1958 (4) TMI 48 - SUPREME COURT

Whether the Provincial Legislature had authority under Entry 48 of List II, Schedule 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?

Held that:- On our finding on the first question that the impugned provisions of the Act are ultra vires the powers of the Provincial Legislature under Entry 48 in List II in the Seventh Schedule, we should set aside the orders of the Court below, and direct that the respondents be restrained from enforcing the provisions of the Central Provinces and Berar Sales Tax Act, 1947, in so far as they seek to impose a tax on construction works. It should be made clear, however, in accordance with what we have already stated, that the prohibition against imposition of tax is only in respect of contracts which are single and indivisible and not of contracts which are a combination of distinct contracts for sale of materials and for work, and that nothing that we have said in this judgment shall bar the Sales Tax Authorities from deciding whether a particular contract falls within one category or the other and imposing a tax on the agreement of sale of materials, where the contract belongs to the latter category. Appeal allowed.