M.S. Menon, J.
1. The petitioner was assessed to sales tax for the years 1950-51 and 1951-52 in respect of certain works contracts under the Travancore-Cochin General Sales Tax Act, 1125, and he challenges by this petition the validity of those assessments. The orders impugned are :
(1) the assessment order No. STD. 4/50-51 and 51-52 dated 18th September, 1952, passed by the 1st respondent, the Agricultural Income-tax and Rural Sales Tax Officer, Devicolam ;
(2) the order dated 30th March, 1954, passed by the 2nd respondent, the Appellate Assistant Commissioner of Agricultural Income Tax and Sales Tax, Ernakulam, in ESTA. 116 & 117/52-53 on appeal ;
(3) the order dated 10th December, 1954, passed by the 3rd respondent, the Deputy Commissioner of Agricultural Income Tax and Sales Tax, Trivandrum, in Sales Tax Revision Nos. 368 and 369/54 ; and
(4) the order, No. D. Dis. 756/55, dated 17th September, 1955, passed by the 4th respondent, the Sales Tax Commissioner, Trivandrum, in Sales Tax Revision Case No. 10/55.
2. The order of the 3rd respondent, the Deputy Commissioner of Agricultural Income Tax and Sales Tax, Trivandrum, gives the necessary background to the contentions urged before me and reads as follows :-
It is submitted that the Appellate Assistant Commissioner of Agricultural Income Tax and Sales Tax, Ernakulam, has dismissed the appeals filed against the orders of assessment passed by the Agricultural Income Tax and Sales Tax Officer, Devicolam, for 1950-51 and 1951-52 without deducting the cost of 'pure labour' involved in the works contract under reference. It is also added that there is no 'sale of materials' effected as such in the above cases.
The learned representative who appears before (me on behalf of the petitioner files before me a detailed statement of works contracts executed by him during the two years. On a careful scrutiny of the same, I find that the same includes the cost of both material and labour and so the authorities below are sufficiently justified in calculating the taxable turnover at 30% of the contract amount as prescribed under the Rules.
In the result the orders in appeal passed by the Appellate Assistant Commissioner are upheld and the revision petitions stand dismissed.
3. According to Section 2(j) of the Travancore-Cochin General Sales Tax Act, 1125, 'sale' with all its grammatical variations and cognate expressions 'includes also a transfer of property in goods involved in the execution of a works contract' and the expression 'works contract' as defined in Sub-section (1) of that section :
means any agreement for carrying out for cash or for deferred payment or other 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.
4. The relevant portion of the definition of 'turnover' [section 2(k)] reads as follows :
The aggregate amount for which goods are either bought by or sold by a dealer, whether for cash or for deferred payment or other valuable consideration....
Explanation.-Subject to such conditions and restrictions, if any, as may be prescribed in this behalf :-
(i) the amount for which goods are sold shall, in relation to a works contract, be deemed to be the amount payable to the dealer for carrying out such contract less such portion as may be prescribed of such amount, representing the usual proportion of the cost of labour to the cost of materials used in carrying out such contract.
Under Sub-rule (1) of Rule 4 of the Travancore-Cochin General Sales Tax Rules, 1950, the gross turnover of a dealer for the purposes of those rules will be the amount for which goods are sold by him and Sub-section (3) of the said rules provides :
For the purposes of Sub-rule (1), the amount for which goods are sold by a dealer shall, in relation to a works contract, be deemed to be the amount payable to the dealer for carrying out such contract less a sum not exceeding such percentage of the amount payable as may be fixed by the Board of Revenue 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 percentages:- Per cent.(a) in the case of an electrical contract 20(b) in the case of a structural contract 30(c) in the case of a sanitary contract 33 1/3(d) in the case of other contracts 30.
5. The learned Government Pleader has not been able to trace any fixation of a percentage by the Board of Revenue as contemplated by the sub-rule. The Department is apparently proceeding on the assumption that in the absence of percentages fixed by the Board of Revenue the maximum percentages mentioned in the sub-rule are the deductions admissible in respect of works contracts. This may not be correct. What the sub-rule does is not to fix a maximum percentage and allow a downward revision by the Board of Revenue but to leave the fixation itself to the Board of Revenue subject to the maximum percentages indicated therein. As a result the non-fixation of percentages by the Board may mean that no deduction is admissible until they are fixed or that no sales tax is attracted until the fixation is effected, the result being entirely dependent on the answer to the question as to whether the provision for a fixation of percentages by the Board of Revenue is a condition precedent to the levy or not.
6. The arguments before me proceeded on the assumption that the maximum percentages specified in Sub-rule (3) have as a matter of fact been fixed as admissible deductions. In view of this I do not think I need express any definite opinion on this point and shall deal with the case on the basis of the assumption made.
7. The petitioner's main contention is that Sub-rule (3) cannot be sustained as the State Legislature has no power to levy a tax except on the sale of goods (Entry 54 of List II of Schedule VII to the Constitution) and it cannot in exercise of that power introduce taxation based on a notional conception of what it 'will consider as the sale price of the goods involved in a works contract irrespective of the actual price of the goods concerned. Such a contention has found favour with the High Court of Nagpur in Pandit Banarsi Das v. State of Madhya Pradesh and Ors.  6 S.T.C. 93 a case relating to building contracts under the Central Provinces and Berar Sales Tax Act, 1947, and the Central Provinces and Berar Sales Tax Rules, 1947. Hidayatullah, J., delivering the judgment of the Court extracted the relevant definition of 'sale price' :
(h) 'sale price' means the amount payable to a dealer as valuable consideration for-
(ii) the carrying out of any contract, less such portion, representing the proportion of the cost of labour to the cost of materials used in carrying out such contract, as may be prescribed.
and the rule concerned:
4. Taxable turnover in respect of contracts.-In calculating the sale price for the purpose of Sub-clause (ii) of Clause (h) of Section 2, a dealer may be permitted to deduct from the amounts payable to him as valuable consideration for carrying out a contract, a sum not exceeding such percentages as may be fixed by the Commissioner for different areas subject to the following maximum percentages, namely :-
(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 or gas contract 33 1/3 per cent.
(d) In the case of overhaul or repair of any motor vehicle 60 per cent.
(e) In the case of other contracts 30 per cent.
and said :
In my view, 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 tax is not laid in the Act on different articles and commodities supplied by the contractor but on their cost, and this cost is not found out actually but is deducted by subtracting from the total consideration, the consideration for the execution of the contract as opposed to cost of materials which the Commissioner thinks suitable in any area, subject to an upward limit fixed by the rules. If there had been provision for agreements on the basis of 'cost-plus-a-fee', the matter might have been simple. But since the contract is for a finished work and payment is in a lump sum on the basis of quantity and quality, rather than the cost of labour plus the cost of the materials supplied, it is impossible on the rules as they exist to determine the correct price of the goods on which the tax can legitimately be demanded. There is a distinct probability that the tax falls on services by inclusion into the price of materials determined in this artificial manner.
I would, therefore, hold that the artificial test laid down in the Act to determine sale price of goods in respect of building contracts and the rule prescribing the proportion are clearly not within the power granted to the Legislature and must therefore be declared as ultra vires. The contractors could have been asked to furnish a return of the cost of materials supplied in their contracts in the assessment year. A provision to this end and a further provision for a 'best judgment' assessment in case the return was not acceptable would have met the case. But I cannot imagine that the determination of the price of goods involved in such transactions can be made by a rule of thumb applicable in any particular area on the basis of the Commissioner's will. I, therefore, hold Section 2(h)(ii) and Rule 4 ultra vires.
8. There was no attempt to distinguish the decision and as I am in agreement with the reasoning embodied in the paragraphs reproduced above I must hold that Sub-rule (3) of Rule 4 and that portion of the definition of the expression 'turnover' given in Section 2(k) of the Act which supports such a rule are ultra vires of the powers of the State Legislature.
9. The only further contention that remains to be noticed is the contention of the learned Government Pleader that the question of ultra vires should not be allowed to be raised as it was not urged before the Sales Tax Authorities. There can be no doubt that the question of ultra vires even if it was not specifically raised in an earlier stage can be raised by the petitioner in a petition like this under Article 226 of the Constitution and I decide accordingly.
10. It follows that the orders impugned which were passed on the basis of a pre-determined proportion as provided in that sub-rule have to be quashed and I direct accordingly.
11. The learned counsel for the petitioner submitted that if I am holding Sub-rule (3) of Rule 4 and that portion of the definition of the expression 'turnover' in Section 2(k) of the Act which supports that sub-rule to be ultra vires and quashing the four orders impugned on that ground I need not consider the other questions argued by him. Those questions and the two decisions cited at the Bar, viz., Gannon Dunkerley and Co., (Madras) Ltd. v. State of Madras A.T.R. 1954 Mad. 1130 and Mohamed Khasim v. State of Mysore A.I.R. 1955 Mys. 41, are hence not dealt with in this judgment. I also express no opinion on the various aspects covered by Pandit Banarsi Das v. State of Madhya Pradesh and Ors.  6 S.T.C. 93, except to the extent of the reasoning adopted by me for the decision of this case.
12. The petition is allowed in the manner and to the extent indicated above. The petitioner will have his costs from the respondents, advocate's fee Rs. 100.
Order dated 16th March, 1956.
After I read out the attached judgment in Court yesterday afternoon but before it was fair-copied or signed it struck me that a question which was not, dealt with at the Bar may prove to be of considerable importance. The question is :
What, if any, is the effect of the fact that the Travancore-Cochin General Sales Tax Act, 1125, received the assent of His Highness the Raj Pramukh on 5th January, 1950, and was published in the Gazette dated 17th January, 1950, though the notification bringing it into force with effect from 30th May, 1950, in exercise of the powers conferred by section l(c) of the Act was issued and published only after the Constitution came into force ?
Following the practice adopted by the Court of Appeal in Hedger v. Shutter 139 E.G. 386-See also A.I.R. 1949 P.C. 112 I direct that the O.P. be posted before me on 19th March, 1956.
Order dated 19th March, 1956.
Mr. Namboodiripad is ill. Post this petition for hearing to Monday the 26th March, 1956.
Order dated 26th March, 1956.
The petitioner proposes to file a fresh petition raising all his objections and giving full details. In view of this the petition is not pressed and is hereby dismissed with freedom reserved to the petitioner to file a fresh petition as proposed. No costs.