Judgment

T. L. VENKATARAMA AIYAR, J. : These are appeals against the judgment of the High Court of Nagpur in writ applications filed by the appellants impugning the validity of certain provisions of the Central Provinces and Berar Sales Act No. XXI of 1947, hereinafter referred to as the Act, imposing sales-tax on materials used in construction works.

2. It will be convenient to refer to these provisions at this stage. Section 2 (b) of the Act defines "contract" as including "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 or the installation or repair of any machinery affixed to a building or other immovable property." Section 2 (c) of the Act defines "dealer" as including a person who carried on the business of supplying goods. In S. 2 (d), "goods" are defined as including "all materials, articles and commodities whether or not to be used in the construction, fitting out, improvement or repair of immovable property." Section 2 (g) defines "sale" 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 the execution of a contract, but does not include a mortgage, hypothecation, charge or pledge; and the word purchase shall be construed accordingly."

Section 2 (h) defines "sale price" as including the amount payable to a dealer as valuable consideration for the carrying out of any contract, less such portion, representing the proportion of the cost of labour to the cost of materials, used in carrying out such contract, as may be prescribed. "Turnover" is defined in S. 2 (j) as including the aggregate amount of the sale price received or receivable by a dealer in respect of the supply of goods in the carrying out of any contract. The charging section is S. 4 (a), and it provides that dealers whose turnover exceeded certain limits shall be liable to pay tax in accordance with the provisions of the Act on all sales effected after the commencement of the Act. Rule 4 of the Sales Tax Rules, 1947, provides that "in calculating the sale price for the purpose of sub-cl. (ii) of Cl. (h) of S. 2, a dealer may be permitted to deduct from the amounts payable to him as valuable consideration for carrying out a contract, a sum not exceeding such percentages as may be fixed by the Commissioner for different areas subject to the following maximum percentages," and then follows a scale of percentages to be allowed in respect of different classes of contracts.

3. Acting on these provisions, the authorities constituted under the Act called upon the contractors within the State to furnish returns in respect of their receipts from contract works for the purpose of assessment of sales-tax, to which the appellants replied by instituting the proceedings, out of which the present appeals arise. The appellant in Civil Appeal No. 253 of 1955 is a contractor doing business in the construction of buildings and roads for the Military and Public Works Department in the State in Madhya Pradesh, and he filed M. P. No. 245 of 1954 challenging the validity of the assessment which the respondents proposed to make, on two grounds. He contended firstly that the Provincial Legislature had authority under Entry 48 of List II, Sch. VII of the Government of India Act, 1935, to impose tax only on sale of goods, that the supply of materials in works contracts was not a sale within that Entry, and that the provisions of the Act, which sought to impose a tax thereon treating it as a sale, were therefore ultra vires; and secondly that he was entitled to exemption under item 33 in Sch. II to the Act as enacted by Act XVI of 1949, and that the notification of the Government dated 18-9-1950 withdrawing that exemption was unconstitutional and vo