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TMI Blog1961 (2) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... red, and remain as originally enacted. These are firstly the following parts of definition by section 2. "2. (e) 'goods' means all kinds of movable property and includes all materials, commodities and articles including those to be used in the construction, fitting out, improvement or repair of immovable property; or in the fitting out, improvement or repair of movable property; and also includes all growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under a contract of sale, but does not include actionable claims, stocks and shares and securities; 2.. (j) 'sale' with all its grammatical variations and cognate expressions, means every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration and includes also a transfer of property in goods involved in the execution of a works contract, but does not include a mortgage, hypothecation, charge or pledge; 2.. (k) 'turnover' means the aggregate amount for which goods are either bought by or sold by a dealer, whether for cash or for deferred payment or other va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (e) in the case of textile dyeing and printing works contract 50 (f) in the case of watch and/or clock repair contracts 50 (g) in the case of sculptural contract or contracts relating to arts 70 (h) in the case of other contracts 30." There is nothing on the record to show about the rules having been framed prior to the inauguration of the Constitution, and it is not disputed that they came into operation on 30th May, 1950. The aforesaid provisions clearly authorise the sales tax being collected on transfer of goods in works contract, and one of the points inviting adjudication in these petitions is whether such an authorisation is valid due to the Act having been enacted prior to the Constitution by an authority not controlled by the Government of India Act, 1935. At one time there was divergence of views about levy of sales tax on works contracts being proper; but that divergence has been settled by State of Madras v. G. Dunkerley Co.[1958] 9 S.T.C. 353; A.I.R. 1958 S.C. 560 at 577., where it was held that the authorisation under the Government of India Act, 1935, to levy tax under List II, Entry 48, did not justify legislation for taxing transfer of goods in works co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clude his making the claim due to the payment being under error of law and recoverable under section 72 of the Contract Act. In 0. P. 70/60 the dealer out of the turnover of Rs. 1,22,32,430-50 nP., claims Rs. 19,96,702-12 nP. to have been got for works contract and the sales tax on this amounts to Rs. 44,281-42 nP. The balance due towards the entire tax amount is Rs. 33,160-52 nP., which means that part of the liability has been discharged, but that would not preclude the dealer's claiming the tax being ultra vires. The assessment year for the aforesaid tax is 1957-58. In O.P. 71/60, the dealer's turnover is Rs. 1,23,69,417-5-4, out of which the claim on account of works contract is Rs. 17,32,087-6-5. The assessment year is 1956-57 for this petition, and the objection by the dealer to the tax had been disallowed by the taxing authorities. The turnover in the fourth writ petition, O.P. 673/60, amounts to Rs. 40,45,725-57 nP., on which the total tax levied is Rs. 96,050-79 nP., and the total of what is objected to by the dealer as not liable on the ground of having been earned from works contracts, comes to Rs. 10,93,084-21 nP. The assessment year is 1958-59, and the objection to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "It is now well established that while Article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. In order however, to pass the test of permissible classification, two conditions must be fulfilled, namely, (1) that the classifi. cation must be founded on an intelligible differentia, which distinguishes persons or things that are grouped together from others left out of the group, and (2) that that differentia must have a rational relation to the object sought to be achieved by the statute in question. The classification may be founded on different bases, namely, geographical, or according to the objects or occupations or the like. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration. It is also well established by the decisions of this Court that Article 14 condemns discrimination not only by a substantive law but also by a law of procedure."The same test has been repeated in Moti Das v. S.P. SahilA.I.R. 1959 S.C. 942 at pp. 946-947., where S.K. Das, J., has observed as follows: "It is enough to say that it is now well settled by a series of deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the other person promises to pay for the work done, is a contract for work, although the payment may be called a price for the thing and although the materials, of which the thing is made, may be supplied by the maker. It is, therefore, obvious that, with such well settled distinction between works contract and sale of goods, there should be intelligible differentia between earnings through the former from those by the latter. We now come to the nexus between the aforesaid differentia and the object of legislation. It is clear that the enacting authority was desirous of taxing only the amounts got for transfers of ownership in goods; and where such money be mixed, as in cases of works contract, with the consideration for services, rules for separating the two would be required, which would be different to those dealing with ordinary sales. At this stage we are considering how far the objection to the Act being violative of Article 14 is justified; and the authority, which enacted the law is, in these writ petitions, conceded not to be one with limited powers, like those under the Government of India Act, 1935, or under our present Constitution. Such an authority would, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us to be without relation to the then costs of labour. Therefore, the exercise in the case cannot be struck down as discriminatory. The learned counsel for the writ petitioners has, however, relied on three cases in support of the argument that the provisions in the Act and the rules are ultra vires and violative of Article 14. In Jubilee Engineering Co. v. Sales Tax Officer[1956] 7 S.T.C. 423; A.I.R. 1956 Hyd. 79., one of us has referred to and followed the observations of the learned judges in Pandit Banarsi Das v. State of Madhya Pradesh[1955] 6 S.T.C. 93., which read thus: "This artificial and palpably unnatural determination of the price of goods cannot be said to square with the powers given by the Constitution Act to levy a tax on the 'sale of goods'." The learned counsel urged that those observations apply to the Travancore-Cochin General Sales Tax Act as well; but we see no force in the argument, because such observations are relevant only where the authorisation to enact be limited and the enacting authority cannot overstep the limits by arbitrary and unnatural provisions for fixing the prices. That reasoning would not be available where the competency of the en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continuance of the Act under Article 372, the taxing authorities in this State cannot collect the tax, because the State's executive powers are circumscribed by Article 162, which limits the exercise to subjects covered by the items in List II of the Seventh Schedule. We feel the argument to be without force, because it overlooks Article 277. It cannot be disputed that the Act was saved by Article 372, because, though it came into operation in May, 1950, yet it was passed before the inauguration of the Constitution, with the result that Explanation 1 to Article 372 becomes applicable. That Explanation says that the words "law in force" in the Article shall include a law passed or made by a Legislature or other competent authority in the territory of India before the commencement of the Constitution and not previously repealed, notwithstanding that it or parts of it may not be then in operation. Therefore, the Act, not having come into operation till after the Constitution, would not help the petitioners' case. The Act being thus saved, and not being new, Article 277 would be attracted. That would be the position because the Act authorises what was being levied prior to the inaugur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Form 1-A showing the estimated gross and net turnover for the first twelve months of his business." It is, therefore, clear that the tax on works contract began to be levied in May, 1949, due to the dealers' being authorised to collect and being bound to pay over what they had collected. Mr. T.N. Subramonia Iyer has argued that such a collection should not be treated as being levied, because the charging section makes a dealer liable to pay the tax on his turnover. With respect, we fail to see what other description can be given to the payments by the dealers, who collected tax money under statutory authorisation; nor how the amounts, when paid by the dealers into the Treasury on account of tax, can be treated not to have been collected. The fact of their being provisional does not convert the realisation into one for a different liability. It follows that there is no constitutional prohibition against the authority to collect the tax, as such acts are permitted by Article 277. The learned counsel then urged that framing the rules under the Act could only be by delegation to legislate; and, where the power to legislate, after a certain date be circumscribed, the delegation ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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