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Gammon India Private Ltd. Vs. Sales Tax Officer - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKerala High Court
Decided On
Case NumberTax Revision Case No. 45 of 1960
Judge
Reported in[1962]13STC50(Ker)
AppellantGammon India Private Ltd.
RespondentSales Tax Officer
Appellant Advocate K.P. Abraham,; George Kurien,; E.M. Jacob,;
Respondent AdvocateThe Government Pleader
Cases ReferredTrivandrum v. Sales Tax Officer and Anr.
Excerpt:
- .....general sales tax act, 1125, in respect of the goods involved in the execution of a works contract. the year concerned is 1955-56.2. the order of assessment by the sales tax officer, irinjalakuda, was confirmed both by the appellate assistant commissioner, trichur, and the sales tax appellate tribunal, trivandrum. the tribunal summed up the facts of the case as follows in its order dated 16th february, 1960:-the turnover assessed relates to a building contract dated 21st february, 1951, entered into by the appellants with m/s. j. & p. coats ltd., glasgow. the total amount of the contract was rs. 1,52,986-14-6. 70 per cent, of the same, i.e., rs. 1,07,090-14-6 was treated as the assessable turnover under rule 4(3) of the travancore-cochin general sales tax rules. to this.....
Judgment:

M.S. Menon, J.

1. The petitioner, Gammon India Private Limited, Bombay, was assessed to sales tax under the Travancore-Cochin General Sales Tax Act, 1125, in respect of the goods involved in the execution of a works contract. The year concerned is 1955-56.

2. The order of assessment by the Sales Tax Officer, Irinjalakuda, was confirmed both by the Appellate Assistant Commissioner, Trichur, and the Sales Tax Appellate Tribunal, Trivandrum. The Tribunal summed up the facts of the case as follows in its order dated 16th February, 1960:-

The turnover assessed relates to a building contract dated 21st February, 1951, entered into by the appellants with M/s. J. & P. Coats Ltd., Glasgow. The total amount of the contract was Rs. 1,52,986-14-6. 70 per cent, of the same, i.e., Rs. 1,07,090-14-6 was treated as the assessable turnover under Rule 4(3) of the Travancore-Cochin General Sales Tax Rules. To this was added Rs. 9,710-1-6 representing miscellaneous sales. The appellants were accordingly assessed on a turnover of Rs. i,16,801.

3. The contention of the petitioner is that the sum of Rs. 1,07,090-14-6 is not assessable to sales tax in view of the definitions embodied in Section 2 of the Act. It is common ground that if such is the case, the turnover of the miscellaneous sales amounting to Rs. 9,710-1-6 will not attract any tax in view of Sub-section (3) of Section 3 which says that a dealer whose total turnover in any year is less than ten thousand Indian rupees shall not be liable to pay any tax for that year under Sub-section (1) or Sub-section (2) of that section.

4. Sub-section (1) of Section 3 provides that subject to the provisions of the Act 'every dealer shall pay for each year a tax on his total turnover for such year'. 'Turnover' is denned in Section 2(k) as meaning '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'. The definition goes on to say that '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 cost of labour to the cost of materials used in carrying out such contract.

5. The expression 'works contract' is defined in Section 2(1) of the Act as follows :-

'Works contract' 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.

There can be no doubt that the contract with which we are concerned is a 'works contract' as defined in the Act.

6. According to Section 2(j) of the Act ' '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.

7. In view of these definitions the only question that can arise, and the only question that is raised before us, is whether the petitioner is not liable to sales tax because of the definition of the expressions 'dealer' and 'goods' in Section 2 of the Act. 'Dealer', according to Section 2(d), 'means any person who carries on the business of buying or selling goods'; and 'goods', according to Section 2(e), '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'. The words 'to be used' in the definition of 'goods' are emphasised, and it is contended that only goods which are 'to be used' in the execution of a works contract as distinct from those actually used will attract the tax.

8. We see no force in this contention. In view of the provisions of the charging section-Section 3-and the definitions of 'dealer', 'goods', 'sale', 'turnover' and 'works contract' in Section 2 we have no hesitation in holding that the assessment of the sum of Rs. 1,07,090-14-6 is proper and that the decision of the Appellate Tribunal requires no modification. As stated by the High Court of Nagpur when dealing with similar definitions in Pandit Banarsi Das v. State of Madhya Pradesh and Ors. [1955] 6 S.T.C. 93:

These definitions extend the operation of the impugned Act to reach the supply of materials used in the building contracts.

9. In Gannon Dunkerley and Co., Madras (Private] Ltd. v. Sales Tax Officer, Mattancheri [1957] 8 S.T.C. 347 a contention similar to the one urged before us was considered and negatived by this Court. In paragraph 17 of the judgment the Court said:

The second contention is that even if the Travancore-Cochin General Sales Tax Act, 1125, is not ultra vires of the Constitution, the legislative intent was only to tax the sale of goods strictly so called and that the intent is manifest from the preamble which says, 'whereas it is expedient to provide for the levy of a general tax on the sale of goods in the State of Travancore-Cochin; it is hereby enacted as follows'.

and held 'that the legislative intent is not so restricted is clear from the definitions in Section 2 of the Act.

10. It was conceded before the Appellate Tribunal that the works contract involved in this case is not different from the one involved in Gannon Dunkerley and Co., Madras (Private) Ltd. v. Sales Tax Officer, Mattancheri [1957] 8 S.T.C. 347. This is clear from paragraph 9 of its order dated 16th February, 1960:

It is admitted by learned counsel for the appellants that the terms of the building contract in this case are exactly similar to those of the building contract that came up for consideration in Gannon Dunkerley and Co., Madras (Private) Ltd. v. Sales Tax Officer, Mattancheri [1957] 8 S.T.C. 347.

11. Our attention is drawn to State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. [1958] 9 S.T.C. 353, wherein Venkatarama Aiyar, J., observed as follows :-

To sum up, the expression 'sale of goods' in Entry 48 is a nomen juris, its essential ingredients being an agreement to sell movables for a price and property passing therein pursuant to that agreement. In a building contract which is, as in the present case, one, entire and indivisible-and that is its norm, there is no sale of goods, and it is not within the competence of the Provincial Legislature under Entry 48 to impose a tax on the supply of the materials used in such a contract treating it as a sale.

It must be taken as settled law that the limitations of Entry 48 has nothing to do with the enactment with which we are concerned. In South India Corporation (Private) Ltd. v. Secretary, Board of Revenue, Trivandrum, and Ors. 1961 K.L.J. 255, Ansari, C.J., quoted the above extract and summarised the Kerala cases on the subject as follows :-

Provisions in the Travancore-Cochin General Sales Tax Act authorising levy of the tax on transfer of goods in works contract were earlier challenged before the Travancore-Cochin High Court in Gannon Dunkerley and Co., Madras (Private) Ltd. v. Sales Tax Officer, Mattancheri [1957] 8 S.T.C. 347 but the Division Bench did not uphold the objection on the ground that the Legislature, which had enacted that law, was not circumscribed by any limitation of powers similar to item 48 of List II of the Government of India Act, 1935. The same view has been reiterated in Subhodaya Corporation, Trivandrum v. Sales Tax Officer and Anr. [1959] 10 S.T.C. 356 which is after the pronouncement of the Supreme Court and on the same grounds. The learned Judges have again held that the Legislature and H.H. The Raj Pramukh had prior to the inauguration of the Constitution plenary powers and, therefore, the limitation on Part B States under Entry 54 of List II of the Seventh Schedule to the Constitution would not retrospectively operate to invalidate the earlier law.

12. In the light of what is stated above this T.R.C. has to be dismissed and we do so. No costs.


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