Contractual supply of building materials can be a taxable sale when ownership passes to the contractor on delivery.

Supply of building materials by a contractee to a contractor for use in construction may amount to a sale where the contract makes the materials the contractor's property on supply and makes their value recoverable from the contractor. The controlling factor is the contractual terms governing ownership and liability, not merely the form of the works arrangement. If the contract does not preserve the contractee's ownership and the materials pass to the contractor for value, the transaction is treated as a sale rather than a mere custody or trust arrangement, and sales tax is attracted accordingly under the U.P. Sales Tax Act.

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Issues: Whether the supply of building materials by the contractee to the building contractor for use in construction work amounted to a sale liable to sales tax.

Analysis: The decisive factor was the terms of the contract governing supply and use of materials. On the wording of the agreement, the materials supplied became the contractor's property on supply and the value of such materials was chargeable to the contractor. The arrangement was not confined to a mere custody or trust for use by the contractor, nor was it a case where the contractee retained ownership throughout. The principle applied was that, even where the parties do not intend a conventional sale, a sale may nevertheless be embedded in the transaction if property in the goods passes to the contractor on supply for use in the work.

Conclusion: The supply of building materials constituted a sale and was liable to tax under the U.P. Sales Tax Act.

Ratio Decidendi: Where the contract provides that materials supplied by the contractee become the contractor's property and their value is recoverable from the contractor, the transaction amounts to a sale and not a mere supply for works.

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