Works contract materials supplied by Government and adjusted against bills can constitute a taxable transfer of property in goods.

Materials supplied by the contractee-Government under a works contract, with their value adjusted against the contractor's bills, were treated as a taxable transfer of property in goods. The materials remained Government property until used for the contract, could not be diverted to other purposes, and were appropriated in execution of the work for consideration by way of set-off or adjustment. Earlier decisions under the same statutory scheme, as approved by the Supreme Court, had held that such appropriation constitutes a sale and brings the transferred value within taxable turnover. The levy of purchase tax under section 6C was therefore sustained.

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Issues: Whether materials supplied by the contractee-Government under clause 10 of the works contract, with their value adjusted against the contractor's bills, constituted a taxable sale attracting purchase tax under section 6C of the Bengal Finance (Sales Tax) Act, 1941.

Analysis: The agreement showed that the materials were supplied for a specific purpose, remained Government property until used, could not be diverted to other purposes, and their value was deducted from sums due to the contractor. The earlier decisions on the same statutory scheme had held that where goods supplied by the contractee are appropriated in execution of the works contract and the price is recovered by adjustment or set-off, there is a sale and the transferred value forms part of taxable turnover. The issue was already settled by the Supreme Court, which had approved the view that use or consumption of such materials in the work brings about transfer of property for consideration and attracts sales tax.

Conclusion: The supply of materials under the contract amounted to a taxable transfer of property in goods, and the levy under section 6C was sustained against the petitioner.

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