.

Issue (i): Whether the supply of building materials by the assessee to contractors and fabricators for construction of buildings amounted to a sale liable to tax under the Madhya Pradesh General Sales Tax Act, 1958.

Analysis: The liability depended upon the contractual terms governing supply of materials. The agreement showed that materials were supplied by the assessee at agreed rates, the value was adjusted against dues, and the materials remained the property of the assessee until used under the contract. Applying the Supreme Court's construction of an identical contractual clause and the definition of sale, the Court held that the ingredients of sale were satisfied. The assessee was therefore a dealer and the transactions were taxable.

Conclusion: The supply of materials constituted a sale and was liable to sales tax. This issue was decided against the assessee and in favour of the Revenue.

Issue (ii): Whether the assessee could claim exemption under Notification No. 2990-3935-V-ST dated 17 September 1977 in respect of such supplies.

Analysis: The notification granted exemption only from purchase tax on specified goods purchased by a dealer for use in construction work for Government or public sector bodies. It did not exempt sales tax, and its operation was confined to cases where purchase tax could otherwise arise. Since the Court had held that the assessee's transactions amounted to sales, the notification did not extend to the assessee's liability. The notification could not be expanded by implication to cover sales tax.

Conclusion: The assessee was not entitled to exemption under the notification. This issue was decided against the assessee and in favour of the Revenue.

Final Conclusion: The reference was answered entirely against the assessee, and the tax liability on the disputed supplies was upheld.

Ratio Decidendi: Where contractual supply of materials under a construction arrangement involves agreed transfer for value with adjustment against contract dues, the transaction is a sale; a notification exempting only purchase tax cannot be invoked to defeat sales tax liability.

---