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TMI Blog1958 (4) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... and indivisible and not of contracts which are a combination of distinct contracts for sale of materials and for work, and that nothing that we have said in this judgment shall bar the Sales Tax Authorities from deciding whether a particular contract falls within one category or the other and imposing a tax on the agreement of sale of materials, where the contract belongs to the latter category. Appeal allowed. - Civil Appeal No. 253, 254, 255 of 1955, - - - Dated:- 3-4-1958 - DAS S.R. J. AND VENKATARAMA AIYAR T.L. AND DAS S.K. AND SARKAR A.K. AND VIVIAN BOSE JJ. N.C. Chatterjee, Senior Advocate, G.C. Mathur, Advocate, with him, for the appellant (In C.A. No. 253 of 55). G.C. Mathur, Advocate, for the appellants (In C.As. No. 254 of 255 of 55.). -------------------------------------------------- The Judgment of S.R. Das, J., Venkatarama Aiyar, S.K. Das and A.K. Sarkar, JJ., was delivered by Venkatarama Aiyar, J. Bose, J., delivered a separate Judgment. VENKATARAMA AIYAR, J.- These are appeals against the judgment of the High Court of Nagpur in writ applications filed by the appellants impugning the validity of certain provisions of the Central Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent areas subject to the following maximum percentages , and then follows a scale of percentages to be allowed in respect of different classes of contracts. Acting on these provisions, the authorities constituted under the Act called upon the contractors within the State to furnish returns in respect of their receipts from contract works for the purpose of assessment of sales tax, to which the appellants replied by instituting the proceedings, out of which the present appeals arise. The appellant in Civil Appeal No. 253 of 1955 is a contractor doing business in the construction of buildings and roads for the Military and Public Works Department in the State of Madhya Pradesh, and he filed M.P. No. 245 of 1954 challenging the validity of the assessment which the respondents proposed to make, on two grounds. He contended firstly that the Provincial Legislature had authority under Entry 48 of List II, Schedule VII, of the Government of India Act, 1935, to impose tax only on sale of goods, that the supply of materials in works contracts was not a sale within that entry, and that the provisions of the Act, which sought to impose a tax thereon treating it as a sale, were therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment on the same grounds as in M.P. No. 245 of 1954. The appellant in Civil Appeal No. 255 of 1955 is the Madhya Pradesh Contractors' Association, Nagpur, which is again a registered body, and it filed M.P. No. 305 of 1954, challenging the legality of the proceedings for assessment on the same grounds as in M.P. No. 245 of 1954. All these three petitions were heard together, and by their judgment dated November 30, 1954, the learned Judges held that the expression sale of goods in Entry 48 was wide enough to cover all transactions in which property in the movables passed from one person to another for money, and that, accordingly, in a building contract there was a sale within Entry 48 of the materials used therein, and that the provisions of the Act imposing tax thereon were valid. But the learned Judges also held that the tax could be levied only on the actual value of the materials to be determined on an enquiry into the matter, and that the definition of price in section 2(h)(ii) and rule 4 framed pursuant thereto were ultra vires in that they laid down artificial rules for fixing the same by deducting certain percentages from out of the total receipts on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion is, on its true construction, a combination of an agreement to sell and an agreement to work, and if they come to the conclusion that such is its character, then it will be open to them to proceed against that part of it which is a contract for the sale of goods, and impose tax thereon. (2) We have next to consider the contention that the notification dated September 18, 1950, is bad as constituting an unconstitutional (1) Since reported as The State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. at page 353 supra. delegation of legislative power. In the view which we have expressed above that there is in a works contract no sale of materials as such, it might seem academic to enter into a discussion of this question; but as there may be building contracts in which it is possible to spell out agreements for the sale of materials as distinct from contracts for work and labour, it becomes necessary to express our decision thereon. Mr. Chatterjee appearing for the appellant in Civil Appeal No. 253 of 1955 contends that the notification in question is ultra vires, because it is a matter of policy whether exemption should be granted under the Act or not, and a decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pollo Candle Company Limited [1885] to App. Cas. 282., the question arose as to whether section 133 of the Customs Regulation Act of 1879 of New South Wales which conferred a power on the Governor to impose tax on certain articles of import was an unconstitutional delegation of legislative powers. In holding that it was not, the Privy Council observed: It is argued that the tax in question has been imposed by the Governor and not by the Legislature who alone had power to impose it. But the duties levied under the Order-in-Council are really levied by the authority of the Act under which the Order is issued. The Legislature has not parted with its perfect control over the Governor, and has the power, of course, at any moment, of withdrawing or altering the power which they have entrusted to him. In these circum- stances, their Lordships are of opinion that the judgment of the Supreme Court was wrong in declaring section 133 of the Customs Regulation Act of 1879 to be beyond the power of the Legislature. In Syed Mohamed Co. v. The State of Madras [1952] 3 S.T.C. 367., the question was as to the vires of rules 4 and 16 framed under the Madras General Sales Tax Act. Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional and subject to any modification that might be issued under section 6(2). In this view, the impugned notification is intra vires and not open to challenge. But on our finding on the first question that the impugned provisions of the Act are ultra vires the powers of the Provincial Legislature under Entry 48 in List II in the Seventh Schedule, we should set aside the orders of the Court below, and direct that the respondents be restrained from enforcing the provisions of the Central Provinces and Berar Sales Tax Act, 1947, in so far as they seek to impose a tax on construction works. It should be made clear, however, in accordance with what we have already stated, that the prohibition against imposition of tax is only in respect of contracts which are single and indivisible and not of contracts which are a combination of distinct contracts for sale of materials and for work, and that nothing that we have said in this judgment shall bar the Sales Tax Authorities from deciding whether a particular contract falls within one category or the other and imposing a tax on the agreement of sale of materials, where the contract belongs to the latter category. The parties will bear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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