Deemed sale in dyeing and printing applies when property in chemicals passes, even in small residual form.

Dyeing and printing of cloth are treated as involving deemed transfer of property in goods under the Works Contracts Act, because the statutory definition extends to goods transferred in any form, including chemical form, during execution of the contract. The dominant intention of the parties is not decisive once property in the materials passes to the customer. The article also states that the small or residual quantity of materials transferred does not take the transaction outside the Act, since taxability depends on passing of property in goods, not on the quantity transferred or the waste discarded.

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Issues: (i) Whether the processes of dyeing and printing of cloth involve transfer of property in goods so as to attract the Works Contracts Act; (ii) Whether the transfer being of a small or insignificant quantity of materials would take the transaction outside the Act.

Issue (i): Whether the processes of dyeing and printing of cloth involve transfer of property in goods so as to attract the Works Contracts Act.

Analysis: The statutory definition of sale under the Works Contracts Act extends to transfer of property in goods, whether as goods or in some other form, involved in the execution of a works contract. After the Forty-sixth Amendment, a works contract is treated as divisible to the extent of the goods involved, and the dominant intention of the parties is not decisive once property in goods passes. The coloured shade obtained on the fabric was held to represent the inherent chemical property of the dyes, colours and chemicals used in the process. The Court held that transfer in some other form includes transfer in chemical form, and that the residue thrown away as waste does not affect taxability once the property has passed to the customer.

Conclusion: The process of dyeing and printing does involve deemed sale of the materials used, and the Works Contracts Act applies.

Issue (ii): Whether the transfer being of a small or insignificant quantity of materials would take the transaction outside the Act.

Analysis: The Court held that the decisive factor under the Works Contracts Act is the passing of property in goods, not the quantity that passes. Once the property in the materials used in the execution of the works contract passes to the customer in any form, taxability follows. The fact that the coloured shade represents only a small or residual part of the solution was held to be irrelevant because the statute taxes the property that passes, not the balance that is discarded.

Conclusion: The insignificance of the quantity transferred does not exclude the transaction from the Act.

Final Conclusion: The reference was answered against the assessee and the process of dyeing and printing was held taxable as a works contract on the basis of deemed transfer of property in goods.

Ratio Decidendi: Under the Works Contracts Act, transfer of property in goods in any form, including chemical form, in the execution of a works contract constitutes deemed sale, and the taxability does not depend on the quantity transferred or on the dominant intention of the contract.

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