Case Note & Summary
The appeals arose from writ petitions filed before the Nagpur High Court challenging the constitutional validity of certain provisions of the Central Provinces and Berar Sales Tax Act, 1947, which sought to impose sales tax on materials used in construction works. The appellants included a contractor doing business in construction of buildings and roads for the Military and Public Works Department in the State of Madhya Pradesh, the Jabalpur Contractors' Association, and the Madhya Pradesh Contractors' Association. The tax authorities had called upon contractors to furnish returns for assessment of sales tax on receipts from contract works under Section 4(a) read with definitions in Section 2 of the Act, which included transfer of property in goods made in course of execution of a contract as a 'sale'. The appellants contended that the Provincial Legislature lacked competence under Entry 48 of List II of the Government of India Act, 1935 to tax supply of materials in works contracts because such supply was not a 'sale of goods' within the meaning of that entry; they also challenged a notification dated September 18, 1950, which withdrew an exemption previously available under item 33 of Schedule II for goods sold to the State Government, leaving only goods sold by the State Government exempt. The High Court held that the impugned provisions were valid under Entry 48 but declared the definition of 'sale price' in Section 2(h)(ii) and Rule 4 ultra vires, while upholding the notification. On appeal, the Supreme Court followed its recent decision in The State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., holding that the expression 'sale of goods' in Entry 48 had the same meaning as in the Indian Sale of Goods Act, 1930, and that in a building contract there was no sale of materials as such. Therefore, the Provincial Legislature was incompetent to impose tax on the supply of materials. On the second issue, the Court held that the delegation under Section 6(2) was constitutional; the legislature could leave to the executive the determination of details relating to taxation, including selection of persons and rates, and that sub-sections (1) and (2) of Section 6 together formed an integral enactment under which an exemption granted under Section 6(1) was conditional and subject to any notification issued under Section 6(2). Accordingly, the notifications amending the exemption were intra vires. The appeals were allowed, and the assessment proceedings based on the ultra vires provisions were restrained.
Headnote
A) Constitutional Law - Legislative Competence - Entry 48 of List II, Seventh Schedule to Government of India Act, 1935 - The expression 'sale of goods' in Entry 48 has the same meaning as in the Indian Sale of Goods Act, 1930; a building contract involves no sale of materials as such - The Provincial Legislature lacked competence to impose sales tax on the supply of materials in works contracts; such provisions were ultra vires - Held that assessment proceedings based on those provisions could not stand.
B) Constitutional Law - Excessive Delegation - Section 6(2) of Central Provinces and Berar Sales Tax Act, 1947 - Delegation of power to State Government to amend exemption schedule by notification is valid - It is not unconstitutional for legislature to leave details of taxation such as selection of persons and rates to executive - Section 6(1) exemption is conditional and subject to notification under s.6(2); notification dated September 18, 1950 amending item 33 was intra vires - Held that exemption withdrawal was valid.
Issue of Consideration
Whether the Provincial Legislature had legislative competence under Entry 48 of List II, Seventh Schedule to Government of India Act, 1935 to impose sales tax on the supply of materials in works contracts; Whether the notification dated September 18, 1950 amending Schedule II item 33 was invalid as excessive delegation of legislative power.
Final Decision
The Supreme Court allowed the appeals, holding that the provisions of the Central Provinces and Berar Sales Tax Act, 1947 imposing sales tax on the supply of materials in building contracts were ultra vires the Provincial Legislature under Entry 48, following The State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. The notification dated September 18, 1950 amending item 33 of Schedule II was held intra vires as a valid exercise of delegated power under Section 6(2). Consequently, the assessment proceedings based on the ultra vires provisions were liable to be restrained.
Law Points
- Legal points not extracted
- Expression 'sale of goods' in Entry 48 of Government of India Act
- 1935 bears same meaning as in Indian Sale of Goods Act
- 1930
- building contract involves no sale of materials as such
- Provincial Legislature lacks competence to impose sales tax on supply of materials in works contracts
- delegation of power to State Government to amend exemption schedule under Section 6(2) of Central Provinces and Berar Sales Tax Act
- 1947 is valid
- exemption under Section 6(1) is conditional and subject to notification under Section 6(2)
Case Details
1958 LawText (SC) (04) 18
Civil Appeals Nos. 253 to 255 of 1955
S.R. Das (CJ), T.L. Venkatarama Aiyar, Vivian Bose, S.K. Das, A.K. Sarkar
Citation not available, 1958 AIR 909, 1959 SCR 427
N. C. Chatterjee, G. C. Mathur, B. Sen, S. B. Sen, I. N. Shroff, C. K. Daphtary, R. H. Dhebar, N. S. Bindra, T. M. Sen
Pandit Banarsi Das Bhanot; Jabalpur Contractors' Association and certain contractors; Madhya Pradesh Contractors' Association, Nagpur
State of Madhya Pradesh & Others
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Nature of Litigation
Writ petitions challenging constitutional validity of provisions of Central Provinces and Berar Sales Tax Act, 1947 imposing sales tax on materials used in construction works, and validity of notification amending exemption schedule.
Remedy Sought
Appellants sought a writ to restrain tax authorities from proceeding with assessment of sales tax on receipts from construction contracts.
Filing Reason
The tax authorities proposed to assess contractors on turnover from supply of materials in execution of building and road contracts under the impugned provisions.
Previous Decisions
Nagpur High Court in Misc. Petitions Nos. 245, 279 and 308 of 1954 held that the tax on building contracts was intra vires Entry 48 but the definition of 'sale price' in Section 2(h)(ii) and Rule 4 were ultra vires; notification dated 18-09-1950 was held valid. Appeals to Supreme Court under Article 132(1).
Issues
Whether the Provincial Legislature had competence under Entry 48 of List II, Seventh Schedule to Government of India Act, 1935 to impose sales tax on supply of materials in works contracts treating it as a sale.
Whether the notification dated September 18, 1950 issued under Section 6(2) of the Central Provinces and Berar Sales Tax Act, 1947 amending exemption item 33 was invalid as excessive delegation of legislative power.
Submissions/Arguments
Appellants contended that supply of materials in works contracts was not a sale within Entry 48, as sale of goods should have the same meaning as in the Indian Sale of Goods Act, 1930, and therefore the impugned provisions were ultra vires.
Appellants further argued that the State Government could not alter the exemption granted by the legislature under Section 6(1) by notification under Section 6(2); the notification withdrawing exemption was unconstitutional delegation of legislative power.
Respondents contended that the expression 'sale of goods' in Entry 48 was wide enough to include transfers of property in movable materials used in building contracts and that the notification was within the validly delegated authority under Section 6(2).
Ratio Decidendi
The expression 'sale of goods' in Entry 48 of the Government of India Act, 1935 is to be interpreted in the same sense as under the Indian Sale of Goods Act, 1930; a building contract involves no sale of materials as such, and therefore the Provincial Legislature cannot impose sales tax on the supply of materials under such contracts. The delegation of power to the State Government to amend exemption schedules under Section 6(2) of the CP & Berar Sales Tax Act is constitutional; the power to determine details of taxation, including exemptions, may be left to the executive, and an exemption under Section 6(1) remains conditional and subject to any notification issued under Section 6(2).
Judgment Excerpts
The expression 'sale of goods' in Entry 48 has the same meaning which it has in the Indian Sale of Goods Act, 1930, that in a building contract there is no sale of materials as such, and that it is therefore ultra vires the powers of the Provincial Legislature to impose tax on the supply of materials.
It is not unconstitutional for the legislature to leave it to the executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid, the rates at which it is to be charged in respect of different classes of goods, and the like.
Sub-sections (1) and (2) of s. 6 together form integral part of a single enactment the object of which is to grant exemption from taxation in respect of such goods and to such extent as may from time to time be determined by the State Government, and an exemption granted under s. 6(1) is conditional and subject to any notification that might be issued under s. 6(2).
Procedural History
The appellants filed writ petitions before Nagpur High Court (Misc. Petitions Nos. 245, 279 and 308 of 1954) challenging proposed sales tax assessments under the Central Provinces and Berar Sales Tax Act, 1947. The High Court by judgment dated November 30, 1954 held the charging provisions valid under Entry 48 but declared Section 2(h)(ii) and Rule 4 ultra vires and upheld the notification dated September 18, 1950. The appellants obtained certificate under Article 132(1) of the Constitution and preferred appeals to the Supreme Court; the Supreme Court heard the appeals and delivered judgment on April 3, 1958, allowing the appeals on the main ground of lack of legislative competence.
Acts & Sections
- Central Provinces and Berar Sales Tax Act, 1947: Sections 2(b), 2(c), 2(d), 2(g), 2(h), 2(j), 4(a), 6(1), 6(2); Schedule II, Item 33
- Government of India Act, 1935: Entry 48 of List II, Seventh Schedule
- Indian Sale of Goods Act, 1930:
- Constitution of India: Article 132(1)
