Summarize the following court judgment. ivil Appeal No. 340 of 1988. From the Judgment and Order dated 8.12.1986 in the High Court of Madhya Pradesh in M.P. No. 1670 of 1984. R.K. Virmani for the Appellant. T.C. Sharma for the Respondents. The Judgment of the Court was delivered by SABYASACHI MUKHARJI	 J. This appeal by special leave is from the judgment and order of the Full Bench to the Madhya Pradesh High Court	 dated 8th December	 1986. The Writ Petition in question out of which this Judgment arose	 had been referred to the Full Bench by the Division Bench on the question whether the petitioner appellant could be said to have effected entry of the goods in the local area and thereby made it liable for payment of entry tax under Section 3 of the M.P. Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam	 1976 (hereinafter called `the Act '). I here was conflict between the Division Benches of the Madhya Pradesh High Court and as a result the matter was referred to the Full Bench. In order to appreciate the controversy and the question	 it is necessary to state a few facts. The appellant company is a building contractor at Rajnandgaon in Madhya Pradesh and is registered as a dealer under the Madhya Pradesh General Sales Tax Act. The appellant 's tender for construction of foodgrains godown and ancillary buildings at Rajnandgaon was accepted by the Central Public Works Department. It was an item rate tender. In the tender so submitted by the appellant the prices of the materials to be used for the construction including cost of iron	 steel and cement were included. The PWD	 however	 had agreed to supply from its stores the said iron	 steel and cement for the construction work and to deduct the prices of materials so supplied and consumed the construction from the final bill of the appellant Clause (10) of the Contract is relevant and was as follows: PG NO 661 "Clause 10. If the specification or Schedule of terms provides for the use of any special description of materials to be supplied from Engineer in charge 's Stores	 or if it is required that the Contractor shall use certain stores to be provided by the Engineer in charge as shown in the Schedule of materials hereto annexed	 the contractor shall be bound to procure and shall be supplied such material and stores as are from time to time required to be used by him for the purposes of the contract only	 and the value of the full quantity of materials and stores to supply at the rates specified in the said Schedule of materials may be set off or deducted from any sums then due or thereafter to become due to the contractor under the contract or otherwise	 or against or from the Security deposit	 or the proceeds or sale thereof if the same is held in Government securities	 the same or a sufficient portion thereof being in this case sold for the purpose. All materials so supplied to the contractor shall remain the absolute property of Government and shall not be removed on any account from the site of the work	 and shall be at all times open to inspection by the Engineer in charge. Any such materials remaining unused and in perfectly good condition at the time of the completion or determination of the contract shall be returned to the Engineer in charge at a place directed by him	 if by a notice in writing under his hand he shall so require; but the contractor shall not be entitled to return any such materials unless with such consent and shall have no claim for compensation on account of any such materials so supplied to him as aforesaid not being used by him or for any wastage in or damage to any such materials. Provided that the contractor shall in no case be entitled to any compensation or damage on account of any delay in supply or non supply thereof all or any such materials and stores. Provided further that the contractor shall be bound to execute the entire work it the materials are supplied by the Government within the scheduled time for completion of the work plus 50 per cent thereof (scheduled time plus 6 months if the time of completion of the work exceeds (12 months) but it a part only of the materials has been supplied within the aforesaid period	 then the contractor shall be bound to do so much of the work as may be possible with the materials and stores supplied in the aforesaid period. For the completion of the rest of the work	 the contractor shall be PG NO 662 entitled to such extension of time as may be determined by the Engineer in charge whose decision in this regard shall be final". As mentioned hereinbefore	 under the said clause	 all materials supplied to the contractor remained the absolute property of the Government and could not be removed on any account from the site of the work and were at all times open to inspection by the Engineer in charge. Any such materials remaining unused and in perfectly good condition at the time of completion or determination of the contract were to be returned to the Engineer in charge at a place directed by him by a notice in writing in his hand if he so required but the contractor was not entitled to return any such material unless he was required to do so. There was no dispute that for the construction the appellant was supplied iron	 steel and cement by the PWD and it had purchased other materials from the market. The prices of iron	 steel and cement supplied to the appellant for the work were deducted from its final bill. On 22nd September	 1982 the appellant was assessed by the respondent for entry tax for the period 7th June. 1979 to 31st March	 1980 to a tax of Rs.11	292 including penalty of Rs. 2	000 and by an order dated 5th October 1982 the appellant was assessed for the period from 1st April	 1980 to 31st March	 1981 for the entry tax of Rs. 23	393 including penalty of Rs. 4	500. The appellant was a registered dealer under the Madhya Pradesh General Sales Tax Act and had been assessed to purchase tax under Section 7(1) of the Act and was as such liable for payment of entry tax for iron	 steel and cement	 the entry for the same having been effected at the instance of the appellant because it had ultimately used the material for the construction work. The appellant filed revisions before the Deputy Commissioner of Sales Tax who affirmed the assessment orders. The appellant then filed a writ petition challenging the assessment of purchase tax under Section 7(1) of the Madhya Pradesh General Tax Act and assessment of entry tax under Section 3(1) of the Act saying that the entry of the materials so supplied by the PWD was effected by it and not by the appellant and it further contended that as there was no sale of these materials and that as these materials were used for construction of the building	 there was no sale as such and so no entry tax could be levied. It was contended that since the appellant had purchased the iron	 steel and cement from the PWD and not from the market as per the PG NO 663 contract the prices of which had been deducted from its final bill	 the entry of material could be presumed to have been made at the instance of the appellant who had ultimately used the materials for the construction work	 and since these materials were purchased from the unregistered dealer	 i.e. the PWD	 the appellant was held liable for payment of purchase tax and entry tax. Section 3 of the Act is the charging section. Under this	 entry tax is levied on the entry in the course of business of a dealer of goods in local area specified in Schedule II for consumption	 use and sale therein and on the entry of the goods specified in Schedule III for consumption	 use of such goods as raw materials or as packing materials or in the execution of work contracts but not for sale therein. Iron and steel are in Schedule II and cement is in Schedule III and these are assessable to entry tax at the rate of 1.5 per cent and 1 per cent respectively. Under Section 6(c) of the Act where a dealer purchases goods specified in Schedule II and Schedule III in a local area from a person or a dealer who is not a registered dealer	 it is presumed	 unless the contrary is proved by him	 that the entry of such goods had been effected by him into such local area before they were purchased by such dealer. It was	 in those circumstances	 presumed that the appellant had effected the entry of iron	 steel and cement which were supplied by the PWD for the construction of work in the local area for consumption	 use and sale therein. This position was conceded on behalf of the appellant before the Full Bench of the High Court. The PWD is not a registered dealer	 and therefore	 Section 6(c) of the Act applied to the appellant. Under Section 13 of the Act	 certain provisions of the M.P. General Sales Tax Act applied mutatis mutandis to a dealer in respect of entry tax payable under the Act. The question	 therefore	 was whether there was sale of iron	 steel and cement by the PWD while supplying those materials for the construction work undertaken by the appellant. If supply of these materials is sale within the meaning of Section 2(n) of the M.P. General Sales Tax Act then the appellant would be liable for payment of entry tax as it has been assessed. The question	 therefore	 is whether there was sale and whether the property in the goods in question passed to the appellant or continued to remain with the PWD although the PWD had in the final bill debited the prices of the goods so supplied to the appellant under clause (10) of the contract. The Full Bench found that there was sale and as a result of that the duty was leviable. The question	 therefore	 is whether there was sale of goods in view of the contract between the parties whereunder the custody and control of the goods remained with the PWD PG NO 664 and goods were only used in the construction under the contract. This question has been considered by this Court in The Government of Andhra Pradesh vs Guntur Tobaccos Ltd.	 16 STC 240. There	 the majority of the judges in a Bench of three learned Judges	 viz.	 Justice Shah and Justice Sikri held that although in the execution of a contract for work some materials were used and property in the goods so used passed to the other person	 the contractor undertaking the work would not necessarily be deemed	 on that account	 to sell the materials. This Court observed that a contract for work in the execution of which goods were used might take one of the three forms. It was indicated that the contract might be for the work to be done for remuneration and for supply of materials used in the execution of the works for a price	 it might be a contract for work in which the use of the materials was necessary and incidental to the execution of the work or it might be a contract for work and use and supply of materials	 though not accessory to the execution of the contract	 was voluntary or gratuitous. In the last class there was no sale because though the property passed	 it did not pass for a price. Whether a contract was of the first or the second class must depend upon the circumstances; if it was of the first class	 it was composite contract for work and sale of goods; where it was of the second category	 it was a contract for execution of work not involving sale of goods. The majority of the learned Judges was of the view that in order that there should be a sale of goods which was liable to sales tax as part of a contract for work under a statute enacted by the Provincial or State Legislature	 there must be a contract in which there was not merely transfer of title to goods as an incident of the contract	 but there must be a contract	 express or implied	 for sale of the very goods which the parties intended should be sold for a money consideration	 i.e.	 there must have been in the contract for work an independent term for sale of goods by one party to the other for a money consideration. The question in each case was one about the true agreement between the parties and the terms of the agreement must be deduced from a review of all the attendant circumstances. But from the mere passing of title to goods either as integral part of or independent of goods	 it could not be inferred that the goods were agreed to be sold	 and the prices were liable to sales 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 authorities 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 party performing service or executing the contract stood transferred to the other party. In that case	 the assessee PG NO 665 company was a dealer carrying on the business of redrying in its factory raw tobacco entrusted to it by its customers. The assessee redried the tobacco	 packed it in packing materials purchased from the market and delivered it to the customers. For redrying each bale of tobacco the assessee had charged the customers a certain sum but there was no separate charge for the value of the packing materials used. The assessee was assessed to sales tax under the Madras General Sales Tax Act	 1939	 on the value of the packing materials on the ground that there was a sale of the packing materials. The High Court found that the packing of the redried tobacco and its storage for the requisite period was an integral part of the redrying process and held that there was no sale of packing materials. On appeal in that case	 this Court by majority held that the finding recorded by the High Court that it was intended by the parties that the packing material should form an integral part of the process of redrying the without the use of the "packing material" redrying process could not be completed	 and that there was no independent contract for sale of "packing material". It was only as an incident of redrying process and as a part thereof that the assessee had to seal up the package of tobacco	 after it had emerged from the reconditioning chamber	 with a view to protect it from atmospheric action. In the absence of any evidence from which contract to sell "packing material" for a price might be inferred	 the use of the "packing material" by the assessee must be regarded as all execution of the works contract and the fact that the tobacco delivered by the constituent was taken away with the "packing material" would not justify an inference that there was an intention to sell the "packing material". Mr. Justice Subba Rao	 as the Chief Justice then was	 held	 however	 that all the ingredients of the charging Section read with the definition of "sale" were satisfied. He observed that unless it could be said that the material used for packing was transformed into some other commodity not covered by the definition of "goods"	 it could not be held that there was no sale of the material. The packing material remained distinct from the dried tobacco. Property in it passed to the customer	 who had paid for it. On the basis of the practice prevailing in the factory of the assessee	 contracts for sale arose easily by implication and therefore the Sales Tax Authorities had rightly assessed the turnover in regard to the packing materials. In Hindustan Steel Ltd. vs The State of Orissa	 25 STC 211	 this Court was concerned with Section 9(1) read with Section 25(1)(e) of the Orissa Sales Tax Act	 1947. Penalty was imposed therein for failure to register as a dealer. But the liability to pay penalty did not arise merely upon proof PG NO 666 of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation was the result of a quasi criminal proceeding and penalty would not ordinarily be imposed. Between 1954 and 1959	 the appellant company was erecting factory buildings for its steel plant	 residential buildings for its employees and ancillary work such as roads	 water supply and drainage. Some construction work was done departmentally and the rest through contractors. The company supplied to the contractors for use in construction bricks	 coal	 cement	 steel etc. for a consideration which in addition to the cost price of the appellant company included some additional amounts which were charged by the appellant. The question was whether the supply of building materials amounted to "sale" and the appellant company was a dealer for the purpose of sales tax under the Orissa Sales Tax Act	 1947. It was held that the supply constituted "sale". It was further held that	 however	 the company had charged a fixed percentage above its cost price only for storage	 insurance and rental or other incidental charges	 it could not be said that the company was carrying on business of supplying materials and it would not be a "dealer". In other words	 it is clearly held by this Court in the Hindustan Steel Ltd. case (Supra) that where company supplies to the contractor for use in its construction coal	 steel and cement etc. for a consideration	 it amounts to a "sale" and the company becomes a "dealer" for the purpose of sales tax. The provisions were similar to that of the present Act. In Brij Bhushan Lal Parduman Kumar etc. vs Commissioner of Income Tax	 Haryana	 Himachal Pradesh and New Delhi III	 	 the question arose in the context of income tax. The appellant therein	 a registered firm	 was a Military Engineering Services contractor carrying on the business of executing contracts and works on behalf of the Government. For the execution of the works undertaken by the appellant	 certain materials	 such as cement	 coal	 steel etc. were supplied by the Government at the fixed rates specified in the respective contract. Such materials	 though in the custody of the appellant	 remained the property of the Government and any surplus had to be returned to the Government	 and the Government was to give credit therefor at fixed rates at which they were supplied by the Government. After rejecting the book results	 the Income Tax Officer sought to estimate the profits of the appellant at a percentage of the net cash payments received by the appellants against the contracts as well as the cost of the materials supplied by the Government. The Appellate Tribunal	 however	 held that the cost of the materials supplied by the Government could not be added to the figure of cash payments received by the appellant as no profits could have arisen therefrom. On a reference	 the High Court held that the cost of materials was liable to be included PG NO 667 before applying a flat rate to the appellant 's receipts. On appeal	 this Court reversing the decision of the High Court held that since in substance and in reality the materials supplied by the Government always remained the property of the Government and the appellant merely had custody and fixed or incorporated them into the works	 there was not even a theoretical possibility of any element of profit being involved in the turnover represented by the cost of such materials. Though	 ordinarily	 when a works contract was put through or completed by a contractor	 profit from the contract was determined on the value of the contract as a whole and not by considering the several items that would go to form such value of the contract	 where	 as in that case	 materials were supplied at fixed rates by the Government to the contractor solely for being used	 fixed or incorporated in the works on the terms that they would remain the property of the Government and any surplus should be returned to the Government	 and the real total value of the entire contract would be the value minus the cost of such materials so supplied. Since no element of profit was involved in the turnover represented by the cost of the materials supplied by the Government to the appellant	 the income or profits derived by the appellant from such contracts had to be determined on the basis of the value of the contracts represented by the cash payments received by the appellant from the Government exclusive of the cost of the materials received for being used	 fixed or incorporated in the works. There the question was whether there was profit taxable to income tax on the sale of the materials. There was none and it was so held. This Court again examined the question in the context of a sale of meals and amenities by a hotelier in the case of The State of Himachal Pradesh & Ors. vs Associated Hotels of India Ltd.	 29 STC 474	 where this Court reiterated that mere passing of property in an article or commodity during the course of the performance of a transaction did not render it a transaction of sale. For	 even in a contract purely of work or service	 it is possible that articles may have to be used by the person executing the work and property in such articles or materials may pass to the other party. That would not necessarily convert the contract into one of sale of those materials. In every case	 the court has to find out the primary object of the transaction and the intention of the parties while entering into it. It may	 in some cases	 be that even while entering into a contract of work or even service	 parties might enter into separate agreements	 one of work and service and the other of sale and purchase of materials to be used in the course of executing the work or performing the service. In such cases the transaction would not be one and indivisible	 but would form two separate agreements one of work or service and the other of sale. PG NO. 668 Therefore	 from the above decisions it follows that in order to be sale taxable to duty	 not only the property in the goods should pass from the contractor to the Government	 or the appellant in this case but there should be an independent contract separate and distinct apart from mere passing of the property where a party purchases or procures goods from the Government. Mere passing of property from the contractor to the Government would not suffice. There must be sale of good. The primary object of the bargain judged in its entirely must be viewed. In the instant case	 clause (10) is significant as we have set out hereinbefore. For the purpose of performance	 the contractor was bound to procure materials. But in order to ensure that quality materials are procured	 the PWD undertook to supply such materials and stores as from time to time required by the contractor to be used for the purpose of performing the contract only. The value of such quantity of materials and stores so supplied was specified at a rate and got set off or deducted from any sum due or to become due thereafter to the contractor. Mr. Virmani	 appearing for the appellant submitted before us that in the instant case	 there was no such independent and separate sale. But we are unable to accept. Though	 in a transaction of this type there is no inherent sale; a sale inheres from the transaction. Clause (10) read in the proper light indicates that position. Our attention was drawn to a Bench decision of the Kerala High Court in Construction Company	 Changanacherry & Anr. vs State of Kerala	 36 STC 320	 wherein on a consideration of the contract the Court came to the conclusion that the consideration stipulated to be paid to the petitioner in that case was for the work which the petitioner had undertaken to perform and not by way of sale price of the poles to be produced and delivered by the petitioner. Therefore	 it was held that the petitioner was not liable to sales Tax. Mr. Virmani also drew our attention to a Division Bench decision of the Calcutta High Court in Cementation Patel (Durgapur) vs Commissioner of Commercial Taxes	 West Bengal	 Calcutta	 47 STC 385. There	 on a consideration of the transaction entered into between the parties the Court came to the conclusion that the property in the materials all along remained with the Government of India and whatever was the nature of the transaction involved between the assessee on the one hand and the other members of the consortium or the sub contractors on the other	 the same did not and could not amount to sale as the assessee could not in the facts of that case transfer the PG NO 669 property therein. In the instant case	 by use or consumption of materials in the work of construction	 there was passing of the property in the goods to the assessee from the PWD. By appropriation and by the agreement	 there was a sale as envisaged in terms of clause (10) set out hereinbefore. Therefore	 in our opinion	 there was a sale which was liable to tax. The Full Bench was right in its conclusion. The appeal	 therefore	 fails and is accordingly dismissed. There will be no order as to costs. R.P.D. Appeal dismissed.

Section 3 of M.P. Sthaniya Kshetra Me Mal Ke Prevesh Par Kar Adhiniyam 1976 provides for levy of entry tax on the entry of goods specified in Schedule Il for consumption	 use and sale therein	 and on entry of goods specified in Schedule III for consumption or in the execution of work contracts but not for sale. Section 6(c) provides that where a dealer purchases goods specified in Schedule II and Schedule III in a local area from a person or a dealer who is not a registered dealer	 it is presumed	 unless the contrary is proved by him	 that the entry of such goods had been effected by him into such local area before they were purchased by such dealer. Iron and steel are listed among other goods in Schedule II	 and cement in Schedule III. Section 13 provides that certain provisions of the M.P. General Sales Tax Act apply mutatis mutandis to a dealer in respect of entry tax payable under the Adhiniyam. The appellant company	 a building contractor and registered as a dealer under the Madhya Pradesh General Sales Tax Act	 entered into a Works Contract with the P.W.D. for construction of foodgrains godown and ancillary buildings. It was on item rate basis. In the tender submitted by the appellant	 the prices of the materials to be used for construction including cost of iron	 steel and cement were included. The P.W.D. had agreed to supply from its stores the iron	 steel and cement for the construction work and to deduct the prices of materials so supplied and consumed in the said construction work from and out of the final bill of the appellant. Under clause 10 of the Works Contract	 the contractor was `bound to procure ' certain materials of special description	 and in order to ensure that quality materials are procured	 the PWD undertook to PG NO 657 PG NO 658 supply such materials and stores from time to time as required by the contractor to be used for the purpose of performing the contract. The value of such quantity of materials and stores so supplied was specified at a rate and got set off or deducted from any sum due or to become due thereafter to the contractor. It also provided that all materials supplied to the contractor	 remained the absolute property of the Government and could not be removed on any account from the site of the work and were at all times open to inspection by the Engineer in charge. Any such materials remaining unused and in perfectly good condition at the time of completion or determination of the contract were to be returned to the Engineer in charge. Iron	 steel and cement were supplied by the P.W.D.	 an unregistered dealer	 to the appellant for the construction of work. The Taxing authority assessed the appellant to purchase tax under section 7(1) of the Madhya Pradesh General Sales Tax Act and also held it liable for payment of entry tax for iron	 steel and cement	 the entry for the same having been effected at the instance of the appellant because it had ultimately used the materials for the construction work. The aforesaid assessment orders were affirmed by the Deputy Commissioner of Sales Tax by dismissing the revision petitions of the appellant. The appellant challenged the aforesaid assessment orders in a writ petition before the High Court	 on the ground that the entry of materials so supplied by the P.W.D. was effected by it and not by the appellant and that as these materials were used for construction of the building	 there was no sale as such and consequently no entry tax could be levied. On behalf of the Taxing authorities respondent	 it was argued that since the appellant and purchased the iron	 steel and cement from the PWD and not from the market as per the contract the prices of which had been deducted from its final bill	 the entry of material could be presumed to have been made at the instance of the appellant who had ultimately used the materials for the construction work	 and since these materials were purchased from the unregistered dealer	 i.e.	 the P.W.D.	 the appellant was liable for payment of purchase tax and entry tax. The Full Bench of the High Court	 which disposed of the writ petition found that there was `sale ' and that the tax was leviable. In the appeal by special leave by the assessee to this Court	 on the question: whether there was sale and whether the property in the goods had passed to the appellant or continued to remain with the PWD	 although the PWD had in the final bill debited the prices of the goods so supplied to the appellant under clause (10) of the contract: PG NO 659 Dismissing the appeal	 this Court	 HELD: 1.1. 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 authorities 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 party performing service or executing the contract stood transferred to the other party. [664G H] 1.2 Even in a contract purely of work or service	 it is possible that articles may have to be used by the person executing the work and property in such articles or materials may pass to the other party. That would not necessarily convert the contract into one of sale of those materials. In every case	 the court has to find out the primary object of the transaction and the intention of the parties while entering into it. [667F G] 1.3 In order to be 'sale taxable to duty '	 not only the property in the goods should pass from the contractor to the Government	 or the appellant in the instant case	 but there should be an independent contract separate and distinct apart from mere passing of the property where a party purchases or procures goods from the Government. Mere passing of property from the contractor to the Government would not suffice. There must be sale of goods. The primary object of the Bargain judged in its entirety must be viewed. [668B C] 1.4 In the instant case	 by use or consumption of materials in the work of construction	 there was passing of the property in the goods to the Assessee from the PWD. By appropriation and by the agreement	 there was a sale as envisaged in terms of clause (l0) of the contract	 and consequently such sale was liable to tax. [669A B] The Government of Andhra Pradesh vs Guntur Tobaccos Ltd.	 16 STC 240; Hindustan Steel Ltd. vs The State of Orissa	 25 STC 211	 The State of Himachal Pradesh & Ors. vs Associated Hotels of India Ltd.	 29 STC 474	 relied on. Brij Bhushan Lal Parduman Kumar etc. vs Commissioner of Income Tax	 Haryana	 Himachal Pradesh and New Delhi III	 	 referred to. PG NO 660 Construction Company Changanacherry & Anr. vs State of Kerala	 36 STC 320	; Cementation Patel (Durgapur) vs Commissioner of Commercial Taxes	 West Bengal	 Calcutta	 47 STC 385	 distinguished.