Deemed sale under sales tax law applied to contractual supply of construction materials and explosives for use in works contracts.

Contractual supply of cement, steel and explosives to contractors at fixed rates, with the goods to be consumed in execution of the work and their value recovered from contractor bills, fell within the inclusive definition of sale under Section 2(m) of the Sikkim Sales Tax Act, 1983. The Court treated the arrangement as a deemed sale, covering transfer of property in goods involved in a works contract and transfer of the right to use goods. The petitioner's reliance on bailment principles was rejected because the agreements showed taxable supply rather than mere custody, and the cited authority on absence of transfer of the right to use goods was inapplicable. The assessment was therefore upheld.

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Issues: Whether the supply of cement, steel and explosives by the petitioner to its contractors under the project agreements constituted a sale within Section 2(m) of the Sikkim Sales Tax Act, 1983, so as to attract sales tax.

Analysis: Section 2(m) of the Sikkim Sales Tax Act, 1983 is an inclusive definition of sale and, for the present controversy, its sub-clauses covering transfer of property in goods involved in execution of a works contract and transfer of the right to use goods were material. The agreements showed that the petitioner supplied specified goods at fixed rates, the goods were to be consumed in the execution of the work, and the corresponding value was recovered from the contractors' bills. Such arrangements fell within the statutory concept of deemed sale. The Court distinguished the bailment-based situation relied upon by the petitioner and held that the cited authority on absence of transfer of right to use goods did not apply on these facts.

Conclusion: The supply of the goods under the agreements amounted to sale under Section 2(m) of the Sikkim Sales Tax Act, 1983, and the tax assessment was valid against the petitioner.

Final Conclusion: The writ petition failed because the transactions were held to be taxable sales in the nature of deemed sale arising from transfer of goods in a works contract and transfer of the right to use goods.

Ratio Decidendi: Where contractual supply of specified goods to contractors is made at fixed rates for use in execution of work and the value is recovered from the contractor, the transaction may constitute a deemed sale under the sales tax law if it answers the statutory description of transfer of property in goods involved in a works contract or transfer of the right to use goods.

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