T. L. Venkatarama Aiyar, J. - (1.) The petitioners are building contractors carrying on business in Delhi, and they have filed the present applications under Art. 32 of the Constitution challenging the validity of certain provisions of the Bengal Finance (Sales Tax)Act (Ben. VI of 1941) which had been extended to the State of Delhi by a notification dated 28th April 1951.
(2.) The impugned provisions of the Act may now be referred to. Section 2 (d) of the Act defines "good" as including "all materials, articles and commodities, whether or not to be used in the construction, fitting out, improvement or repair of immovable property" . "Sale" is defined in S. 2 (g) as including "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 . . . . ." . Section 2 (b) defines "contract" as meaning, omitting what is not relevant, "any agreement for carrying out for cash or deferred payment or other valuable consideration- the construction, fitting out, improvement or repair of any building, road, bridge or other immovable property." "Sale price" is defined in S. 2 (h) (ii) as meaning valuable consideration for "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." "Turnover" is defined in S. 2 (i), and is as follows: "Turnover" used in relation to any period means the aggregate of the sale-prices or parts of sale prices receivable, or if a dealer so elects, actually received by the dealer during such period after deducting the amounts, if any, refunded by the dealer in respect of any goods returned by the purchaser within such period." Section 4, which is the charging section, provides 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 date so notified."
(3.) The Bengal Finance (Sales Tax) Act 1941, was a law passed by the Legislature of the Province of Bengal and applied only to sales effected within that Province, and after the partition of the Country, to sales effected within the State of West Bengal. Under the Government of India Act, 1935, Delhi was a Chief commissioner's Province administered by the Governor-General, and under the Constitution, it became a Part C State, and Art. 239 vested its administration in the President acting through a Chief Commissioner or a Lieutenant-Governor as he might think fit. Article 246 (4) which is material for the present purpose is as follows: "Parliament has power to make laws with respect to any matter for any part of the territory of India not included in Part A or Part B of the First Schedule notwithstanding that such matter is a matter enumerated in the State List." In exercise of the power conferred by this Article, Parliament enacted the Part C States (Laws) Act No. XXX of 1950, and S. 2 thereof is as follows: "The Central Government may, by notification in the Official Gazette, extend to any Part C State (other than Coorg and the Andaman and Nicobar Islands) or to any part of such State, with such restrictions and modifications as it thinks fit, any enactment which is in force in a Part A State at the date of the Notification....." On 28th April 1951, the Chief Commissioner of Delhi issued a notification under this section extending the operation of the Bengal Finance (Sales Tax) Act, 1941, to Delhi as from 1st November 1951. Acting under the provisions of this Act, the Sales Tax Officer, Karolbagh, Delhi issued on 12th June 1952, notices to the petitioners calling upon them to submit returns of their receipts from building contracts and to deposit the taxes due thereon. In compliance with these notices, the petitioners were sending quarterly returns of their taxable turnover and assessment orders were also made in respect of their annual turnover for the years 1951-1952 and 1952-1953, and the amounts due thereunder had also been paid. For the year 1953-1954, the quarterly returns had been submitted and the tax due thereon deposited, and proceedings were pending for assessment of tax for that year. This was the position when the Madras High Court pronounced its decision in 'Gannon Dunkerley and Co. vs. State of Madras 1954-5 S T C 216, that the provisions of the Madras General Sales Tax Act, 1939, imposing tax on the supply of materials in construction works were ultra vires the powers of the Provincial Legislature under Entry 48 in List II, Sch. VII to the Government of India Act, 1935.;