Law:

Section:

ACT: Sales Tax-Building contracts-Tax on supply of materials in construction works--State's Power of taxation-" Sale of goods ", Meaning of-Legislative practice-Nature of agreement in building, contracts Sale of Goods Act, 1930 (III of 1930), S. 4 Madras General Sales Tax Act, 1939 (Mad. IX of 1939), as amended by Madras Act XXV Of 1947, SS. 2(c)(h)(i), Explanation 1(i), r. 4(3)-Government of India Act, 1935 (26 Geo. 5, Ch. 2), S. 107, Sch. VII, List II, Entry 48. HEADNOTE:The respondent company, doing business, inter alia, in the construction of buildings, roads and other works was assessed to sales tax by the sales tax authorities who sought to include, the value of the materials used in the execution of building contracts within the taxable turnover of the respondent. The validity of the assessment was challenged by the respondent who contended that the power of the Madras Legislature to impose a tax on sales under Entry48 in List II in Sch. VII of the Government of India Act,1935, did not extend to imposing a tax on the value of materials used in construction works, as there was no transaction of sale in respect of those goods, and that the provisions introduced in the Madras General Sales Tax Act,1939, by the Madras General Sales Tax (Amendment) Act, 1947,authorising the imposition of such tax were ultra vires. The Sales Tax Appellate Tribunal rejected the respondent's contention but, on380revision, the High Court took the view that the expression "sale of goods " had the same meaning in Entry 48 which it has in the Indian Sale of Goods Act, 1930, that the construction contracts of the respondent were agreements to execute works to be paid for according to measurements at the rates specified in the schedule thereto, and were not contracts for sale of the materials used therein, and that further, they were entire and indivisible and could not be broken up into a contract for sale of materials and a contract for payment for work done. Accordingly, it held that the impugned provisions introduced by the Madras General Sales Tax (Amendment) Act, 1947, were ultra wires the powers of the provincial Legislature. On appeal to the Supreme Court: Held, (1) On the…

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