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TMI Blog1955 (10) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... ternity hospital at Mahboobabad for Rs. 52,290 and the other for repairing a large tank at Rudrur for Rs. 1,11,660. It is alleged that the petitioner received a sum of Rs. 52,290 at various intervals between 2nd November, 1950, and 7th May, 1951. In so far as repairs to Rudrur tank is concerned, the petitioner received on 26th September, 1952, an amount of Rs. 74,691 after deduction of 7 1/2 per cent. With respect to these two contracts the petitioner was assessed for the year 1951-52 on a taxable turnover of Rs. 1,14,709-0-0 which consisted of Rs. 78,166-3-3 towards the repairs of the large tank and Rs. 36,603-6-4 with respect to building of the maternity hospital at Mahboobabad after deducting 30 per cent. of the contract amounts under rule 5(3) of the Sales Tax Rules on account of expenses of labour incurred in the execution of work. The petitioner alleges that the Sales Tax Officer had taken the entire amount tendered for the repairs of the Rudrur tank into account while the Exe- cutive Engineer's certificate shows that the work done was only for Rs. 81,303 less the further security deposit. The petitioner having been aggrieved by this order of the Sales Tax Officer filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials such as bricks, lime, stone, cement, tiles, Shahabad stone, wood doors and windows, painting, white-washing, colour washing, etc. have to be provided for or undertaken by the contractor himself and the work with all these materials is inclusive of all leads and lifts and complete in itself, such as where bricks are used, the rate is either for completing the superstructure with brick in mud or brick in lime and lime-plastering with rubbed finish, and where Shahabad stone is used for flooring the rate is complete with its fixing on morham with cement, painting, etc. It may be noticed that no part of the contract prescribes any separate rate for the material itself without the attendant labour and fixing material resulting in the superstructure. Similarly with respect to the repair to the large tank at Rudrur, according to the sample furnished, Exhibit P. IV, the only material which is utilised for this purpose is either mud work or cutting in earth. Now it is necessary to examine the respective contentions of the parties in order to determine whether the provisions of the Sales Tax Act which authorise the levy of sales tax on the turnover of the material used in the const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning any agreement for carrying out for cash or for deferred payment or valuable consideration, the construction, fitting out, improvement or repair of any building, road, bridge or other immovable property or the fitting out, improvement or repair of any movable property. In order to apportion what amount of goods have been used for purposes of their inclusion in the turnover in the works contract, the State Government by sub-rule (3) of rule 5 provided that for pur- poses of sub-rule (1) the amount for which goods are sold by a dealer shall in relation to works contract, be deemed to be the amount pay- able to the dealer for carrying out such contract less a sum not exceed- ing such percentage of the amount payable as may be fixed by the Commissioner, from time to time for different areas, representing the usual proportion in such areas, of the cost of labour to the cost of materials used in carrying out such contract, subject to the following maximum percentage: (a) in the case of an electrical contract 20 per cent. (b) in the case of a structural contract 30 per cent. (c) in the case of a sanitary contract 33-I/3 per cent. (d) in the case of other contracts 30 per cent. Havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used in the works contract as we will presently see; and he could not therefore be justified in imposing sales tax on the assumption that materials liable to sales tax were used in it with- out any evidence before him. He could have quite easily called for the contracts from the P.W.D., which could have furnished the necessary basis for his assessment. In our view he failed to exercise his jurisdic- tion. The Sales Tax Officer, as we have already seen, after deducting 30 per cent. under rule 5(3)(b) towards labour from the contract amount of Rs. 1,11,660 has included Rs. 78,166-3-0 as turnover of the assessee for payment of sales tax. This amount, therefore, has illegally been made the subject-matter of sales tax and the orders of both the Sales Tax Officer and the Commissioner in this behalf are ultra vires. Even otherwise the basis of rule 5(3), as held on an analogous rule 4 of the Central Provinces and Berar Sales Tax Act, 1947, in the case of Pandit Banarsidas v. State of Madhya Pradesh(1), to which a further re- ference will be made hereafter, is that "this artificial and palpably un- natural determination of the price of goods cannot be said to square with the powers given b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Das v. State of Madhya Pradesh and Another(2). Both these cases were decided under the respective Sales Tax Acts made in exercise of the legislative power conferred under item 48 of List II of the Government of India Act, 1935. The provisions of the two Sales Tax Acts are not dissimilar to that of the Hyderabad Sales Tax Act and at any rate as far as the inclusion of the works contracts are concerned there is no difference. In the Madras case, Satyanarayana Rao, J., with whom Raja- gopalan, J., agreed, after an exhaustive review of the case law and on a (1) [1954] 5 S.T.C. 216; A.I.R. 1954 Mad. 1130. (2) [1955] 6 S.T.C. 93. detailed examination and analysis of the various aspects of the matter held that the power of the Provincial Legislature to levy a tax on sale of goods is confined and restricted only to the transaction of sale as under- stood by the Parliament of the United Kingdom in the law relating to the sale of goods, and any attempt of the Legislature to tax under the guise or under the pretence of such a power transactions which are wholly outside will be ultra vires and must be declared invalid. In that case the assessee's main business was to execute contracts f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arayana Rao, J., went on to consider the elements which constitute a contract of sale under the Roman Law as well as under the English Law and as to whether a con- tract which involves labour and work is a contract for the sale of goods, or is a contract purely for the supply of labour and work. At page 240 he observed: "It, therefore, follows that the building contracts, which the asses- sees entered into during the assessment year, on which the turnover was calculated, do not involve any element of sale of the materials and are not in any sense contracts for the sale of goods as understood in law. Having regard to the terms of particular contracts, there may be an in- tention to pass the ownership in the materials for a price agreed upon between the parties, in which case such contracts might contain an element of sale of goods, but that is not the case here. If the amend- ments introduced in 1947 by the Provincial Legislature are intended to catch in the net of tax contracts of the nature with which we are con- cerned, we should hold that to that extent the amendments introduced are ultra vires of the Provincial Legislature as they had no power to tax transactions which are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edded was a necessary part of the power. They disagreed with the view of the Madras High Court and confined the observations of their Lordships of the Supreme Court in Budh Prakash Jai Prakash's case(3), to the particular question in issue before them and only to the extent of considering whether the expres- sion 'sale of goods' included an agreement to sell. In the result it was held that if a building contract is not split up into its component parts, viz., into material and labour, in legislative practice relating to the ordinary regulation of sale of goods, there is no warrant for holding that it cannot be so split up even for purposes of taxation. Building materials are goods and there is payment for materials although it is not made separately, but as part of a larger amount. The supply of goods, therefore, is tantamount to the sale thereof. In that case Hidayatullah, J., with whom Sinha, C.J., agreed, after referring to several cases to see how far these cases had laid down legislative practice to be a test in determining the scope and ambit of the legislative power conferred by an entry in the legislative list came to the conclusion that it was not a conclusive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been understood in legal parlance. In so far as we are able to gather on a very careful reading of the decision in Gannon Dunkerley's case(1), there is nothing in it to militate against the aforesaid proposition which is also consistent with the view expressed by Hidayatullah, J., in Pandit Banarsidas case(2), where he definitely says that legislative practice is helpful within limits but not conclusive and that it is also plain that judicial interpretation of words and expressions is not necessarily conclusive unless those decisions are well-known and the Legislature is legislating upon the same matter for the same purpose and for the same object. Of course Hidayatullah, J., has limited the meaning of the expression used by the Legislature only to cases where it was legislating upon the same matter for the same purpose and for the same object, following the rule laid down by James, L.J., in Greaves v. Tofield(3). In other words, the rule laid down is the well-known rule of construction that statutes in pari materia are (1) [1954] 5 S.T.C. 216; A.I.R. 1954 Mad. 1130. (3) (1880) 14 Ch. D. 563 at page 571. (2) [1955] 6 S.T.C. 93. only relevant for the purpose of interpreting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time when the Constitution was promulgated, the intention of the framers of the Constitution must be ascertained by reference to the plain meaning of the words and expressions used in it. But as we have already observed if the words or expressions have acquired legal currency and have been given a (1) (1829) 7 Co. 457 at page 470. (2) (1880) 14 Ch. D. 563. definite meaning in legal parlance it is safe to presume that the drafts- men or the framers could not but have intended to use them in the same sense. It is not easy to break away from the legal conceptions or meaning of certain legal phrases which are well-known under the law existing at the time when the Constitution was promulgated. It is a matter of history that there were in the Constituent Assembly as well as in the drafting committee eminent lawyers of India. In these circumstances when we find Item 54-but for a few minimum changes to which we have already adverted-is substantially similar to and designed to confer the same powers as Entry 48 of List II of the Government of India Act, 1935, namely, to tax sale of goods whether at the purchase point or at the sale point, we are entitled to have recourse to legislati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sarily to be considered on a generic interpretation which again brings us to the basic principle of interpretation to which we had already adverted, namely, that the true test must always be the actual language used from which the intention of the framers of the Constitution as to the scope and ambit of the power intended to be conferred on the Legislature has to be determined. Of some of the other principles which govern the interpretation of the legislative lists as observed by Fazl Ali, J., who after an examina- tion of the previous case law in The State of Bombay and Another v. F.N. Balsara(1), went on to determine the meaning of the word "liquor" in Entry 31 of List II of the Government of India Act by reference not only to the Oxford Dictionary and the American Statutes but also to the various Abkari Acts passed in India upto 1935 and concluded at page 325 as under: "The framers of the Government of India Act, 1935, could not have been entirely ignorant of the accepted sense in which the word 'liquor' has been used in the various Excise Acts of this country, and, accordingly, I consider the appropriate conclusion to be that the word 'liquor' covers not only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmine is whether in a works contract which has as its object the construction of a building as such, the contractor could be said to have sold any goods or materials used in the building in order to bring them within the power of taxation conferred on a State by Entry 54 of List II of Schedule VII of the Constitution. The Nagpur High Court, as we have already seen, took the view that the selection of the taxable event and the severance of transactions of sale from other transactions in which they might be embedded was a necessary power and that there is always a sale if goods are transferred to another and paid for by him and that it cannot be gainsaid that there is a payment for materials though the payment is not made separately but as a part of a larger amount. The question is to what extent the expression "tax on the sale or purchase of goods" could be deemed to include the incidental powers of dissecting a works contract into its various component parts and taxing those parts separately apart from the finished physical subject-matter or the main object of the works contract. In our view the expression "sale of goods " connotes a contract whereby goods are sold for a price and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to what extent the expression "tax on the sale or purchase of goods" could be deemed to include the incidental powers of dissecting a works contract into its various component parts and taxing those parts separately apart from the finished physical subject-matter or the main object of the works contract. In our view the expression "sale of goods " connotes a contract whereby goods are sold for a price and the property in them is transferred. The power of taxation conferred by Entry 54 is on the transaction of sale or purchase of goods, (1) [1953] 4 S.T.C. 133; A.I.R. 1953 S.C. 252. (2) [1955] 6 S.T.C. 446; A.I.R. 1955 S.C. 661. subject-matter of a sale because there is no agreement to sell the mate- rials nor is the price of the goods fixed nor is there a passing of the title in these goods as such, except as part of the building or the thing in which they are embedded. Therefore where as in this case bricks, rafters, beams, doors, windows, etc. are embedded in a building or go to make the construction of a building as such, a contractor who has undertaken to build cannot by any stretch of the words in Entry 54 be said to have agreed to sell or is said to have sold bricks, rafters, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erhaps because as Buckland in his Text Book of Roman Law says the site was part of the finished product so that he only produced part of the material or because the result of his work merged in the land and had, when the work was finished, no independent existence. Inasmuch as the learned Advocate for the applicant as well as the learned Advocate-General have merely contented themselves by adopting the reasoning in Gannon Dunkerley's case(1) and Pandit Banarsi Das' case(2) respectively as their arguments, we cannot in the view we have taken, with great respect, add to what has been said by Satyanarayana Rao, J., in Gannon Dunkerley's case(1), after an exhaus- tive review and careful analysis of all the aspects of the matter and we agree with the conclusions arrived at by him. We also find support for that view in the weighty pronouncement of their Lordships of the Supreme Court. There is yet another question to be determined namely, whether the assessee in this case can be termed to be a dealer or a casual trader within the definition of sections 2(c) and 2(e) of the Hyderabad General Sales Tax Act. These terms connote that a person either generally or occasionally is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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