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Bhuramal and ors. Vs. State of Rajasthan - Court Judgment

LegalCrystal Citation
SubjectSales Tax;Constitution
CourtRajasthan High Court
Decided On
Case NumberCivil Writ Appln. Nos. 9, 10, 53, 54, 103, 104 and 121 of 1956
Judge
Reported inAIR1957Raj104; [1957]8STC463(Raj)
ActsInterpretation of Constitution Act; Constitution of India; Rajasthan Sales Tax Act, 1954 - Sections 2 and 5; Code of Civil Procedure (CPC); Sales of Goods Act, 1930 - Sections 4; Rajasthan Sales Tax Rules, 1955 - Rule 7
AppellantBhuramal and ors.
RespondentState of Rajasthan
Appellant Advocate Jiwansingh, Adv. (for Nos. 1 to 6) and;M.M. Vyas (for No. 7)
Respondent Advocate L.N. Chhangani, Govt. Adv.
Cases ReferredRex v. West Riding of Yorkshire County Council
Excerpt:
- - in connection with their contracts, they supply material as well as labour, & after their work is finished are paid by the state both for the material used by them in 'the building or road or any other work and for the labour supplied by them. (1) a building'contract, which includes a contract for labour as well as for material, is one and indivisible, and does not involve any element of sale of the materials, and is not a contract of sale of goods, and not covered by entry 54 of list ii of schedule vii of the constitution; (4) .7. the contention of the applicants is that this definition of sale of goods must be deemed to have been well-known to the constituent assembly when item 54 of list ii was put in the seventh schedule, and therefore the words 'sale of goods' used in the.....wanchoo, c.j. 1. these are seven applications tinder article 227 of the constitution for issue of a writ, direction or order in connection with the sales tax act of raj-asthan (hereinafter called the act.) we propose to decide them by one order as the points raised in them are common.2. the applicants are building contractors and undertake building work for the public works department and other departments of the state. in connection with their contracts, they supply material as well as labour, & after their work is finished are paid by the state both for the material used by them in 'the building or road or any other work and for the labour supplied by them.in this connection, notices were issued to the applicants by the sales tax officers of various places calling upon them to submit a.....
Judgment:

Wanchoo, C.J.

1. These are seven applications tinder Article 227 of the Constitution for issue of a writ, direction or order in connection with the Sales Tax Act of Raj-asthan (hereinafter called the Act.) We propose to decide them by one order as the points raised in them are common.

2. The applicants are building contractors and undertake building work for the Public Works Department and other departments of the State. In connection with their contracts, they supply material as well as labour, & after their work is finished are paid by the State both for the material used by them in 'the building or road or any other work and for the labour supplied by them.

In this connection, notices were issued to the applicants by the Sales Tax Officers of various places calling upon them to submit a return oftheir turnover with respect to their contracts, so that they might be assessed to sales-tax and made to pay it. In some cases, the applicants have already paid the tax. Their contention, is that, according to their contracts, they are paid either a lump sum for the work done by them, or according to a schedule of rates after the work done is measured.

They, however, do not sell any materials used in the execution of the contract for a stipulated price to the Government. Their contention, therefore, is that there is no Sale of any goods, which is liable to be taxed under the Rajasthan Sales Tax Act; but the Act has so defined the word 'sale' in Section 2, Sub-section (o) of the Act as to include the materials that they provide in carrying out their contracts as a sale of goods.

The Act has also provided explanation (i) to Section 2, Sub-section (t) defining the word 'turnover' for purposes of determining the value of the goods. Further Rule 7 of the Rajasthan Sales Tax Rules, 1955 (hereinafter called the Rules) has provided certain percentages which have to be deducted to represent the cost of labour to arrive at the value of the goods. In view of these provisions, the Sales Tax Officers concerned have given notices to the applicants for levy of Sales Tax and have also served ' notices under Section 16 which deals with offences, penalties and prosecutions.

The applicants contend that the provisions contained in Sections 2(e), 2(f), 2(h), 2(o) and 2(t), and Sections 3 and 5 of the Act and Rule 7 of the Rules are unconstitutional and ultra vires. The main grounds on which this is urged are these:

(1) A building'contract, which includes a contract for labour as well as for material, is one and indivisible, and does not involve any element of sale of the materials, and is not a contract of sale of goods, and not covered by entry 54 of List II of Schedule VII of the Constitution;

(2) that explanation (i) to Section 2(t) of the Act, and rule 1 of the Rules are beyond the powers of the legislature inasmuch as they levy taxation on an artificial basis having no relevance to the price of the materials used by a building contractor in the execution of his contract;

(3) that the Act is not applicable to the applicants, as they are neither dealers nor manufacturers within the meaning of Sections 2(f) and 2(k);

(4) that sales tax could not be levied in any case on contracts which were entered into before the Act came into force, i.e. before the 1-4-1955. There are other grounds which appear in some of the applications, but they have not been urged, and we need not therefore refer to them. We may add that those grounds have no force either, and that is the reason why they were not urged before us.

3. No reply has been filed on behalf of the State, as there was no dispute as to the facts. It has, however, been urged that there is no force in the points urged on behalf of the applicants, and these applications should be dismissed.

4. We begin with the first point relating to building contracts. Such contracts include contracts of all kinds for the construction of dams, roads, bridges, buildings etc. These contracts are generally of two kinds. In the first kind, the contractor merely supplies labour and work, while the materials used are supplied by the person who gives the contract.

Such a contract obviously cannot involve any sale of goods, as labour and work cannot be deemed to goods in any sense of the term. The second kind of contract is where the contractor not only supplies labour and work, but also supplies the materials, and the finished product is not a chattel, but results in immovable property iu the shape ofa building, road, dam, or bridge which is fixed tothe earth. It is with this kind of contract only that, we are dealing in the present set of cases.

5. The contention of the applicants is that in this type of contract there is no element of sale of goods, and therefore there is no question of any tax under the Act being levied on any part of the money that is paid to the contractor on the completion of the contract.

6. The entry, with which we are concerned, is entry 54 of List II of the Seventh Schedule which is in these terms:

'Taxes on the sale or purchase of goods other than newspapers.'

It is contended that the words 'sale or purchase of goods' used in this entry has to be understood in the sense which can be deduced from Section 4 of the Sale of Goods Act, 1930 read with Section 2, Sub-section (7) of the same Act.

There are differences between the various High Courts in India on this point. The applicants rely on Gannan Dunkerley and Co. (Madras) Ltd. v. State of Madras, AIR 1954 Mad 1130 (A), which represents one view of the niatier. The State, on the other hand, relies on Banarsi Das v. State of Madh-ya Pradesh 1955-6 STC 93 (B), decided by the Nag-pur High Court, which represents the other view. Section 2(7) of the Sale of Goods Act is in these terms:

'goods' means every kind of moveable property other than actionable claims and money, and includes stocks and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be served before sale or under the contract of sale.'

The relevant portion of Section 4 of the Sale of Goods Act is in these terms:

4. '(1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.

(2) .....

(3) Where under a contract of sale the property in the goods is transferred 'from the seller to the buyer the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.

(4) .....'

7. The contention of the applicants is that this definition of sale of goods must be deemed to have been well-known to the Constituent Assembly when item 54 of List II was put in the Seventh Schedule, and therefore the words 'sale of goods' used in the entry cannot mean anything more than what is meant by these words in the Sale of Goods Act. Reliance in this connection is placed on the. following observations of their Lordships of the Privy Council in E R Croft v. Sylvester Dunphy AIR 1933 PC 16 (C) at page 19:

'when a power is conferred to legislate on a particular topic it is important in determining the scope of the power, to have regard to what is ordinarily treated as embraced within that topic in legislative practice end particularly in the legislative practice of the State which has conferred the power.'

Their Lordships were in that case dealing with the Customs Act of 'Canada, and the question was whether a particular provision, which extended the territorial waters of Canada to within 12 miles of the shore, was valid.

Their Lordships held that in legislative practice in England, the limit was in some cases fixed as far as 24 miles from the shore, and therefore when the Imperial Parliament bestowed plenary powers on the Dominion Parliament to legislate inrelation to customs, it must have conferred thesame power which was being exercised in England. It will be clear that legislative practice in this case was used to support the validity of the law and not to cut down the plenary powers conferred on the Dominion Parliament.

8. It is well-settled that the provisions of a constitution Act should not be cut down by a narrow and technical construction but considering the magnitude of the subjects with which it purports to deal in a very few words, it should be given a large and liberal interpretation (See in the matter of Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act 1938, AIR 1939 FC 1 (D).

9. The question, therefore, that arises is whether we should give the same meaning to the words 'sale or purchase of goods' appearing in entry 54 of List II as to be found in Section 4 of the Sale of Goods Act read with Section 2(7). Section 2(7) lays down that things attached to or forming part of the land which are agreed to be served before sale or under the contract of sale are goods.

The argument is that in a building contract of the nature with which we are dealing there is no agreement to sever the materials from the land, and therefore when the contract is completed, and the building handed over to the person giving the contract, there is no question of any sale of goods. Stress is also laid on the ingredients of a sale of goods, which have been thus summarised in Bengal Immunity Co., Ltd. v. State of Bihar (S) AIR 1955 SC 661 (E) at page 701 by Bhagwati J.:

'The following are some of them:

(1) the existence of goods which form the subject-matter of the sale,

(2) the bargain or contract which, when executed, will result in the passing of the property in the goods for a price,

(3) the payment, or promise of payment, of a price,

(4) the passing of the title.'

It is urged that unless all these ingredients are present, there is no sale of goods, and that in the case of a building contract of the nature with which we are dealing there is no bargain or contract which when executed will pass the property in the goods; nor is there any payment of a price for the goods as such. Therefore, there never is a sale of goods in the sense in which it is understood under the Sale of Goods Act in these building contracts.

The argument then proceeds that in view of this interpretation of Entry 54 of List II the Rajas-than Legislature was not entitled to define the word sale in such a manner as to divide the building contract into two parts.

10. This brings us to Section 2(o) of the Act, which is as follows:

' 'sale' with all its grammatical variations and cognate expressions means any transfer of property in goods for cash or deferred payment or other valuable consideration including a transfer of property in goods made in course of execution of a contract, but does not include a mortgage, hypothecation, charge of pledge.'

There are two explanations to this sub-s. which we need not set down. The attack is on the words 'including a transfer of property in goods made in course of execution of a contract'. It is urged that this is not a sale of goods as defined in Sale of Goods Act, for there is no contract for the sale of goods as such; nor is the property in the goods agreed to be transferred to the buyer for a price. As such it is not intra vires of Entry 54 of List II.

11. The question, that falls for consideration, is whether, when entry 54 was included in List II of the Seventh Schedule of the Constitution, the intention was to limit its meaning to what is found in Section 4 of the Indian Sale of Goods Act read with Section 2(7).

If we look at the words of entry 54, without any pre-conceived notion derived from the Provisions of the Sale of Goods Act, that entry authorises taxes whenever there is a sale of goods. Let us look at the substance of the transaction which is a building contract of the nature with which we are dealing. In such a contract, the contractor contracts to supply material and make a building dam, or bridge etc and is paid in a lump sum or at certain schedule rates according to the work done when the contract is complete. The land, to which the building or dam is attached, is not the property of the contractor, and all that he supplies to person giving the contract is the finished product which includes in its coming into existence materials, labour and work of the contractor.

Though, therefore, the contractor is handing over a completed building or dam or bridge according to the terms of the contract, what he is really selling is the materials which are included in the building etc., in addition to the labour charges which he has incurred, and charges for his ownwork and skill. There must, in our opinion, be an element of sale of the materials also, for without that we cannot see how the property in the materials, which undoubtedly belonged at one stage to the contractor, would pass to the person who gave the contract.

When therefore a contract of this nature is completed, and the contractor is paid for it, he isreally being paid for the materials employed by him, the labour used by him and his own work and skill. What the Rajasthan Legislature has done by incorporating the impugned words in Section 2(o) of the Act is to separate that part of the sale which relates to the materials and to provide sales tax on it.

Reading therefore entry 54 of List II without any pre-conceived notion derived from the Sale of Goods Act, it is to our mind obvious that there must be a sale of the materials used in the building contract at some stage or other by the contractor to the person who gave the contract, as otherwise we can see no way in which the property in the materials would pass to the person who gave the contract.All, therefore, that has been done by putting the impugned words in Section 2(o) is to separate this element of the sale of materials from the composite sale which must be deemed to have taken place when the property in the finished produce which is the result of the contract, passes from the contractor, on payment of a certain sum of money, to the person who gave the contract.

Therefore, though there may not be technically a contract as such for the purchase of the materials, and a price settled as such for the materials which eventually pass to the person who gave the contract, there is no doubt that there is an element of sale of the materials in the end between the contractor and the person who gave the contract.

12. Now entry 54 provides for taxes on sale or purchase of goods. It is in the most general terms, and we do not see why we should cut It down by importing the provisions of the Sale of Goods Act, which deal with specific sales of move-able property.

Nor can we see any difficulty in such severance being made by the Legislature On the ground that the materials are fixed to the land, and there isno contract for their separation from the land, and therefore they are not movable property at all, which alone is intended to be taxed under item 54.

It is enough to say in reply that so far as the contractor is concerned, he has nothing to do with the land. He is merely selling the goods, and the property becomes immovable property for the person who gives the contract when the contract is complete and the person who gives the contract acquires title to the finished product. It is not, in our opinion, immovable property, for the contractor and the Sale is only of goods and not of immovable property so far as the contractor is concerned.

13. That it is possible to make this severance and to treat the materials which are transferred as movable property, even though they may be fixed to the earth by the contractor, and Will become immovable property when the contract is complete and the contractor has been paid Its price will be clear from M. R. Hornibrook (Pty.) Ltd., and The Federal Commissioner of Taxation, 62 Com WLR 272 (F). .

That was a sales tax case by which the tax was levied upon the sale value of goods manufactured in Australia. In that case, a contractor constructed a bridge under contract. The bridge was built on reinforced concrete piles, driven into the bed of the sea. The contractor was assessed to sales tax in respect of the piles, and the question arose whether the concrete piles were goods within the meaning of the Sales Tax Assessment Act. The following observations of Latham C. J. in this connection at page 278 may be quoted:

'Thus there was in fact no sale of the piles by the appellant to any person whereby that person became owner of the piles before they lost their character 'as chattels and became part of the bridge. Therefore it is necessary for the commissioner to rely upon some special provision in the Act creating a liability in such a case as the present. Such a provision, the commissioner contends, is found in Section 3 of the Act.....

Section 3(4) of the Act ..... was at therelevant time in the following form:

'For the purposes of this Act, a person shall be deemed to have sold goods if, in the performance of any contract under which he has received, or is entitled to receive, valuable consideration, he supplies goods the property in which (whether as goods or in some other form) passes, under the terms of the contract, to some other person.' In my opinion the commissioner is right in his contention that this provision applies to the present case.....'

14. Thus though ordinarily such piles would be immovable poperty, it was open to the legislature to make special provision for taxation of goods which become embedded in the earth and become immovable property on the title passing to the person who gives the building contract.

This is exactly what the Rajasthan legislature has done by including in the definition of the word 'sale' the impugned words, namely 'a transfer of property in goods made in course of execution of a contract'. It is obvious that in all such building contracts, with which we are dealing, there is transfer of property in the materials in the course of the execution of the contract, and as there is a specific provision for taxation of such transfer as sale of goods, the applicants cannot contend that a sales tax cannot be levied on them under the Act.

Nor do we see any reason for confining the general words of entry 54 of List II to those cases only where there is a contract as such for the saleof goods and a settlement of price as such for particular goods. The words of the entry are general, and wherever, even on a composite transaction a sale of goods takes place, the legislature, in our opinion, has the competence to separate that transaction and to treat it as a sale of goods which is liable to tax.

15. Let us now turn to the Madras Case (A) which is the leading case for the view pressed by the applicants. The basis of that decision is the meaning of the words 'sale of goods' to be deduced from Section 4 of the Sale of Goods Act.

The learned Judges were certainly conscious of the well-known principle that a constitution is not to be construed in a narrow and pedantic sense, and that a broad and liberal spirit should inspire those whose duty it is to interpret it.

But they thought that laws, which impose a tax, are subject to strict construction. With all due respect we feel that there is a certain amount of confusion here. So far as the interpretation of the Rajasthan Sales Tax Act is concerned, it being a tax law has certainly to be interpreted strictly.

But the point which is being raised by the applicants is not the interpretation of the Sales Tax Act. It is the interpretation of item 54 of List II of the Constitution, and it is that item which they ask us to interpret strictly within the ambit of Section 4 of the Sale of Goods Act. What we have to see is whether the enactment of the Act is within the competence of the legislature in view of entry 54 in List II, This has nothing to do with the interpretation of the taxation Statute itself. We are, therefore, of opinion that we must interpret entry 54 of List II in a large and liberal spirit, and unless there is some reason for us to hold that the sale of goods in that entry has the same meaning as is to be deduced from Section 4 of the Sale of Goods Act, there is no reason why we should limit that only to the particular type of transactions which |are covered by Section 4 of the Sale of Goods Act.

We feel that if a liberal interpretation is given to the words in entry 54, it will be quite possible to hold that materials supplied during the course of a building contract of this nature are sold, and that they are goods which are sold, even though, after the contract is complete and the property passes to the person who gives the contract, the finished product may become immovable property being attached to the land of the person giving the contract.

16. In support of the view we have taken, we may refer to Banarsidas's case (B) decided by the Nagpur High Court, In this case the importance to be attached to legislative practice was considered, and reference was made to James v. Commonwealth of Australia (No. 2) 1936 AC 578 (G), where Lord Wright observed as follows at page 614:

'It is true that a Constitution must not be construed in any narrow and pedantic sense. The words used are necessarily general, and their full Import and true meaning can often only be appreciated when considered, as the years go on, in relation to the vicissitudes of fact which from time to time emerge. It is not that the meaning of the words changes, but the changing circumstances illustrate and illuminate the full import of that meaning..... The true test must, as always,be the actual language used.

Nor can any decisive help here be derived from evidence of extraneous facts existing at the date of the Act of 1900, such evidence may in some cases help to throw light on the intention of the framers of the statute, though that intention can in truth be ascertained only from the language used.'

17. In Edwards v. Attorney General for Cana-da 1930 AC 124 (H), the Judicial Committee laiddown that though it was permissible to considertwo points, namely, the external evidence derivedfrom extraneous circumstances such as previouslegislation and decided cases and the internal evidence derived from the Act itself, the conclusionbased on legislative practice must not be pushedtoo far.

18. Again in Rex v. West Riding of Yorkshire County Council 1906-2 KB 676 (I) tneir Lordships made the following weighty observations at page 716:

'Over and above that, their Lordships do not think it right to apply rigidly to Canada of today the decisions and the reasons therefor which com-mended themselves, probably rightly, to those who had to apply the law in different circumstances, in different centuries, to countries in different stages of development. Referring therefore to the judgment of the Chief Justice and those who agreed with him, their Lordships think that the appeal to Roman Law and to early English decisions is not of itself a secure foundation on which to build the interpretation of the British North America Act of 1867'.

19. The learned Judges of the Nagpur High Court, therefore, arrived at the following conclusion with respect to legislative practice:

'It would appear from the foregoing discussion that legislative practice is helpful within limits, but not conclusive. 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.'

If we may say so with respect, we agree with this conclusion. Reference in this connection was also made to Sales Tax Officer v Budh Prakash Jai Prakash AIR 1954 SC 459 (J). That was, however, a case of forward transaction. In that connection, it was pointed out by the Supreme Court that the expression 'sale of goods' was never applied execept to those transactions when there was a completed sale involving transfer of title.

In case of forward transactions there could be no suit for the recovery of the price, but only for damages for breach of contract. The Supreme Court should not in that case be deemed to have limited the scope of the entry for all purposes, and the decision must be limited to a case where there was no sale at all. But where, as in the case of building contracts, there must necessarily be a sale of materials also at some stage, for without such sale the property in the materials can never pass to the person giving the contract, there is no reason why such a transaction should not be separated by the legislature, and could not be severed by entry 54 relating to taxes on sale or purchase of goods.

It is true that the legislature could not, under the guise of entry 54, tax a sale of services as a sale of goods; but it can, in our opinion, tax a genuine transaction of sale of goods whatever form it takes. The learned Judges of the Nagpur High Court also observed, and if we may say so with respect very rightly,

'that there is always a sale if goods are transferred to another, and paid for by him. It cannot be gainsaid that there is payment for materials, though the payment is not made separately, but as part of larger amount.'

Finally the Nagpur High Court came to this conclusion :

'We are here concerned with a taxing measure and the power to levy the tax can only be determined by a fair consideration of the ambit of theentry by which the power is conferred. If the pith and substance of the Act come within that ambit, the power is there, otherwise not.

If a building contract was not split up into its component parts, that is to say, material and labour, in legislative practice relating to the ordinary regulation of sale of goods, there is no warrant for holding that it could not be so split up even for purposes of taxation. The reasoning in the Madras case does not take into account the fundamental fact that the Legislature could select out of a composite transaction the actual sale of materials and tax such sale in the exercise of undoubted plenary powers.'

If we may say so with respect, this is exactly what we have said above, and we agree with this view of the Nagpur High Court.

20. We, therefore, come to the conclusion that Section 2(o) is intra vires of the powers of the Rajasthan legislature by virtue of entry 54 in List II of the Seventh Schedule of the Constitution.

21. It is also faintly urged that the impugned words in Section 2(o) of the Act will result in double taxation. We are of opinion that this is not so. Section 5 of the Act shows that the tax will be levied at a single point. The definition of the words 'taxable turnover' in Section 2(s) of the Act shows that it is only that part of the turnover which remains after deducting therefrom the aggregate amount of the proceeds of sale of goods on which no tax is leviable under this Act, or which have already been subjected to a tax under this Act.

Thus if sales tax has already been paid on certain goods purchased by a contractor, which he in his turn passes on to the person who has given him the contract, these sales will not be included within the words 'taxable turnover', and thus there will be no double taxation.

22. After the foregoing discussion, we do not think it necessary to consider in detail Section 2(e) defining 'contract', section 2(f) defining 'dealer', and section 2(h) defining 'goods'. These sections, in our opinion, are within the competence of the legislature once it is held that S 2(o) is intra vires. Similarly we see nothing ultra vires in Sections 3 and 5.

23. We now come to the second point raised by the applicants, namely that explanation (i) to Section 2(t) of the Act, and Rule 7 of the Rules are beyond the power of the legislature. Explanation (i) to Section 2(t) is as follows:

'the amount for which goods are sold or supplied shall in relation to a contract, be deemed to be the amount payable to the dealer for carrying out such contract less such portion as may be prescribed of said amount representing the usual proportion of the cost of labour to the cost of materials used in carrying out such contract;'

Further, Rule 7 prescribes certain percentages on various types of contracts, which have to be deducted in order to arrive at the Price of the materials which are deemed to have been sold under Section 2(o) in relation to a building contract.

The contention on behalf of the applicants is that explanation (i) read with rule 7 allows the executive to fix a sale price on an artificial basis without any relation whatsoever to the real value of the materials. It is urged that the materials used have all got market value, and there is no reason why the tax should not be fixed on the real market value of the materials, and why that value should be arrived at by an artificial formula of the kind provided in rule 7.

We are of opinion that there is force in this argument. Payment is made to such contractors when the work is complete either on a lump sumbasis, or on the basis of schedule rates which include both labour and materials. Entry 54 of List II contemplates tax on the actual sale price of the goods.

But the method followed by the legislature by providing explanation (i) to Section 2(t), and leaving it to the Government to frame a rule accordingly is artificial, and there is no knowing whether the amount, that is left over after the deduction has been made according to rule 7 is only the price of materials supplied, or also includes something over and above that.

It is obvious that if it includes something over and above that, the legislature is taxing not only the sale price of the goods, but also the labour supplied by the contractor, and the work of the contractor himself, which, of course, it could not do under entry 54.'

Consequently this artificial rule cannot be sustained as a valid piece of legislation under entry 54. Therefore, explanation (i) to Section 2(t), and rule 7 must be held to be ultra vires of the powers of the State legislature, As these are separable, they can struck down without in any way affecting the rest of the Act. We may point out that it is not impossible for the Sales Tax Officer to find out the actual price of the materials sold by the contractor in connection with the contract. The contractors should be asked to furnish a return of the cost of materials supplied in their contracts in the assessment year. This is the only way that the Sales Tax Officer can proceed as there is no provision for the best judgment assessment in case the return was not acceptable to him.

24. In these circumstances, we hold that explanation (i) to Section 2(t) and Rule 7 of the Rules are beyond the powers of the State legislature conferred on it by Entry 54 of List II of the Seventh Schedule of the Constitution.

25. The third point is that the Act is not applicable to the applicants as they are neither dealers nor manufacturers within the meaning of those terms as defined in the Act. A dealer in Section 2(f) means any person who carries on the business of selling or supplying goods, whether on commission or for remuneration or otherwise. The argument is that the applicants do not carry on the business of selling or supplying goods, they merely carry on the business of building contract We are of opinion that this argument simplifies the matter too much, and cannot be accepted. It is true that the applicants are building contractors, and not what are generally known as shop-keepers Whose business it usually is to sell goods.

But in the course of their business as building contractors, the applicants also make it their business to supply goods for remuneration to those who give them contracts. The definition of a dealer includes not only those who sell goods, but also those who supply goods, whether on commission, or for remuneration or otherwise. This is a very wide definition, and includes persons like the applicants who in the course of their business as building contractors supply goods to those who give them contracts. This supply is certainly for remuneration, and is not gratis. The applicants, therefore, must be held to be dealers within the meaning of Section 2(f). This contention, therefore, fails.

26. The last contention on behalf of the applicants is that sales tax cannot be levied on contracts which were entered into before the Act came into force, i.e., before the 1st of April, 1955. The tax is levied on the sales of goods. Under Section 5, the tax is payable by a dealer under this Act at such single point in the series as may be prescribed. It is not the date of the contract which is material indetermining whether the tax is payable. The material date, in our opinion, is the date on which the sale is deemed to have taken place under Section 2(o).

In the case of contracts of this nature, the sale must generally be deemed to take place when the contract is completed, unless there are terms to the contrary in the contract itself, when of course those terms would prevail. In each case, therefore, the Sales Tax Officer will have to see the terms of the contract, and if there is any date mentioned in the terms of contract when the sale is complete, that would be the relevant date, and the tax would be levied if the date is 1st April, 1955, or afterwards.

When there is no date in the contract, the date would be the date when the contract is actually completed, and if that date is on or after the 1st of April, 1955, the Sales Tax Act would apply. The date of contract itself is not necessarily the date of sale, and the fact that the contract is entered into before the 1st of April, 1955, would not in itself make the Act inapplicable.

27. Let us now turn to Individual cases.

28. In cases Nos. 9, 10, 53, 54, 103 and 104, all that has happened is that the Sales Tax Officer, Udaipur, is taking proceedings for realisation of sales tax against the applicants, & has served a notice to them under Section 16 of the Act. In view of what we have said above, there is no case for interference in these cases. The Sales Tax. Officer will keep our judgment in mind declaring explanation (i) to Section 2(t), and Rule 7 of the Rules ultra vires when taking further proceedings. We dismiss these applications with costs.

29. In case No. 121, the proceedings are being taken by the Sales Tax Officer, Bikaner, The Sales Tax Officer has already passed an order requiring the applicants to pay Rs. 654/8/- as sales tax. It is said that this has been done on the best assessment basis, probably acting on Rule 7 of the Rules. In these circumstances, we allow this application and set aside the order assessing Rs. 654/8/- on the applicants. It will be open to the Sales Tax Officer to take further proceedings in the light of this judgment delivered by us after treating explanation (I) to Section 2(t) and Rule 7 as ultra vires, and without relying on those provisions for purposes of theassessment. This applicant will get his costs fromthe State.


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