Deemed sale in works contracts cannot trigger double taxation where goods have already suffered tax under sales tax law.

Goods used as inputs in a works contract may fall within the deemed-sale fiction under article 366(29A), but the levy remains subject to the constitutional limits governing sales tax. Goods already taxed or otherwise exempted under the State sales tax regime cannot be taxed again merely because they are transferred in the execution of a works contract. The assessment was set aside because the authority had not verified the taxpayer's factual claim that the rubber products used in tyre retreading had already suffered tax at the first point of sale. The matter was remitted for verification of that claim and fresh disposal in accordance with law.

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Issues: Whether goods used as basic inputs in the execution of a works contract can be subjected to tax again as deemed sale when they have already suffered tax at the point of first sale under the State sales tax law.

Analysis: Clause (29A) of article 366 enlarges the concept of tax on the sale or purchase of goods to include transfer of property in goods involved in the execution of a works contract, but the levy remains subject to the constitutional discipline applicable to sales tax. The reasoning in Builders Association of India and Gannon Dunkerley establishes that the States may tax the deemed sale component in a works contract, yet the value of goods already exempted or already taxed under the State regime cannot be taxed again merely because they are used in a works contract. On the facts pleaded, the petitioner asserted that the rubber products used in tyre retreading had been locally purchased and had already suffered tax at the first point of sale, but that factual assertion had not been verified by the assessing authority before making the assessment.

Conclusion: The same goods cannot be subjected to tax a second time merely because their transfer occurs in a deemed sale under a works contract. The assessment and demand were therefore set aside, and the matter was remitted for verification of the petitioner's factual claim and fresh disposal in accordance with law.

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