K.M. Joseph, Judge.

1. The matter comes up before us on the basis of a Reference by a Division Bench. We extract the Order of Reference as hereunder:

“The question raised is whether the service rendered by the petitioner in the form of chemical treatment of effluent water for the awarder amounts to sale of goods in the execution of works contract. Petitioner has developed a chemical product by name “Envirofloc” which is used as a chemical for effluent treatment. During the years 1988-99 and 1989-90, or which the issue arises, the petitioner carried out pollution control treatment for Madura Coats Limited, Korratty, which is a known company engaged in manufacture of yarn. There may be massive pollution of water on account of dye-application on yarn. In the course of effluent treatment entrusted to the petitioner, the petitioner applies the chemical Envirofloc and it either gets used up in the treatment of effluent water probably by neutralizing colour, ordour, etc. Petitioner’s case is that no transfer or sale has taken place in the execution of works contract. The department’s case is that material is consumed in the process of effluent treatment and it gets transferred in the course of such treatment and there is sale of goods involved in the execution of works contract which under the definition includes processing, preparing, improvement etc. Counsel for the petitioner cited before us the decision of the Division Bench of this Court in The Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. M.K.Velu (89 STC 40), wherein this Court following the decision of Patna High Court held that there is no sale of goods in the display of fireworks done by the contractor on behalf of the awarder. Even though this Court has followed the decision of the Patna High Court in the case of pest control, strangely the definition of works under KGST Act is not referred to by Division Bench in their judgment. Another decision of this Court cited by counsel for the petitioner is that of a single Bench in Dynamic Industrial and Cleaning Services (P) Ltd. V. State of Kerala & Anr. (1994 (2) KLT 188 = (1995) 97 STC 564) which is a case of cleaning of boiler with cleaning aids, which the Court found not taxable under the Act. The Government Pleader cited latest decision of the Supreme Court In Tata Consultancy Services v. State of Andhra Pradesh (2005 (1) KLT SN 13(C.No.15) SC = (2004) 137 STC 620), and B.S.N.L. & Anr. V. Union of India & Ors. (2006 (3) KLT SN 45(C.No.64) SC = (2006) 145 STC 91) wherein the Supreme Court followed the case in Associated Cement Companies Ltd. v. Commissioner of Customs ((2001) 124 STC 59) and the case reported in Rainbow Colour Lab & Anr. v. State of Madhya Pradesh (2000 (2) KLT SN 13 (C.No.15) SC= (2000)118 STC 9). It was held by the Supreme Court that in order to attract sales tax, there need not be transfer of any tangible goods. The contract of the nature arising in this case also involves two stages. One supply of goods and the other services rendered with such goods. The petitioner utilizes the chemical for treatment of the effluent and brings out an improvement of the effluent quality, conform it with the parameters prescribed by Pollution Control Board for the awarder to retain their licence. Certainly it is processing of the effluent done by the petitioner with the materials used by him. The point of transfer of goods to the awarder is by way of appropriation to the contract, that is the application of the materials in the water which brings out the desired result, though in the process it gets consumed. Petitioners cited a Division Bench decision of this Court in Ajanta Colour Lab v. State of Kerala (1999(2) KLT 445) and another judgment of this Court in Southern Cable And Engineering Works v. State of Kerala (2002 (1) KLT SN 56(C.No.67). We feel these judgments do not reflect the correct law by virtue of later decisions of the Supreme Court referred above. Moreover, peti