K. L. SHARMA, J. Both these revisions filed under section 11 of the U. P. Sales Tax Act, 1948 (recently designated as U. P. Trade Tax Act and hereinafter referred to as "the Act") involve common questions of law and facts and have been heard together and are being disposed of together by a common judgment. The S. T. R. No. 415 of 1992 relates to the assessment year 1986-87 under the Act and involves sales tax of Rs. 1,09,94,000 and the other S. T. R. No. 448 of 1992 relates to the assessment year 1985-86 under the Act and involves sales tax of Rs. 49,45,929 on the assessed turnover of Rs. 7,66,07,077. 2. The revisionist is a company (Government of India undertaking) controlled and managed by the Department of Fertiliser, Ministry of Agriculture, Government of India. The majority of the shares of this company are held by the Government of India and the balance shares subscribed by the States Level Co-operative Federation of 17 States of the country. This company has been established to manufacture and supply fertilisers to the agriculture sector of the country. The company obtained provisional registration under section 8-B of the Act during the assessment year 1985-86 as it intended to establish its business of manufacture and sale of fertiliser in the State of Uttar Pradesh and to set up a plan by choosing its factory site near Bareily. During the assessment year 1985-86 and the assessment year 1986-87 neither any purchase of the raw material was done nor any manufacture of fertiliser was done and consequently no sale of the fertiliser was done during these assessment years. The construction of the factory buildings and other buildings was undertaken through the contractors under specific agreement and written contracts. Under the terms of the contract the company had agreed to issue supply and had issued cement, iron and street to the contractors for being used in the construction of the factory buildings, etc. , without transferring property in these goods of cement, iron and steel. Under the terms of the contract the company had agreed to issue supply and had issued cement, iron and street to the contractors for being used in the construction of the factory buildings, etc. , without transferring property in these goods of cement, iron and steel. The company obtained a licence from the Government of India for purchasing the cement, iron and steel for being used in the construction of the factory buildings and other buildings and after purchasing these goods directly from the manufacturers, the company handed over the same to the contractors subject to the terms of the contract for utilisation in the proposed factory building and other buildings. The contractors utilised the cement, iron and steel supplied by the company in the construction of the buildings and were made responsible to return the excess and unused cement, iron and steel. However the assessing authority considered the supply of cement, iron and steel to the contracts as a sale under the Act and levied sales tax on the value of these goods. An appeal was filed before the Assistant Commissioner (Judicial) but it was later transferred to the Deputy Commissioner (Appeals), Bareilly, who was pleased to dismiss the same. The company then filed a second appeal before the Tribunal under section 10 of the Act but Tribunal also dismissed the appeal upholding the transaction as sale. 3. The company filed these under section 11 of the Act raising a common legal question : whether the supply of cement, iron and steel by the company to the contractors for utilising the same in the construction of factory building and other buildings of the company amounted to sale under the terms of the Act and if not, any tax liability was attracted under the Act ? 4. The learned counsel for the revisionist, Mr. Bharat Ji Agrawal, has referred to the various terms and conditions of the contract entered into by the company with the contractors for the construction of the factory building and other buildings of the company and he contended that the supply of cement, iron and steel by the company to the contractors for the specific purpose does not amount to sale and no tax liability was attracted under the Act. In support of his contention he has relied upon a decision of this Court in the case of Oil and Natural Gas Commission v. Commissioner of Sales Tax, 1992 UPTC 170 and another decision of this Court in the case of Modi Xerox v. Commissioner of Sales Tax 1992 UPTC 717. He has also referred to another decision of this Court in the case of Commissioner of Sales Tax v. Ansal Properties and Industries Pvt. Ltd. 1989 UPTC 1366 and a decision of the Calcutta High Court in the case of Cementation Patel (Durgapur) v. Commissioner of Commercial Taxes, West Bengal, Calcutta [1981] 47 STC 385. 5. The learned standing counsel for the opposite party has asserted that the supply of cement, iron and steel by the company to the contractors for being used in the construction of factory building and other buildings amounted to a transaction of sale within the meaning of section 2 (h) of the Act, and sales tax was liable to be paid as rightly assessed by the assessing authorities and confirmed by the appellate authorities. In support of his assertion he has relied upon the judgment of the honourable Supreme Court in the case of N. M. Goel & Co. v. Sales Tax Officer [1989] 72 STC 368; 1990 UPTC 865 and a decision of this Court in the case of Executive Engineer, Electricity Civil Construction Division, UPSEB, Meerut v. Commissioner of Sales Tax 1994 UPTC 438. 6. I have carefully persued these judgments cited by the learned counsel for the parties. Though these judgments are confined to the facts and circumstances of each case and the terms of the contract involved in the transaction, yet the principle of law is not disputed. 6. I have carefully persued these judgments cited by the learned counsel for the parties. Though these judgments are confined to the facts and circumstances of each case and the terms of the contract involved in the transaction, yet the principle of law is not disputed. According to the latest decision of the honourable Supreme Court in the case of N. M. Goel [1989] 72 STC 368; 1990 UPTC 865, a contractor of P. W. D. whose appeal was dismissed, the question depends in each case on the terms and conditions of the agreement between the parties and the intention of the parties which can be inferred not only from terms of the agreement but also from the review of all the attendant circumstances for passing of the title to the goods either as integral part of goods or independent part of goods, could give rise to an inference that the goods were agreed to be sold and the prices were liable to sale tax. Whether a contract for service or for execution of work involved a taxable sale of goods must be decided on the facts and circumstances of each case. The burden in such a case lay upon the taxing authority to show that there was a taxable sale and that burden was not discharged by merely showing that property in the goods which belonged to the parties performing the service or executive the contract stood transferred to the other party. While examining the terms and conditions of the agreement entered by N. M. Goel with the P. W. D. the honourable Supreme Court found clause (10) sufficient to treat the transaction as sale and accordingly agreed with the view of the Full Bench [see [1989] 72 STC 370] and dismissed the appeal of the contractor. But this decision based on clause (10) of that particular agreement cannot constitute a binding precedent to hold that the agreement of work entered with the contractor to make a transaction sale liable to tax. 7. In the case of Executive Engineer, UPSEB 1994 UPTC 438 this Court lay emphasis on the same principle of law but while examining the terms and the conditions of the contract of work, this Court reached the conclusion that the materials supplied to the contractor became the property of the contractor and amounted to sale attracting tax liability on its price. This decision is also confined to the facts and circumstances of that case and the terms and contract of work involved in that case. But it does not mean that in every case the supply of goods to the contractor for the purposes of utilising them in the construction of the building would amount to sale and attract tax liability. The honourable Supreme Court has not laid down such a principle. In the case of Oil and Natural Gas Commission 1992 UPTC 170 this Court examined specific terms and conditions of the contract of work entered by the Oil and Natural Gas Commission with the contractor for the construction of their building and came to the conclusion that the supply of the material to be used in the construction did not amount to sale and the prices were not subjected to tax. Similarly in the case of Modi Xerox 1992 UPTC 717, this Court came to the conclusion on the examination of the terms and the conditions of the contract of work that the supply of material for construction could not be treated as a sale and no tax was liable on the prices of the materials supplied. In the case of Ansal Properties and Industries Pvt. Ltd. 1989 UPTC 1366 also the goods supplied to the contractor in execution of work of the contract were not held as sale within the meaning of section 2 (h) of the Act in view of the terms and conditions of the contract of work. I therefore proceed to examine the terms and conditions of the contract of work entered into by the company with the contractors in the present case. Relevant clauses pertaining to the supply of iron, steel, and cement supplied by the company to the contractors are reproduces as follows : " 1. 1. The contractor shall at his own expense, provide all materials required for the works other than those which are to be supplied by owner. Adequate stocks of all the materials required for the work are to be maintained at site. 1. 2. Materials to be supplied by the owner to contractor : SCHEDULE V : 1. Cement, portland ordinary in standard 50 Kg. jute bags, or Blast furnace slag cement ditto. or Portland pozzolane cement ditto. 2. High yield strength - deformed or twisted steel bars in available lengths (all diameters ). 3. 1. 2. Materials to be supplied by the owner to contractor : SCHEDULE V : 1. Cement, portland ordinary in standard 50 Kg. jute bags, or Blast furnace slag cement ditto. or Portland pozzolane cement ditto. 2. High yield strength - deformed or twisted steel bars in available lengths (all diameters ). 3. Mild steel, bars, round in available lengths : (i) Up to and inclusion of 12 mm. dia. (ii) above 12 mm. dia. 4. Structural steel : (a) M. S. angle (b) M. S. channel (c) M. S. joist (d) M. S. plate and flats (e) M. S. chequered plate (five items only) Note - (a) Materials shall be issued to the contractor solely for the purpose of incorporation in the works. However, cement may also be issued for preparatory work such as water storage tanks, temporary workshops and stores/godowns and platforms, required at site of works covered by this contract. Specifications of such preparatory works involving use of cement shall approved by the owner/consultant. (b) Recoveries shall be made for the gross quantity issued and not for the net metered quantity of finished work. (c) Contractor shall submit his demand for the materials in writing to the owner/consultant at least 7 days in advance of his requirements. Materials shall be issued keeping in view the contractors progress of the work. Quantities issued may, however, be limited to the extent materials are required over the next 15 days. (d) Cement and steel shall not be issued for RCC pipes and similar other items of work which are available readymade in the market or are specified to be of the approved make. (e) In case ordinary portland cement is not available, owner may issue blast furnace slag cement or portland pozzolane cement. The contractor shall have no claim whatsoever on account of use of these cement involving longer period for removal of forms and for curing. (f) In case more than one type/quality of cement is issued the type/quality of cement and the location where used shall be kept on record. Different types of cement supplied under this Schedule shall be stacked separately and shall not be mixed together in use. (g) Cement will be issued as received by owner. Weight of each bag of cement for the purpose of issue will be reckoned as 50 kg. Different types of cement supplied under this Schedule shall be stacked separately and shall not be mixed together in use. (g) Cement will be issued as received by owner. Weight of each bag of cement for the purpose of issue will be reckoned as 50 kg. The contractor shall have no claim on account of any variation in the weight of cement bag issued to him (h) The empty cement bags are non-returnable. 1. 2. 1. 1. The rates quoted in the tender shall include the cost of these materials at the rates mentioned. Since the rates quoted in the tender are inclusive of the cost of materials supplied by the owner, their cost will be recovered from them on account bills of the contract at the said rates, progressively. 1. 2. 1. 2. The contractor shall not have the option to refuse to take the delivery of materials offered to him. No claim on this account shall be entertained. 1. 2. 2. Issue of cement : The cement will generally be issued on weight basis and the lot received first will be issued first and the lot received later will be issued later. 1. 2. 2. 3. In case of excess consumption, the recovery for the excess quantity beyond the permissible quantities shall be at twice the issue rate or the market rate of cement, whichever is higher. 1. 2. 2. 5. Day-to-day account of cement : The day-to-day account of all receipts and issues of cement in each godown of the contractor shall be maintained separately by the contractor. These accounts shall be made available for inspection of the owner/consultant. Weekly reports of statements giving details of issues, consumption and stock in hand of materials issued by the owner shall be submitted to the owner/consultant. 1. 2. 3. Reinforcement for concrete work rolled Steel sections for structural steel work; 1. 2. 3. 1. Steel shall be issued in lengths and in form as available in the stores. No claim on this account shall be entertained nor any claim for straightening the reinforcing steel, which might be issued in coils or in folded lengths, nor any claim shall be entertained for removal of tying pieces of bundles in case reinforcement bars are supplied in bundles tied together. 1. 2. 6. No claim on this account shall be entertained nor any claim for straightening the reinforcing steel, which might be issued in coils or in folded lengths, nor any claim shall be entertained for removal of tying pieces of bundles in case reinforcement bars are supplied in bundles tied together. 1. 2. 6. All materials issued to the contract by the owner for incorporation or fixing in the works (including preparatory work) shall, on completion or on foreclosure of the works, be returned by the contractor at his expense, at the place of issue, after making due allowance for actual consumption, reasonable wear and and tear and/or waste. If the contractor is required to deliver such materials at a place other than the place of issue, he shall do so and the transportation charges from the site to such place, loss incurred by the contractor had such materials been delivered at the place of issue, shall be borne by the owner. 1. 2. 6. 1. Surplus materials returned by the contractor shall be credited to him by the owner/consultant at the rates at which these were originally issued to him provided these are returned in the same form and condition in which they were issued. 1. 2. 6. 2. If on completion of works, the contractor fails to return surplus materials out of those supplied by the owner then in addition to any other liability which the contractor would incur the owner/consultant may by a written notice to the contractor, require him to pay within a fortnight of the receipt of the notice, for such unreturned surplus materials at double the issue rates or the market rates, whichever are higher, failing which this amount will be deducted from the contractors bills. 2. 4. The material issued to the contractor, by the owner will remain under the custody of the contractor as a trustee. However title on the same will remain with the owner. The contractor will be responsible for loss or damage to such materials and shall preserve them in good working condition as required for the contract and good construction practices till such time that they are erected, aligned and fully installed in position, and handed over to the owner. In case the owner/consultant feels that arrangements made by the contractor are not adequate he shall so advise the contractor and the contractor shall promptly take corrective action. In case the owner/consultant feels that arrangements made by the contractor are not adequate he shall so advise the contractor and the contractor shall promptly take corrective action. In case the contractor fails to take corrective action within a reasonable time, the owner on advice of the consultant shall take such corrective actions and recover the cost thereof from the contractors bills. " A perusal of these bare clauses in the agreement make it crystal clear that the supply of cement, iron and steel to the contractors was not by way of sale and the contractors received these goods only as a trustee to utilise the same in the construction of the buildings and to account for the proper consumption thereof in accordance with the terms of the agreement. The word "sale" has been defined by section 2 (h) of the Act in the following terms : " (h) sale with its grammatical variations and cognate expressions, means any transfer of property in goods (otherwise than by way of a mortgage, hypothecation, charge or pledge) for cash or deferred payment or other valuable consideration and includes - (i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (iii) the delivery of goods on hire purchase or any system of payment by installments; (iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (v) the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; and (vi) the supply, by way of or as part of any service or in any other manner whatsoever of goods, being food or any other article for human consumption or any drink (whether or not intoxicating) where such supply or service is for cash, deferred payment or other valuable consideration. " 8. " 8. Considering the definition of the word "sale" for the purpose of the Act and the provisions of the agreement in question clearly show that the property in the goods of cement, iron and steels was not absolutely transferred as owner to the contractor and therefore it could not be treated as a sale for the purpose of tax under he Act. There are other circumstances also which bear out the intention of the parties in supply of these goods to the contractor for a specific purpose. Firstly, the contractor was made responsible for proper storage and protection of the cement and was also bound to return the unused cement, iron and steels which were not utilised by the contractors in the construction of the buildings. There is a provision for imposing penalty on the contractor for misuse of any of these goods. The penal consequences are of both civil and criminal nature. Had there been any transfer of ownership in the goods supplied to the contractors the accounting and penal consequences would not have been required. 9. Moreover, the applicant is not a dealer for the sale of the cement, iron and steel and is not carrying on the business of purchase and sale of cement, iron and steel. The application was registered for the purpose of manufacture and sale of fertiliser and not for the procurement of cement, iron and steel for the purpose of sale. The applicant obtained a licence from the Government of India to procure these essential items - cement, iron and steel only for the purpose of utilising the same in the construction of factory building, which was necessary as a first step for commencement of the business of manufacture and sale of fertilisers. The applicant was bound by the terms and conditions of the licence in obtaining the supply of cement, iron and steel from the factories authorised by the licence only and the contractors were required to obtain supplies from the owners godown in the project site. In view of the nature of the business of the applicant registered under the Act there could not be even remote possibility of transfer of ownership on the goods of cement, iron and steel to the contractors for the specific job-work. In view of the nature of the business of the applicant registered under the Act there could not be even remote possibility of transfer of ownership on the goods of cement, iron and steel to the contractors for the specific job-work. The contractors were in fact bailees in respect of these goods received from the applicant under section 148 of the Contract Act and they were accountable in law and fact. Therefore, these three goods - cement, iron and steel supplied by the applicant to the contractors for the purpose of utilising the same in the construction of the factory building and other buildings cannot be treated as a sale. 10. However the learned Tribunal has treated the supply of these goods as a sale attracting tax liability for some reasons. The Tribunal has observed hat since the account of debit and credit is required to be maintained under the agreement, this gives rise to sale. The observation of the Tribunal is not correct, for the simple reasons that mere keeping of the account in the form of debit and credit entries does not by itself amount to sale. The nature and purpose of the account will have to be taken into consideration. The banks also maintain accounts in the nature of debit and credit entries in respect of their customers but that does not mean sale of anything. In the case of Cementation Patel (Durgapur) [1981] 47 STC 385 (Cal.) it was held "that the entries in the books of account could not alter the position in law. As it was found that the debits made in the books were confined to the basic rates and the handling and storage charges, the transactions were not sale for profit. In any event, there was no agreement of sale between the assessee and the other members of the consortium or the sub-contractors prior to or in connection with such transfers. Such transactions not being transactions of sale in any view of the matter the assessee could not be subjected to sales tax in respect thereof". 11. The Tribunal has observed that since the contractor was permitted to retain unused surplus cement on payment of price of the cement at double the issue rate, and this amounted to sale of the cement to the contractor. The observation of the Tribunal is wholly untenable and unjustified. 11. The Tribunal has observed that since the contractor was permitted to retain unused surplus cement on payment of price of the cement at double the issue rate, and this amounted to sale of the cement to the contractor. The observation of the Tribunal is wholly untenable and unjustified. The intention of the parties cannot be gathered from a particular clause of the agreement read in isolation but has to be gathered from the totality of the provisions of the entire agreement and has to be appreciated and understood in the light of the attendant circumstances. The Tribunal has not done so and has rather adopted a pedantic approach without caring the fact that the whole agreement has to be understood and the attendant circumstances have to be taken into consideration. The applicant is a Government of India undertaking which was set up with aid of Government find and the co-operative federations of the 17 States. It has planned a project for manufacture of fertilisers in the State of Uttar Pradesh. This noble cause cannot be allowed to be frustrated in the beginning of the project by unlawful attitude to fasten the liability on the undertaking without there being any business in the nature of manufacture of fertilisers. The public purpose to be achieved by the setting up of this project in the State should not have been defeated. The State was to gain in every respect if the undertaking was allowed to set up this plant smoothly and quickly so that it could commence its business of manufacturing fertilisers and supplying the fertilisers to the agriculturists of the State at the rates fixed by the Government and could help in the larger production of the agricultural goods. The State could of course charge sales tax on the actual business of selling the fertiliser within the State. The assessing authority or the appellate authority and the Tribunal have unfortunately overlooked the larger interest of the public and of the State in wrongly and illegally treating the supplies of cement, iron and steel to the contractors as a sale and have also committed error of law. 12. The reasons given by the Tribunal for treating the supply of iron, cement and steel in the present case are wholly untenable and liable to be rejected. 12. The reasons given by the Tribunal for treating the supply of iron, cement and steel in the present case are wholly untenable and liable to be rejected. The Tribunal has referred to the footnote of the Schedule V of the agreement wherein it has provided that the empty cement bags are not returnable. It has also referred to the clause whereby the cutpieces of steel bars and structural sections, etc. after completion of the work which will not be use to the owner, shall be taken away by the contractor only after necessary inspection and approval of the owner. On the basis of these clauses the learned Tribunal has jumped over the conclusion that "since the gunny bags and the cutpieces have been left at the disposal of the contractors, it is clear that the transaction of supply of the materials to the contractors amounts to same as held by the Supreme Court in the case of N. M. Goel & Co. [1989] 72 STC 368. In my opinion the argument adopted by the learned Tribunal deriving strength from the judgment of the Supreme Court in the case of N. M. Goel [1989] 72 STC 368 is not at all justified. There is no intention at all indicated by the these clauses relating to gunny bags or cut-pieces that the entire supply of these materials is by way of sale by the company to the contractors. In fact, these gunny bags after being used in the building work become useless and uneconomical for the company to receive and dispose them of. Similarly the cutpieces of steel bars and sections, etc. , after completion of the work are of no use and economic value to the company in comparison to the expenditure likely to be involved in taking the possession, for storage or disposal thereof. If these useless materials are left with the contractors, it does not at all indicate that the contractors became owners thereof. They can be only said to have received the property of the company without ownership being transferred. These abandoned materials which are useless can be at best said to have been gifted to or left with the trustees, but in no case the intention of the company can be thwarted by abandonment of useless materials. They can be only said to have received the property of the company without ownership being transferred. These abandoned materials which are useless can be at best said to have been gifted to or left with the trustees, but in no case the intention of the company can be thwarted by abandonment of useless materials. The clauses of the agreement involved in the case of N. M. Goel [1989] 72 STC 368 (SC) are different from those of the present agreement. The honourable Supreme Court interpreted clause (10) of the agreement in Goels case [1989] 72 STC 368 (SC) and came to a conclusion that there is a sale of goods, but in the present case on examination of the provisions of the agreement the position is entirely different. The goods have been supplied to the contractors as a trustee and not by way of sale and therefore the argument of parity with N. M. Goels case [1989] 72 STC 368 (SC) is uncalled for. Thus, the inference drawn by the Tribunal on the basis of the gunny bags and cutpieces that the ownership of the materials supplied has been passed on to the contractors, is wholly unwarranted and untenable. The judgment and order dated February 22, 1992 passed by the Tribunal in Second Appeal No. 311 of 1991 (85-86) and Second Appeal No. 800 of 1991 (86-87) cannot be sustained. 13. In the opinion of this Court, the supplies of cement, iron and steel by the undertaking to the contractors for utilising the same in the construction of the factory buildings and other buildings at the site of the project do not amount to sale within the meaning of section 2 (h) of the Act and do not fall within the definition of business as defined under section 2 (aa) and dealer as defined by section 2 (c) of the Act. No tax liability on the price of these goods supplied to the contractors is attracted under the Act. Therefore the legal question raised in this revision is accordingly answered. The S. T. R. No. 415 of 1992 is hereby allowed and the impugned judgment and order dated February 22, 1992 passed by the Tribunal is hereby set aside. The S. T. R. No. 448 of 1992 is hereby allowed and the impugned judgment and order dated February 22, 1992 passed by the Tribunal is hereby quashed. The S. T. R. No. 415 of 1992 is hereby allowed and the impugned judgment and order dated February 22, 1992 passed by the Tribunal is hereby set aside. The S. T. R. No. 448 of 1992 is hereby allowed and the impugned judgment and order dated February 22, 1992 passed by the Tribunal is hereby quashed. The learned Tribunal is hereby directed to pass further consequential orders accordingly. Petitions allowed. .