1957 Supreme(Cal) 14

HIGH COURT OF CALCUTTA
Sinha
DUKHINESWAR SARKAR AND BROTHERS LTD. - Appellant
Versus
COMMERCIAL TAX OFFICER - Respondent
Matter 18  Of  1955
Decided On : JANUARY 18, 1957

The supply of materials by a contractor, who agrees to build a house (or any other structure) or repair the same, does not amount to a sale of such materials and such supply does not come within the concept of the transaction known as sale of goods.

Headnote:

The court held that the supply of materials by a contractor, who agrees to build a house (or any other structure) or repair the same, does not amount to a sale of such materials and such supply does not come within the concept of the transaction known as sale of goods. The court also held that the artificial and arbitrary rule contained in the definition of "sale price" in the Act and in Rule 2 of the Rules is bad and ultra vires.

Fact of the Case:

The petitioner is a company incorporated under the Indian Companies Act and is a registered dealer under the Bengal Finance (Sales Tax) Act 1941 (hereinafter called the 'act' ). It carries on business inter alia as builders and contractors. It has been regularly submitting returns as required under the provisions of the said Act. For the Bengal year 1367 (corresponding to the period' April 1950 to April I95l the petitioner company submitted returns and paid sales tax to the extent of Rs. 3,568/4/. On May 11, 1964 the respondent No. 2 as the Commercial Tax Officer, made an assessment for the year 1357 holding that the petitioner was liable to pay a tax of Rs. 15,756/1/- and also imposed a penalty of Rs. 2,000/-upon the petitioner. For the Bengali year 1358 (April 1951 to April 1952), the petitioner likewise submitted returns and paid sales tax to the extent of Rs. 1200/8/3 for the first quarter, Rs. 4,798/1/- for the second quarter and a further payment of Rs. 354/9/. On November 24, 1954 the respondent No. 2 as the Commercial Tax Officer made an assessment in respect of the Bengali year 1358 holding that the petitioner was liable to pay a tax of Rs. 39,182/97. He,also imposed a penalty of Rs. 1,000/' upon the petitioner. Against both the orders of assessment the petitioner has filed appeals to the Assistant Commissioner, Commercial Taxes. In spite of the appeals being pending the respondents have proceeded under the Public Demands Recovery Act and a certificate has been filed in respect of Rs. 14,187/13/- said to be due on the basis of the assessment order dated May 11, 1954 and this certificate is being enforced against the petitioner. This Rule has been issued on February 22, 1955 upon the respondents to show cause why an order in the nature of a writ or certiorari should not be made quashing the assessment orders dated 11-5-1954 and November 24, 1954 mentioned above, and why an order in the nature of a writ of certiorari should not be made quashing the certificate filed in the office of the Certificate Officer of 24 Perganas mentioned in the petition, and why the respondents should not be prohibited from taking any further steps under the said assessment orders and/or the said certificate and/or why the respondents should not be ordered to deal with the assessment of the petitioner for the Bengali years 1357 and 1358 in accordance with law.

Finding of the Court:

The court held that the provisions of the Bengal Finance (Sales Tax) Act 1941 in so far as it seeks to bring within the net of taxation goods including materials commodities and articles supplied in the execution of the construction, fitting out, improvement or repair of any building, road, bridges, or other immoveable properties, and in so far as it declares it to be a sale of goods and in so far as it seeks to realise taxes upon what is called the "sale price" thereof is ultra vires of the provincial and the State legislatures and is void. The court also held that Rule 2 of the Bengal Finance (Sales Tax) Act 1941 prescribed by Government for the fixation of the money consideration for what is called the price of goods supplied in the execution of the building contract is in excess of the powers or the legislature and the Government and is ultra vires and must, be declared to be void.

Issues: Whether the supply of materials by a contractor, who agrees to build a house (or any other structure) or repair the same, amounts to a sale of such materials and such supply comes within the concept of the transaction known as sale of goods.

Ratio Decidendi: The court held that the supply of materials by a contractor, who agrees to build a house (or any other structure) or repair the same, does not amount to a sale of such materials and such supply does not come within the concept of the transaction known as sale of goods. The court also held that the artificial and arbitrary rule contained in the definition of "sale price" in the Act and in Rule 2 of the Rules is bad and ultra vires.

Final Decision: The court issued a Writ in the nature of Certiorari quashing the assessment orders dated May 11, 1954 and November 24 1954 mentioned in the petition as also the Certificate No. 152 S. T. (B. D.) 53-54 mentioned in the petition. The court also issued a Writ in the nature of Mandamus directing the respondents not to give effect to either the said assessment orders or the said Certificate or to continue any further Certificate proceedings in respect thereof. The respondents were directed to deal with the assessment of the petitioner for the Bengali years 1357-58 in accordance with law.