Transfer of property in goods during works contracts can be taxable even when chemicals are consumed in effluent treatment.

Chemicals used in effluent treatment under a works contract were treated by the majority as taxable transfer of property in goods under the Kerala General Sales Tax Act, 1963, read with Article 366(29A)(b), because the chemicals were owned by the assessee and their property passed to the awarder when poured into the effluent. The fact that they were later consumed and left no trace did not prevent the transfer from being taxable. The dissent treated the chemicals as consumables merely used up in the process, with no transfer of property in goods, and considered their value deductible as consumables in works contracts.

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Issues: Whether chemicals used in effluent treatment under a works contract were consumables used up in the process, or whether their use amounted to transfer of property in goods exigible to sales tax under the Kerala General Sales Tax Act, 1963.

Analysis: The majority held that the statutory scheme, including Article 366(29A)(b) of the Constitution and the charging and definitional provisions of the Act, permits levy of tax where property in goods involved in a works contract is transferred, whether as goods or in some other form. The chemical mixture used for effluent treatment was found to be goods owned and used by the assessee, and the property in those goods passed to the awarder when they were poured into the effluent. The fact that the chemicals were thereafter consumed and left no trace in the treated water did not prevent the transfer from being a taxable transfer. The majority treated the case as one of transfer of goods in the course of execution of a works contract and relied on the principle that consumption after transfer does not negate sale.

Conclusion: The use of the chemicals constituted a taxable transfer of property in goods involved in the execution of a works contract, and the issue was answered against the assessee.

Dissenting Opinion: The dissent held that the chemicals were only consumables used up in the process of effluent treatment, that no transfer of property in goods occurred either as goods or in any other form, and that the value of the chemicals was deductible under the provision dealing with consumables used in works contracts.

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