T. L. Venkatarama Aiyar, J. - (1.) This is a petition under Art. 32 of the Constitution, and the question that is raised therein for our decision is as to the validity of certain provisions of the East Punjab General Sales, Tax Act (East Punj. XLVI of 1948), hereinafter referred to as the Act, imposing a tax on the supply of materials in construction works treating it as a sale.
(2.) It will be convenient at this stage to refer to the relevant provisions of the Act. Section 2 (c) defines "contract" as meaning, "Any agreement for carrying out for cash or deferred payment or other valuable consideration, - (i) the construction, fitting out, improvement, or repair of any building, road, bridge or other immovable property; or (ii) the installation or repair of any machinery affixed to a building or other immovable property . . . . . ." "Dealer" is defined in S. 2 (d) as any person engaged in the business of selling or supplying goods. Section 2 (h) defines "sale" as meaning "any transfer of property in goods for cash or deferred payment or other valuable consideration, including a transfer of property in goods involved in the execution of a contract . . . . . . ." "Turnover" is defined in S. 2 (j) as including "the carrying out of any 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" Section 4 (1) enacts that, ". . . . . every dealer whose gross turnover during the year immediately preceding the commencement of this Act exceeded the taxable quantum shall be liable to pay tax under this Act on all sales effected after the coming into force of this Act." Section 5 provides that the tax shall be levied every year on the taxable turnover of a dealer at such rates as the Provincial Government may by notification direct. Rule 28 prescribes the mode of computing the taxable consideration with reference to contracts as provided in sub-cl. (ii) of cl. (i) of S. 2.
(3.) The petitioners are a firm of building contractors. In December, 1956, they entered into a contract with the Military Engineering Services Department of the Government for the construction of certain buildings known as "Married accommodation" at Ambala Cantonment and received a sum of Rs. 32,000 on 31st January 1957, as advance. On 14th February 1957, the assessing authority, Jullundur District issued a notice intimating the petitioners that as they had failed to apply for registration under S. 7 of the Act assessment would be made under S. 18, sub-s. (2) for the periods commencing from 1st April 1955, onwards, and calling upon them to produce their account books and attend the hearing on 16th February 1957. Thereupon, the petitioners filed the present petition under Art. 32 of the Constitution challenging the legality of the assessment proceedings, the main ground of attack being that the legislature of the Province of Punjab had, under Entry 48 in List II of Sch. VII to the Government of India Act, 1935, no power to impose tax on the supply of materials in construction works as there was no sale in fact on in law of those materials, and that the provisions of the Act which sought to do it were ultra vires. This question is now concluded by the decision of this Court in State of Madras vs. Gannon Dunkerley and Co., C. A. No. 210 of 1956 Decided on : 1-4-1958 (A) wherein it has been held that the expression "sale of goods" in Entry 48 has the same import which it bears in the Sale of Goods Act, 1930, that in a building contract there is no sale of materials as such, and that accordingly the Provincial Legislature had no power to impose a tax thereon under Entry 48.;