1959 (2) TMI 22 - HC - VAT and Sales Tax

Summary

Issues:
- Assessment of sales tax on works contracts
- Applicability of the decision in Gannon Dunkerley case
- Interpretation of relevant legal provisions

Analysis:
1. The case involved the assessment of sales tax on works contracts carried out by the appellants, building contractors. The appellants were assessed for the years 1951-52 and 1952-53 based on composite rates covering materials and labor. They claimed exemption for the entire turnover but were unsuccessful in their appeals before the Deputy Commissioner and the Board of Revenue. Subsequently, they filed a petition seeking to quash the assessment order.

2. The main argument put forth by the appellants was based on the decision of the Madras High Court in the Gannon Dunkerley case, which held that the amendment to the Sales Tax Law in 1947 was ultra vires as it extended to taxing "works contracts" beyond the scope of sale of goods. However, a subsequent decision by the Kerala High Court clarified that the principle of the Madras decision did not apply to the Travancore-Cochin Sales Tax Act, as the legislative powers at the time of passing the Act were different.

3. The appellants also referred to a recent decision of the Supreme Court affirming the Madras High Court decision in the Gannon Dunkerley case. The Supreme Court emphasized the interpretation of the words "sale of goods" in the context of sales tax legislation. It was noted that the appellants did not press their appeal before the Supreme Court, indicating no new developments favoring their position.

4. The appellants attempted to challenge the Gannon Dunkerley case by invoking Article 9 of the Covenant between the Rulers of Travancore and Cochin. However, this argument was dismissed as a misunderstanding of the Covenant's terms. The argument regarding the applicability of Article 54 of List II of the Seventh Schedule to the Constitution was also rejected as it had been previously addressed and found lacking in substance.

5. Ultimately, the court found no merit in the appeal and dismissed it with costs, including counsel's fee. The judgment reaffirmed the earlier decisions regarding the assessment of sales tax on works contracts and the inapplicability of the Gannon Dunkerley case to the specific legal provisions in question.