Works contract materials supplied by Government were taxable sale when cost was deducted from contractors' bills.

Supply of cement, steel, bricks and similar materials by a Government department to contractors, with the cost deducted from running bills, was held to constitute a taxable sale under the U.P. Trade Tax Act, 1948. The Court applied the statutory definition of sale, which includes transfer of property in goods involved in execution of a works contract, and treated the contractual supply arrangement as more than an internal adjustment. Because the Government is a dealer under the Act and the admitted clause showed transfer of materials for the work, the supply attracted tax liability. The Tribunal was held to have erred in treating the transaction as non-taxable.

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Issues: Whether supply of cement, steel, bricks and similar materials by a Government department to contractors, with the cost deducted from the contractors' bills, constituted a taxable sale under the U.P. Trade Tax Act, 1948.

Analysis: The definition of sale under Section 2(h) of the U.P. Trade Tax Act, 1948 includes transfer of property in goods involved in the execution of a works contract. The Court applied the principle that where materials are supplied under a contractual arrangement similar to the clause considered by the Supreme Court in N.M. Goel, the transaction is not a mere internal accounting entry but involves transfer of property in the goods used in execution of the work. The Act also treats Government as a dealer under Section 2(c)(iv), and the admitted contractual clause showed that the materials supplied to the contractors remained part of the contractual arrangement attracting tax liability.

Conclusion: The question was answered in favour of the Revenue. The Tribunal erred in holding that the supply of materials did not amount to sale liable to tax.

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