Article 285 does not bar sales tax on Union-supplied materials where a works contract amounts to a taxable sale.

Article 285 does not bar sales tax on materials supplied by the Union to contractors because it protects Union property from direct taxation, not indirect tax on a taxable sale. The Court treated the contract as involving transfer of property in goods on use and consumption in construction, with consideration satisfied by adjustment in bills, so the transaction amounted to a sale under the Rajasthan Sales Tax Act, 1994. On that footing, the Union fell within the statutory definition of dealer for levy purposes. The separate single-point tax objection was left to the competent authorities if not already concluded.

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Issues: (i) Whether Article 285 of the Constitution of India barred levy of sales tax on materials supplied by the Union to its contractors. (ii) Whether the supply of materials under the contract amounted to a sale under the Rajasthan Sales Tax Act, 1994 and the Union could be treated as a dealer.

Issue (i): Whether Article 285 of the Constitution of India barred levy of sales tax on materials supplied by the Union to its contractors.

Analysis: Article 285 protects Union property from direct taxation, but not from indirect taxes. Sales tax is an indirect tax attracted on the act of sale, not a direct tax on the property itself. The constitutional exemption therefore does not disable the State from levying sales tax on a taxable transaction merely because the materials belonged to the Union before transfer.

Conclusion: The contention based on Article 285 failed and the levy was not unconstitutional.

Issue (ii): Whether the supply of materials under the contract amounted to a sale under the Rajasthan Sales Tax Act, 1994 and the Union could be treated as a dealer.

Analysis: The contract terms showed that materials were supplied for use in execution of the work and their value was adjusted in the contractors' bills. On use and consumption in the construction work, property in the goods passed and consideration moved by adjustment of bill amounts. That satisfied the statutory notion of sale. Once the transaction was a sale within the Act, the Union fell within the definition of dealer for the purposes of the levy. The separate contention relating to single-point tax was not finally adjudicated and was left to the competent authorities if not already concluded.

Conclusion: The supply of materials constituted a sale and the Union was liable to be treated as a dealer under the Act.

Final Conclusion: The appeals were liable to fail because the constitutional objection and the challenge to the taxable nature of the transaction were both rejected.

Ratio Decidendi: Article 285 bars only direct taxation on Union property and does not prevent sales tax on a transaction where property in materials passes to the contractor for consideration under a works contract.

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