Judgment

HEGDE, J.-These appeals by special leave arise from the decision of the High Court of Madhya Pradesh in references made to that Court under Section 44 of the Madhya Pradesh General Sales Tax Act, 1958 (to be hereinafter referred to as the Act).

2. The sole question that arose for decision in those references was whether the transactions referred to in those references are sales within the meaning of the Madhya Pradesh General Sales Tax Act, 1958 or whether they were merely works contracts. The High Court has opined that they were works contracts and as such the turnovers relating to those transactions are not liable to be taxed under the Act.

3. The facts material for the purpose of deciding these appeals are : The assessee entered into two contracts with the S. E. Railway for breaking stones and supplying ballast. Under the 1st contract he was to break stones into ballast and supply approximately 60,00,000 cubic feet of ballast at Rs. 27/6/- per cubic feet. Under the second contract, he was to supply in small slacks of a specified size at a flat rate of Rs. 35/- per 100 cubic feet. The general and special conditions of those contracts were the same. The quarry from which the stones were to be quarried belonged to the railway administration. The assessee was merely to quarry stones from those quarries, break them into pieces of specified size and supply them to the railway administration. During the assessment period commencing from April 1, 1958 to March 31, 1959, the assessee had received Rs. 19,162.50P. and Rs. 21,000/-respectively for the works done under the aforementioned two contracts. The total amount of Rs. 40,162.50P. so received was treated by the sales tax authorities as the price of the material supplied and the assessee was taxed on that turnover and further penalty was levied on him under Section 18(6) of the Act. During the assessment period, April 1, 1959 to March 31, 1960, the assessee under two different contracts, similar to those mentioned earlier received a sum of Rs. 37,728.13P. from the S. E. Railway. The sales tax authorities have levied tax on the said turnover and further have levied penalty on the assessee under Section 18(6).

4. The main features of the contracts with which we are concerned in these appeals are: (1) the assessee was to quarry stones from the quarries belonging to the South Eastern Railway and (2) he was to break those stones into pieces and convert them into ballast of a specified size and thereafter supply them to the S. E. Railway, prima facie, the S. E. Railway was the owner of the ballast. The assessee s duty was only to do some work on the stones belonging to the S. E. Railway administration. Hence it is difficult to accept the contention of the sales tax authorities that the transactions in question are sales within the meaning of Section 2(n) of the Act. Section 2(n) reads:

" Sale with all its grammatical variations and cognate expressions means any transfer of property in goods for cash or deferred payment or for other valuable considerations and includes a transfer of property in goods involved in the supply or distribution of goods by a society or club or any association to its members, but does not include a mortgage, hypothecation, charge or pledge and the word Purchase shall be construed accordingly."

From the above definition, it is clear that before a transaction can be considered as a sale, there must be a transfer of property in goods. Without such a transfer, there cannot be any sale. In the instant case, quite clearly, the property in the ballast, at all relevant times was with the S. E. Railway. The ballast was never the property of the assessee. Therefore there was no question of the assessee transferring any property in them to the S. E. Railway. Hence it is not possible to uphold the contention of the department that there was any sale within the meaning of Section 2(n) of the Act. If there was no sale, the penalty imposed cannot be sustained.

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