IMPORTANT POINT
In works contract, for the goods supplied to the contractor by the Union of India and price recovered from the contractor by way of adjustment of value of such goods, held to be a contractor transferred price, is liable to levy of Sales Tax.

JUDGMENT

Santosh Hegde, J.-These appeals involving similar questions of law are preferred against the judgment of the High Court of Judicature for Rajasthan at Jodhpur made in different Sales Tax, Revision Petitions, Writ Petitions and Review Petitions filed before it challenging the demand of Sales Tax made under Rajasthan Sales Tax Act, 1994 (the local Act ).

2. In these petitions certain issues pertaining to interpretation of provision of Article 285 of the Constitution of India, as also the interpretations of the provisions in the local Sales Tax Act are raised. The High Court having rejected the contentions of the appellants in this regard, the appellants are in appeal before us.

3. These matters came to be referred to a larger bench by an order of two Judge Bench on 25.9.2003. Since, according to the said Bench the question involved in the appeals are of an important nature.

4. The constitutional question involved in these petitions pertains to the authority of the State to levy Sales Tax on the Union on its transaction of supply of materials to its contractors. The contentions is based on the exemption granted under Article 285 of the Constitution.

5. The statutory question involved in these appeals pertains to the question whether a supply of materials by the Union of India to its contractors under agreements of works contract would amount to a sale so as to attract the provision of the Sales Tax Act.

6. Since the appeals before us involve similar questions, we will refer to the facts in C.A.Nos. 8540-8544 of 2001 for brevity. The Union through its agency Central Public Works Department (CPWD) undertook the work of erection of barbed wire fencing along Indo Pak boarder from 1991 onwards in the State of Rajasthan. In order to get the construction work done the appellant awarded contracts to various contractors and under the terms and conditions of the said contract it had agreed to supply the contractors materials such as cement, barbed wire, M.S. angles etc. It is pleaded that the appellant purchased the materials from various reputed concerns on payment of consideration and the said transactions were subjected to Sales Tax leviable at that stage. It is further stated that the very same goods were in turn supplied to the contractors and value of the said goods were adjusted in the final bills of the contractors, it is contended that since the appellant issued materials to the contractors at fixed issue rates, the said supply did not amount to "Sale" because the contractor never became owner of such materials but remained only as a "Custodian" of such materials and used them on creation of immovable properties for completing the contracted job. In such circumstances, it is contended that there is no element of sale, therefore, the appellant Union can not be treated as a `dealer under the Act nor it can be subjected to the levy of Sale Tax. The next contention in this regard is assuming for argument sake there would be some sort of a sale, the property so transferred being the property of the Union of India, under Article 285 of the Constitution of India the State has no authority to impose a tax on the property of the Union.

7. By the impugned judgment and orders the High Court of Rajasthan has rejected both the contentions advanced on behalf of the appellants and has held that the transfer in question amounted to sale as defined under the Act and the State tax being not a direct tax on the property of the Union as contemplated under Article 285 of the Constitution the same is liable for levy of Sales Tax.

8. In these appeals number of Advocates appearing for the appellants have commonly contended that in view of the exemption provided in Article 285 of the Constitution, it is not open to the State to tax the property of the Union, therefore, the transferred material being the property of the Union of India, the same is not exigible to any State taxation.

9. The argument that supply of materials to the contractors does not am