Transportation contracts are not works contracts under the TVAT Act; mere carriage of goods does not create tax liability.

A contract for transporting goods from one place to another does not, by itself, amount to a sale or works contract under the TVAT Act because there is no transfer of property in the goods, either directly or by legal inference. The statutory deeming fiction that expands transfer of property in goods for works contracts cannot be extended to ordinary transportation contracts. Transportation charges may form part of the value of goods only in a proper works-contract setting, but a transporter carrying goods for a consignor or consignee is not liable to tax on that basis. Tax deducted from transporters on this footing was therefore illegal and liable to be quashed.

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Issues: Whether a contract for transportation of goods amounts to a sale or works contract so as to attract value added tax under the TVAT Act.

Analysis: The definition of sale under section 2(25) of the TVAT Act covers transfer of property in goods, including specified deemed sales such as works contracts, hire-purchase transactions and transfer of the right to use goods. A pure contract for transporting goods from one place to another does not involve transfer of property in the goods, either directly or by inference. The statutory expansion of the expression transfer of property in goods in the context of works contracts cannot be extended to ordinary transportation of goods. Transportation charges may, in a proper case, form part of the value of goods in the hands of a person executing a works contract, but the transporter is not liable to pay tax merely for carrying goods on behalf of the consignor or consignee.

Conclusion: A transportation contract is not a sale or works contract for the purpose of tax under the TVAT Act, and tax deducted from the transporters was held to be illegal and liable to be quashed.

Ratio Decidendi: Mere transportation of goods does not amount to transfer of property in goods, and the deeming fiction applicable to works contracts cannot be extended to fasten tax liability on a transporter.

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