Taxable sale of explosives to contractors upheld; concessional declaration failed and interest on tax shortfall was recoverable.

Supply of explosives by an assessee to contractors for use in mining operations was treated as a taxable sale under the Rajasthan Sales Tax Act, 1994 because property in the goods passed for consideration, including in the course of execution of the works arrangement. The fact that the explosives were consumed in the work, or that resale was restricted under the licence, did not alter the statutory character of the transfer. The assessee could not rely on concessional procurement declarations to avoid differential tax, as the goods were transferred to contractors rather than used by the assessee itself in the manner required. Interest was also held recoverable on the unpaid tax shortfall from the prescribed default date.

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Issues: (i) Whether supply of explosives by the assessee to its contractors for use in mining operations constituted a sale under the Rajasthan Sales Tax Act, 1994. (ii) Whether such supply could avoid tax as a subsequent or non-taxable sale, or because the explosives were procured at concessional rate against declaration. (iii) Whether interest was leviable on the differential tax amount.

Issue (i): Whether supply of explosives by the assessee to its contractors for use in mining operations constituted a sale under the Rajasthan Sales Tax Act, 1994.

Analysis: The statutory definition of sale included transfer of property in goods for consideration and also covered transfer of property in goods involved in execution of a works contract. The explosives were physically delivered to the contractors, their cost was recovered by adjustment from the contractors' bills, and the transaction was held to satisfy the ingredients of sale. The fact that the explosives were consumed in the mining work or that the assessee's licence restricted resale did not alter the statutory character of the transaction. A transaction may still be taxable even if it is not lawful in general law, because the taxing statute adopts its own definition.

Conclusion: The supply of explosives to the contractors was a sale within the meaning of the Act and was taxable.

Issue (ii): Whether such supply could avoid tax as a subsequent or non-taxable sale, or because the explosives were procured at concessional rate against declaration.

Analysis: The explosives were treated as goods procured for the assessee's mining activity at concessional rate, but the sale to the contractor took place before their use in the assessee's own mining operations. Since the goods were transferred for consideration to the contractor, the assessee could not claim that the goods were used by itself in the manner contemplated by the concessional provision. The declaration in the concessional form was therefore found to be wrongly given, and the statutory consequence was liability to the differential tax. The argument based on consumable items was rejected because explosives were not comparable to ancillary consumables like water, electricity, or fuel in the relevant works-contract context.

Conclusion: The assessee was not entitled to escape the differential tax and the concessional-declaration claim failed.

Issue (iii): Whether interest was leviable on the differential tax amount.

Analysis: The liability to pay tax arose by operation of law and was not dependent on assessment alone. Where tax payable under the Act was not paid to the extent due, interest followed under the interest provision from the prescribed date of default. As the assessee had paid only concessional tax and was found liable for the balance, interest on the shortfall was held payable.

Conclusion: Interest was rightly levied on the differential tax amount.

Final Conclusion: The revision petitions failed because the transfer of explosives to the contractors was a taxable sale, the concessional-declaration claim did not protect the transaction from differential tax, and interest on the unpaid balance was lawfully recoverable.

Ratio Decidendi: A transfer of goods to a contractor for consideration in execution of a works contract is a taxable sale under the Act, and the statutory tax character is not negated by restrictions under another law, consumption of the goods in the work, or the assessees attempt to treat the goods as used for its own purpose.

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