1962 (8) TMI 64 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of the term 'contract' under the East Punjab General Sales Tax Act, 1948.

Analysis:
The case involved a reference by the Financial Commissioner regarding the interpretation of the term 'contract' under the East Punjab General Sales Tax Act, 1948. The dispute arose from two companies claiming exemptions from sales tax on supplies made to the Punjab Government. The companies argued that since the contracts were executed before the commencement of the Act, they should be exempt from tax under the proviso to section 4 of the Act. However, the assessing authorities contended that the concept of 'contract' under the Act had a specific definition under clause (c) of section 2, which did not align with the companies' claims.

The reference questioned whether the term 'contract' in the proviso to section 4 should be interpreted exhaustively as per the Indian Contract Act or limited to the definition under clause (c) of section 2 of the Act. The companies argued that the specific notion of a contract introduced by section 2(c) was unwarranted and had been rejected by the Supreme Court in previous cases. They contended that the sales tax should be levied based on the substantive provisions of section 4, and the term 'contract' in the proviso should refer to the definition in the Indian Contract Act.

The High Court, in its judgment, concluded that the term 'contract' in the proviso to section 4 of the Punjab General Sales Tax Act, 1948, should be interpreted as per the Indian Contract Act and was not limited by the definition under clause (c) of section 2 of the Act. The Court emphasized that the notion of contract as defined in section 2(c) could not be sustained following previous Supreme Court decisions and the subsequent repeal of the provision by the State Legislature. The Court directed the assessing authority to handle the matter in accordance with the clarified interpretation of the term 'contract.'

In conclusion, the High Court answered the reference by specifying that the term 'contract' in the proviso to section 4 should align with the definition in the Indian Contract Act. The judgment provided clarity on the interpretation of the term in question under the East Punjab General Sales Tax Act, 1948, and guided the future handling of similar cases by the assessing authority.