TMI Blog1958 (4) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed. - Petition No. 128 of 1957 - - - Dated:- 7-4-1958 - DAS S.R. J., VENKATARAMA AIYAR T.L., DAS S.K., SARKAR A.K. AND VIVIAN BOSE JJ. Gopal Singh, Advocate, for the petitioner. N.S. Bindra, Senior Advocate, (T.M. Sen, Advocate, with him), for the respondents. -------------------------------------------------- The Judgment of the Court was delivered by VENKATARAMA AIYAR, J. -This is a petition under Article 32 of the Constitution, and the question that is raised therein for our decision is as to the validity of certain provisions of the East Punjab General Sales Tax Act (East Punjab XLVI of 1948), hereinafter referred to as the Act, imposing a tax on the supply of materials in construction works treating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Rule 28 prescribes the mode of computing the taxable consideration with reference to contracts as provided in sub-clause (ii) of clause (i) of section 2. The petitioners are a firm of building contractors. In December, 1956, they entered into a contract with the Military Engineering Services Department of the Government for the construction of certain buildings known as "married accommodation" at Ambala Cantonment and received a sum of Rs. 32,000 on January 31, 1957, as advance. On February 14, 1957, the Assessing Authority, Jullundur District, issued a notice intimating the petitioners that as they had failed to apply for registration under section 7 of the Act assessment would be made under section 18, sub-section (2), for the perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have a right to tax the transaction even apart from the impugned provisions. The question is whether the contract of the petitioners with the Government for construction was one and indivisible, or whether it was a combination of an agreement for sale of materials and an agreement for work and labour. The evidence placed before us leaves us in no doubt as to the true character of the contract. The tenders which were called for and received were for executing works for a lump sum, and in his acceptance of the tender of the petitioners dated December 15, 1956, the Deputy Chief Engineer stated: "The above tender was accepted by me on behalf of the President of India for a lump sum of Rs. 9,74,961." How this amount is made up is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract or of inferior quality, in which case the contractor has to remove them and rebuild with proper materials. Terms such as these and those in rule 33 quoted above are usually inserted in building contracts with the object of ensuring that materials of the right sort are used in the construction and not with the intention of purchasing them. If rule 33 is to be construed as operating by way of sale of materials to the Government when they are brought on the site, it must follow that the surplus materials remaining after the completion of the work must be held to have been re-sold by the Government to the contractor, and that is not contended for. In Tripp v. Armitage [1839] 4 M. W. 687; 150 E.R. 1597, 1603., a builder who had been eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty therein must be held to have passed to them, and that accordingly the assignees in bankruptcy of the contractors could not claim them. That contention was negatived by the House of Lords, who held that the facts relied on did not establish a contract of sale of the materials apart from the contract to construct the ship, and that the title to the materials did not as such pass to the ship-owners. The position is the same in the present case. Rule 33 has not the effect of converting what is a lump sum contract for construction of buildings into a contract for the sale of materials used therein. It must therefore be held following the decision in Gannon Dunkerley Co. v. State of Madras [1958] 9 S.T.C. 353., that there has been no sal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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