Sale by transfer of possession and valuable consideration governs Modvat credit where goods move for job work.

For purposes of Modvat credit, the discussion centres on whether goods moved for job work, rather than by outright sale, can still satisfy the statutory definition of sale under Section 2(h). Transfer of possession in the ordinary course of trade or business is essential, but it must also be supported by cash, deferred payment, or other valuable consideration. The analysis notes that the lower authorities treated continued ownership in the raw materials as decisive, without fully examining whether the transfer, despite no change in title, was nonetheless for valuable consideration. The matter was remanded for fresh adjudication in accordance with law.

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Issues: Whether the disallowance of Modvat credit on the basis that the goods were moved for job work and not by way of sale was sustainable, and whether the transaction satisfied the definition of sale by transfer of possession for valuable consideration.

Analysis: The dispute turned on the meaning of sale under Section 2(h), where transfer of possession in the ordinary course of trade or business for cash, deferred payment, or other valuable consideration is essential. The record showed that the lower authorities proceeded on the footing that ownership in the raw materials remained with the supplier and therefore no sale had taken place. The issue whether the transfer of goods, even without change in title, was supported by valuable consideration and could still answer the statutory definition had not been examined fully on the available facts.

Conclusion: The matter required re-examination by the original authority, and the disallowance was not finally upheld; the appeals were remanded for fresh adjudication in accordance with law.

Ratio Decidendi: For the purpose of the statutory definition, transfer of possession is the essence of sale, but it must also be supported by valuable consideration.

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