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1962 Supreme(P&H) 129
PUNJAB & HARYANA HIGH COURT
Mehar Singh and Shamsher Bahadur JJ.
Wah Stone And Lime Quarry Co.
Versus
State Of Punjab
Sales Tax Reference No. 1 of 1961,
Decided On : AUGUST 1, 1962
The definition of "contract" in the proviso to Sub-section (1) of Section 4 of the East Punjab General Sales Tax Act, 1948, is not limited by the definition under Clause (c) of Section 2 of the Act, which has been repealed.
Headnote:
EAST PUNJAB GENERAL SALES TAX ACT, 1948 - SECTION 4(1) PROVISO - CONTRACT - MEANING - WHETHER EXHAUSTIVE OR LIMITED - INDIAN CONTRACT ACT - SECTION 2(C) - DEFINITION OF CONTRACT - APPLICABILITY.
Fact of the Case:
The applicants, Wah Stone and Lime Quarry Co., Pathankot, and Pathankot Bajri and Stone Co., Pathankot, held contracts for the supply of ballast, bajri, and stone to the Public Works Department of the Punjab Government and claimed exemptions from sales tax under the proviso to Section 4(1) of the East Punjab General Sales Tax Act, 1948, which exempted sales involved in the execution of a contract entered into before the commencement of the Act. The assessing authority and the Deputy Excise and Taxation Commissioner rejected their claims on the ground that the concept of a contract had been given a special meaning under Clause (c) of Section 2 of the Act, which defined a contract as an agreement for carrying out certain specified construction or repair work.
Finding of the Court:
The court held that the word "contract" as used in the proviso to Sub-section (1) of Section 4 of the Punjab General Sales Tax Act, 1948, means a contract as defined in the Indian Contract Act and is not limited by the definition under Clause (c) of Section 2 of the Punjab General Sales Tax Act.
Issues: Whether the word "contract" as used in the proviso to Sub-section (1) of Section 4 of the East Punjab General Sales Tax Act, 1948, is exhaustive and means a contract as defined in the Indian Contract Act or is limited and means only a contract as defined under Sub-section (c) of Section 2 of the said Act?
Ratio Decidendi: The court relied on the decisions of the Supreme Court in State of Madras V/s. Gannon Dunkerley & Co. (Madras) Ltd. [1958] 9 S.T.C. 353 and Firm of Peare Lal Hari Singh V/s. The State of Punjab and Anr.[1958] 9 S.T.C. 412, which held that there was no sale of goods of the materials used in a building contract and the Provincial Legislature possessed no competence to impose a tax on these articles under Entry 48 of List II of Schedule 7 to the Government of India Act, 1935, under the caption "taxes on the sale of goods." The court also noted that Clause (c) of Section 2 of the Punjab General Sales Tax Act had been repealed by Punjab Act No. 18 of 1960, with effect from 1st April, 1960.
Final Decision: The court answered the reference by holding that the word "contract" as used in the proviso to Sub-section (1) of Section 4 of the Punjab General Sales Tax Act, 1948, means a contract as defined in the Indian Contract Act and is not limited by the definition under Clause (c) of Section 2 of the Punjab General Sales Tax Act.
Shamsher Bahadur, J.
1. On a mandamus issued to the Financial Commissioner, the following question of law has been referred by him in Civil Miscellaneous Nos. 160 and 161 of 1959-60, on the two applications presented by Wah Stone and Lime Quarry Co., Pathankot, and Pathankot Bajri and Stone Co., Pathankot:-
Whether the word contract as used under the proviso to Sub-section (1) of Section 4 of the East Punjab General Sales Tax Act, 1948 , is exhaustive and means a contract as defined in the Indian Contract Act or is limited and means only a contract as defined under Sub-section (c) of Section 2 of the said Act ?
2. The circumstances giving rise to the references are these. Wah Stone and Lime Quarry Company, Pathankot, and Pathankot Bajri and Stone Company, Pathankot, held contracts for the supply of ballast, bajri and stone to the Public Works Department of the Punjab Government and both these companies claimed exemptions from sales tax. The assessing authority having disallowed their claims on 29th of June, 1951, appeals were taken to the Deputy Excise and Taxation Commissioner, who rejected these on nth of November, 1951. The first applicant (Wah Stone and Lime Quarry Company) was assessed for the year 1949-50 to a tax of Rs. 3,549-9-0 on a turnover of Rs. 1,13,499-1-0, while the second applicant was assessed for the same year to a tax of Rs. 3,974-6-0 on a turnover of Rs. 1,27,308-7-6.
3. The taxing provision of the East Punjab General Sales Tax Act, 1948 , is Section 4, to which there is a proviso, which has been the sheetanchor of the claimants cases. According to the proviso, "the tax shall not be payable on sales involved in the execution of a contract which is shown to the satisfaction of the assessing authority to have been entered into before the commencement of this Act." The Punjab General Sales Tax Act came into force on 1st of May, 1949, and the contracts having been executed before that day, exemption was claimed under the proviso. The claim of the assessees did not find favour with the Excise and Taxation Officer or the Deputy Excise and Taxation Commissioner on the ground that the concept of a contract has been given a special meaning under Clause (c) of Section 2 of the Act and the claims of the applicants were, therefore, negatived. under Clause (c) of Section 2,
Contract means 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 ; or
(iii) the overhaul or repair of any motor vehicle.
4. According to the assessing authorities the material supplied by the claimants to the Government being used for the repair of buildings, the proviso to Section 4 which granted exemption on sales in the execution of a contract entered into prior to the commencement of the Act could not be made applicable to them. In other words, a contract referred in the proviso is separate and distinct from a contract as defined in Clause (c) of Section 2 of the Act. The claimants having failed also before the Excise and Taxation Commissioner asked the Financial Commissioner to make a reference to the High Court but the then Financial Commissioner, Mr. Kaul, declined to do so. This Court was then moved under Section 22 of the Punjab General Sales Tax Act, 1948, and a Division Bench of Chief Justice G. D. Khosla and Pandit, J., directed the Financial Commissioner to refer the matter to this Court. The Financial Commissioner has accordingly referred the question formulated above to this Court by order of the 19th of December, 1960.
5. It may be mentioned that since the order of the Division Bench of 10th of March, 1960, Clause (c) of Section 2 has been deleted by Punjab Act No. 18 of 1960, with effect from 1st of April, 1960. The Amending Act No. 18 of 1960 was passed as a result of
