Works contract materials retained by supplier are not sales; remand for fresh assessment was sustained.

Materials supplied under a works contract do not constitute a taxable sale where the contract shows that ownership remains with the supplier, unused materials must be returned, and deductions from running bills operate only as accounting adjustments for execution of the work. The Court also upheld a remand for fresh assessment, noting that the assessing authority could examine additional documents after notice and that the assessee would have an opportunity to meet the material relied upon. On that basis, the supplies were treated as outside the definition of sale under the Act and the remand direction was sustained.

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Issues: (i) whether supply of cement, steel and other materials by the Commission to its contractors under the contract amounted to a sale exigible to sales tax; (ii) whether the remand direction to the assessing authority and the consideration of additional documents offended natural justice or were otherwise without jurisdiction.

Issue (i): whether supply of cement, steel and other materials by the Commission to its contractors under the contract amounted to a sale exigible to sales tax

Analysis: The contract clauses showed that the materials supplied by the Commission remained its property, unused materials had to be returned, and the contractor was not free to dispose of them. The amounts recovered from running bills were treated as accounting adjustments for execution of the work, not as consideration for transfer of property in goods. The distinction drawn in the relied upon authorities was that a taxable sale requires transfer of property in the goods, whereas mere supply of materials for use in a works contract, with ownership retained by the supplier, does not satisfy the definition of sale under the Act.

Conclusion: The supply did not amount to a sale and was not exigible to sales tax.

Issue (ii): whether the remand direction to the assessing authority and the consideration of additional documents offended natural justice or were otherwise without jurisdiction

Analysis: The remand was directed so that the assessing authority could examine the relevant documents after notice to the parties and decide the matter afresh. The Court found no illegality in permitting such re-examination, since the assessee would get an opportunity to meet the material relied upon. The challenge that the revisional action could not proceed on subsequently noticed material did not warrant interference in the circumstances of the case.

Conclusion: The remand direction was upheld.

Final Conclusion: The revision was disposed of by sustaining the remand for fresh consideration, while affirming that the supplies of materials under the contract were not sales within the meaning of the Act and must be examined in the light of the binding legal principles indicated by the Court.

Ratio Decidendi: Where materials are supplied for execution of a works contract but ownership is retained by the supplier and unused materials must be returned, the transaction does not amount to a sale unless there is a transfer of property in the goods for consideration.

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