Pandit Banarsi Das v. The State of Madhya Pradesh

s;c.R. SUPREME COURT. REPORTS 427 To avoid misconception, it must be stated that the _z958_ above conclusion has ·reference ·to wo. rks contracts, . \ ~~~ef which· are entire· and''indivisible,\ aS the contracts of- _MJdras_ the respQ~dehts JjaV,~ been held by th~' learned Judges v. o~ th~ Cqurt b~lo'\V' to, he. ~ The" se,veral forms which _Gannon Dunkerley_ such, kinds· of contracts, can,assume are set out in "" _Co .•_ Hudson on Building Contracts; at<p. 165 .. It is pos-. _(Madras) Ltd._ sible that .the parties 1might enter inte> distinct and _venkatarama_ sible that .the parties 1might enter inte> distinct and _venkatarama_ ., separate ·contracts, 'one for the: transfer 'of materials _Aiyar_ _J._ for money consideraticm, and the other for payment of remuneration for services and for work done. In such a case; there, are really two agreements, though there is a single instrument embodying them, and the power of the St.ate to separate the agreement to sell, from the agreement to do work and render service and to impose a tax thereon \cannot be questioned, and will stand untouched by the present judgment. In the result, the appeal fails, and is dismissed with· costs. _Appeal dismissed._ . ~., _!I_ PANDIT BAN ARSI DAS BRANOT. _v._ THE STATE OF MADHYA PRADESH & OTHERS (and connected appeals) (S. R. DAS c. J., VENKATARAMA AIYAR, s. K. DAS, - A. K. SARKAR and VIVIAN BOSE J J.) . _Sales_ _Tax-Building contracts-Tax on_ _supply_ _of_ _materials-_ _V alidity-Statute_ _providing for exemption from_ _t11xation,_ _but_ _also_ _enabling Government_ _to_ _a111end_ _such exemption_ _by_ _notification-_ _C onstitutionality-C entral Provinces and Berar Sales_ _Tax_ _Act, r947_ (C.P. & _Berar_ _2I of 1947),_ ss. _2,_ 4{a), _6(1)(2)._ - Section 4(a) of the Central Provinces and Berar Sales Tax Act, 19~7, provided that every dealer whose turnover exceeded certain limits shall be liable to pay tax in accordance with the ;· provisions of the A~t on all sales effected after the commencement ## _April_ _3._ _**Pandit Banarsi**_ Da.~ v. _**The State**_ _**of**_ _**Madhya**_ _**Pradesh**_ 428 SUPREME COURT REPORTS [1959) of the Act; and bys. 2(g) of the Act, "sale ... means any transfer of property in goods ... including a transfer of property in **goods made in course of the execution of a contract** .... " **Under** s. 6(1) of the Act no tax was payable on the·sale of goods specified in Sch. ][ to the Act ands. 6(2) enabled the State Government by notification to amend the Schedule. Item 33 in Sch. II as amended by Act XVi of 1949 and as adapted by the Adaptation Order of 1950, was " Goods sold to or by the State Government". In exercise of the power conferred bys. 6(2) of the Act, the Government issued a notification on September .18, 19)'0, amending item 33 by snbstituting the words "Goods s_old by the State Government ". The appellant, a contractor doing business in the construction of buildings and roads for the Military and Public Works Department in the State of Madhya Pradesh, challenged the validity of the assessment which the respondent proposed to make on the appellant under the provisions of the Central Provinces and Berar Sales Tax Act, 1947, on the grounds (1) that the Provincial Legislature had no authority under Entry 48 of List II, Sch. VII of the Government of India Act, 1935, to impose a tax tin the supply of materials in works contracts and that the provisions of that Central Provinces and Berar Sales Tax Act which sought to **impose a tax thereon treating it** **as a sale were** _**ultra vires,**_ **and** **(2)** that he was entitled to exemption under item 33 in Sch. II, to the Act and that the notification of the Government dated September 18, r950, withdrawing that exemption was bad as being an unconstitutional delegation of legislative authority : · - _Held,_ that the expression "sales of goods" in Entry 48 has the same meaning which it had in the Indian Sale of Goods Act, 1930, that in a building contract there is no sale of materials as such, and that it is therefore _ultra vires_ the powers of the Provincial Legislature to impose tax on the supply of materials. _The State of Madras_ v. _Gannon Dunkerley_ & _Co._ _(Madras) Ltd.,_ [r959] S.C.R. 379, followed. _/_ _Per_ Das C. J., Venkatarama Aiyar, S. K. Das and A. K. Sark.;tr JJ.-It is not unconstitutional for the legislature to leave it **to the executive to determine details relating to the working of** **taxation laws, such as the selection of persons on whom the tax** is to be laid, the rates at which it is to be charged in respect of different classes of goods, and the like. The power conferred on the State Goveinrnent by s. 6(2) of the Act to amend the Schedule **relating to exe.mption is in consonance with the accepted legis-** lative practice relating to the topic, and is not unconotitutional. Sub-sections (r) and (2) of s. 6 together form integral part of a single enactment the object of which is to grant exemption from taxation in respect of such goods and to such extent as may from time to time be determined by the State <{overnment, and an to time be determined by the State # _t_ S.C.R. SUPREME COURT REPORTS 429 exemption granted under s. 6(1) is conditional and subject to any notification tl~at might be issued under s. 6(2). The· notification d~ted September 18, 1950, is therefore _intra vires._ _Pandit Banarsi_ _Das_ CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. v. 253 to 255 of 1955 .. _The State._ _of_ ·Appeals from the judgment and decree dated _Madhya Pradesh_ November 30, 1954, of the former Nagpur High Court in Misc. Petitions Nos. 245, 279 and 308 of 1954. . _N .. G._ _Chatterjee_ and _G. G._ _Mathur,_ for the appellant ih C. A. No. 253of1955. - G~ _G._ _Mathur,_ for the appellant in C. A. Kos. 254 and 255 of 1955. · _B. Sen, S. B. Sen_ and _I._ _N. Shroff,_ for the respondents in C. A. Nos. 253 and 254 of 1955 and for the Sta.te of Madhya Pradesh (Intervener). _G._ _K. Daphtary, Solicitor-General of India_ and _R.H. Dhebar,_ for the respondents in C. A. No. 255 of 1955 and for the State of Bombay (Intervener). _N._ _S. Bindra_ and _T. M. Sen,_ for the State of Punjab (Intervener). 1958. April 3, The judgment of S. R. Das _c:_ J;, Venkatarama Aiyar, S. K. Das and A. K. Sarkar JJ. was delivered by Venkatarama Aiyar J. Bose J. delivered a separate judgment. VENKATARAMA AIYAR J.-These are appeals _Ver.katarama_ against the judgment of the High Court ofN agpur in _Aiyar_ _J._ writ applications filed by the appellants impugning the validity of certain provisions of the Central Provinces and Berar Sales Tax Act, 1947 (C. P. & Berar 21 of 194 7), hereinafter referred to as the Act, imposing sales tax on materials used in construction works. It will be convenient to refer to thes~ 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 ~onstruction, fitting out, improvement or repair of any building, road, bridge or other immovable property or the iustallation or repair of any machinery •. ' _**Pan.ii! Banarsi**_ _Das_ v. _!_hf_ _**State ..**_ ~f 1 **Af** _**adhya Pradesh**_ _**V enkatarama**_ _**Aiyar**_ _]._ 430 SUPREME COURT REPORTS [1959] affixed to a building or other immovable property". Section 2(c} of the Act defines" dealer" as including a person who carries on the business of supplying goods. In s. 2 (d), "goods" are defined as including "all materials, articles and commodities whether or not to he 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. valuaqle consideration, including a transfer of property in goods made in course bf the execution of a contract, but does not include a mortgage, hypothecatfon, 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 reooived 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. Hule 4 of the Sales Tax Hules, 1947, provi;ies 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 exci.eeding 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. Acting on these provisions, the authorities cornltituted under the Act called upon the contractors within ### the . State to furnish . returns . in respect tJf their receipts ... #### ... 1935, to impose tax only on sale of goods, that th'.e' 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 September 18, 1950, withdrawing that exemption was unconstitutional and void. To appreciate this contention, it is necessary to refer to s. 6 of the Act, which is as follows: 6 (1) "No tax shall be payable under this Act on the sale of goods specified. in the second column of Schedule II, subject to the conditions and exceptions, if any, set out in the corresponding entry in the third column thereof. c (2) The State Government may, after giving by notification not less than one month's notice of their intention so to do, by a notification after the expiry of the period of notice mentioned in the first notification amend either Schedule, and thereupon such. Schedule shall be deemed to be amended accordingly." Item 33 in Sch. II as originally enacted was " Goods sold by the Crown". This was amended by Act XVI of 1949 by. substituting for the above words "Goods sold to or by the Crown ". By,al). Aqa ptation Orc~er of 1950, the words "Sfate Government" were substituted for "Crown", and item 33 became' "Goods sold to or by tlte State Go:vernment ". In exercise pf S.C.R. SUPREME COURT REPORTS 431 from contract works for the purpose of assessment of _r958_ sales tax, to which the appellants replied by instituting _Pandit Banarsi_ the proceedings, out of w ich h the present appeals arise. _Das_ The appellant in Civil Appeal No. 253 of 1955 is a v. contractor doing business in the construction of build- _The state of_ ings and roads for the Military and Public Works _Madhya Pradesh_ Department in the State of Madhya Pradesh, and he filed M. P. No. 245of1954 challenging the validity of Ve;:;:~•7a the assessment which the respondents,proposed to make, on two grounds: He contended ~,rstly, that the Provincial Legislature had authority under Entry 48, of List II, Sch. VII of the Government of India Act, ###### .. _**Pandit**_ _**Hanarsi**_ _Das_ v. _**The**_ _**State of**_ _**M**_ _**{tdhya**_ _**Pradesh**_ _**Venkataranui**_ _**A1'yar**_ _]._ SUPREME COURT REPORTS [Hl59] the power conferred by s. 6 (2) of the Act, the State issued a notification on September 18, 1950, amending item 33 by substituting for the words "Goods sold to or by the State Government" the words "Goods sold by the State Government". The resultant position is that the appellant who was entitled to exemption under Act XVI of 1949 in respect of goods sold to the Government could no longer claim it by reason <"Jf the notification aforesaid. Now, the ground of his attack was that it was not open•to the Government in exercise of the authority delegated to it under s. 6 (2) of the Act to modify or alter what the Legislature had enacted. The appellant accordingly claimed that the proceedings which the respondents proposed to take for assessment of sales tax were incompetent, and prayed that an appropriate writ might be issued restraining them from proceeding with the same. In Civil Appeal No. 254 of 1955, the appellants are the J·abalpur Contractors' Association, which is a registered body and certain contractors, and they filed M. P. No. 279 of 1954 questioning the validity of the proposed assessment on the same grounds as in M. P. No. 245 of 1954. The appellant in Civil Appeal No. 25'5 of 1955, is the Madhya Pradesh Contractors' Association, Nagpur, which is again a registered body, and it filed M. P. No. 305 of 1954, challenging the legality of the proceedings for assessment on the same grounds as in M. P. No. 245 of 1954. All these three petitions were heard together, and by their judgment dated November 30, 1954, the laarned Judges held that the expression " sale of goods " in Entry 48 was wide enough to cover all transactions in which property in the moveables passed from one person to another for money, and that, accordiJ].gly, in a building contract there was a sale within Entry 48 of the materials used therein, and that the provisions of the Act imposing tax thereon were valid. But the learned Judges also held that the tax could be levied only on the actual value of the materials to be determined on an enquiry iitto the matter, and that the definition of " price " in s. 2 (h) (ii) andr. 4 framed pursuant thereto were _ultra_ _vires._ - _t_ S.C.tt. SUPREME OOtJRT .REPORTS 433 in that they laid down artificial rules for fixing the same by deducting certain percentages from out of the total receipts on account of labour. As regards the notification dated September 18, 1950, the learned Judges held that it was within the authority conferred by the statute and was valid. In the result, the impugned provisions of the Act were held to be valid e"cept as to the definition of" price " in s. 2 (h) (ii) and r. 4 of the Sales Tax Rules, 1947. It is against this judgment that the abc1ve appeals have been preferred on a certificate granted by the High Court under Art. 132(1) of the Constitution. Two contentions have been urged in support of the appeals : (1) that the Provincial Legidature has no authority in exercise of its power under Entry 48 to impose a tax on the supply of materials in works contracts as such supply cannot be said to be also of those materials within that Entry ; and (2) that the notification dated September 18, 1950, is bad as being an constitutional delegation of legislative authority. As regards the first contention, the question is now concluded by the decision of this Court in _The State_ _of_ _Madras_ v. _Gannon Dunkerley_ _&_ _Go._ _(Madras) Ltd._ ( [1 ] ) in which it has been held that the expression "sale ·of goods'' in Entry 48 has the same meaning which it has in the Indian Sale of Goods Act, 1930, that in a building contract there is no sale of materials as such, and that it is therefore _ultra vires_ the powers of the Provincial Legislature to impose tax on the supply of materials. Mr. B. Sen appearing for the respondents has argued that even if the expression " sale of good~" in Entry 48 is construed in the sense which it has in the Sale of Goods Act, that might render the impugned provisions of the Act ~tltra _vires_ only in respect of a building contract which is one and in~ivisible, that there might be contracts which might consist of two distinct agreements, one for the sale of materials and another, for work and labour, and that in such a case, it would be competent to the State to impose tax on . the sarle of materials even construing that word in its _Pandit Banarsi_ _Das_ v. _The State of_ _Madhya Pradesh_ _V_ _enkatarama_ _Aiyar_ _J._ (r) [1959] S.C.R. 379. _55_ - \, ' _**Pandit**_ _**Banarsi**_ _Das_ v. _**The State**_ _**of**_ _**Madhya**_ _**Pradesh**_ _**V enkatarama**_ _**Aiyar**_ _**j.**_ 434 SUPREME COURT REPORTS **[1959]** narrow sense, and that these are matters which must be left to be investigated by the appropriate authorities. That undoubtedly is the correct legal position as observed in _The State_ _of Madras_ v. _Gannon Dun-_ _kerley_ _&_ _Co._ _(Madras) Ltd._ (1), and accordingly, when a question arises as to whether a particular works contract could be charged to sales tax, it will be for tl:e authorities under the Act to determine whether thti agreement in question is, on its true construction, a combination of an agreement to llell and an agreement to work, and if they come to the conclusion that such is its character, then it will be open to them to proceed against that part of it which is a contract for the sale of goods, and impose tax thereon. (2) We have next to consider the contention that the notification dated September 18, 1950, is b~d as constituting an unconstitutional delegation of legislative power. In the view which we have expressed above that there is in a works contract no sale of materials as such, it might seem academic to enter into a discussion of this question; but as there may be building contracts in which it is possible to spell out agreements for the sale of materials as distinct from co11tracts for work and labour, it becomes necessary to express our decision thereon. Mr. Chatterjee appearing for the appellant in Civil Appeal No. 253 of 1955 contends that the notification in question is _ultra vires,_ because it is a matter of policy whether exemption should be granted under the Act or not, and a decision on that question must be taken only by the Legislature, and cannot be left to the determination of an outBide authority. While a power to execute a law, it '\Vas argued, could be delegated to the executive, the power to make it must be exercised by the Legislature itself, and reliJ1nce was placed on the observations in _Harnpton JR_ _&_ _Co._ v. _United States_ ( [2] ), _Panarna Refin-_ _ing_ _Co._ v. _Ryan('),_ and _Schechter_ v. _United States('),_ as supporting this position. It was also contended that the grant of a power to an outside authority to (1) [1959] S.C.R. 379. (2) 276 U.S. 394; 72 L. Ed. 624, 629. (3) 293 U.S. 388; 79 L. Ed. 446, 458. (4) 295 U.S. 495; 79 L. Ed. 1570 . .. _t_ ###### " repeal or modify a provision in a statute passed by the legislature was unconstitutional, and that, in ccmsequence, the impugned notification was bad in that, in reversal of the policy laid down by the legislature in Act XVI of 1949 that saies to Government should be excluded from the operation of the Act, it withdrew the exemption which had been granted thereunder, and the observations in _In_ _re_ _The Delhi Laws Act,_ _1912_ _etc._ ( [1] ), and the decision in _Rajnarain Singh_ v. _The_ _Chairman,_ _Patna Administration Committee,_ _Patna and another_ (2), were strongly relied on as establishing this contention. Mr. N. C. Chatterjee particularly relied on the following observations of Bose J. at p. 301 in _Rajnarain Singh's case_ ( [2] ): - " In our opinion, the majority view was that an executive authority can be authorised to modify either existing or future laws but not in any essential feature. Exactly what constitutes an essential feature cannot be enunciated in general terms, and there was some divergence 'of view about this in the former case, but this much is clear from the opinions set out above; it cannot include a change of policy." On these observations, the point for determination is whether the impugned notification relates to what m11.y be said to be .an essential feature of the law, and whether it involves any change of policy. Now, the authorities are clear that it is not unconstitutional for the legislature to leave it to the executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid, the rates at which it is .to be charged in respect of different classes of goods, and the like. In _Powell_ v. _Appollo Candle Company Limited_ ( [3] ), the,question arose as to whether s. 133 of the Customs Regulation Act of 1879 of New South y.;r ales which conferred a power on the Governor to impose tax on certain articles of import· was an unconstitutional delegation of legislative powers. In holding that it was not, the Privy Council observed: S.C.R. SUPREME COURT REPORTS 435 _r9j8_ _Pandit Banarsi_ _Das_ v. _The State of_ _Madhya_ _Pradesh_ _Venkatarama_ _Aiyar ]._ "'[t is argued that the tax in question has been ' (1) [r951] S.C.R. _747, 787',_ 982, 984. · (2) (1955] I S.C.R 290. (3) (i885) IO A.C. '282. -\ \ ' ' _r_ ' _r958_ _**l'andit Banarsi**_ _Das_ v. _**The**_ _**State of**_ _**l'vladhya**_ _**Pradesh**_ _**V cnkatarama**_ _**Aiyar j.**_ 436 SUPREME COURT REPORTS [1959] imposed by the Governor and not by the Legislature who alone had power to impose it. But the duties levied under the Order-in-Council are really levied by the authority of the Act under which the Order is issued. The Legislature has not parted with its perfect control over the Governor, and has the power, of course, at any moment, of withdrawing or altering the power which thev have entrusted to him. In these circmtistances, their Lordships are of opinion that the judgment of the Supreme Court was wrong in declaring Section 13:3 of the Customs Regulation Act of 1879 to be beyond the power of the Legislature." In _Syed_ _111oharned_ _&_ _Go._ v. _1'he State of Jlfadras_ ( [1] ), the question was as to the _vires_ of rules 4 and 16 framed under the Madras General Sales Tax Act. Section 5 (vi) of that Act had left it to the rule-making authority to determine at which single point in the series of sales by successive dealers the tax should he levied, and pursuant thereto, rules 4,and 16 had provided that it was the purchaser who was liable to pay the tax in respect of sales of hides and skins. The validity of the rules was attacked on the ground that it was only the legislature that "as comretent to decide who shall be taxed, and that the determination of that question by the rule-making authorities was _ultra vires._ The Madras High Court rejected this conntetion, and held on a review of the authorities thatl'ne delegation of authority under s. 5 (vi) was within permissible constitutional limits. In _Harnpton_ _J._ _R._ _&_ _Go._ v. _United_ _States('),_ which \\as cited on behalf of the appellant, the question arose whether s. 315(h) of the Tariff Act, 1922, under which the President had been empowered to make such increases and decreases in the rates of duty as were found ;1ecessary for carrying out the policies declared in the statute was an unconstitutional delegation, and the decision was that such delegation was not unconstitutional. 'Ve are therefore of the opinion that the power conferred on the State Government by s. 6(2) to amend the schedule relating to exemption is in consonance with the accepted legislative practice relating to the toP!c, and is not unconstitutional. - (1) (1952) 3 S.T.C,367. (2) '276 U.S. 39t; _72_ L. Ed. 624, 629 . **.** ##### / f ,, Sta~e Government. Section 6 (1), therefore, cannot have an operation independent of s. 6(2), and an exemption granted thereunder is conditional and subject to any modification that might be issued under s. 6(2). In this view, the impugned notification is _intra vires_ and not open to challenge. ·But 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 45 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 prohibiti.on 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 nQ.thing 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. The parties wil.l bear their own costs· throughout, S.C.R. SUPREME COURT REPORTS 437 The contention of the appellant that the notification _r95B_ in question is _ultra vires_ must, in our opinion, fail on _Pandit Banarsi_ another ground. The basic assumption on which the _Das_ argument of the appellant proceeds is that the power v. to amend the schedule conferred on the Government _The State of_ under s. 6(2) is ·wholly independent of the grant of _Madhya Pradesh_ exemption under s. 6(1) of the Act, and that, in con- _Ven-;,.-;;,,ama_ sequence, while an exemption under s. 6(1) would _Aiyar J ._ . stand, an amendment thereof by a notification under s. 6(2) might be bad. • But that, in our opinion, is not the correct interpretation of the section. The two sub-sections together form integral parts of a single . enactment, the object of which is to grant exemption from taxation in respect of such goods and to such extent as may from time to time be determined by the _**Pandit**_ _**Br1narsi**_ _na,_ v. _**The State**_ _**of**_ _**Illadhya**_ _**Pradesh**_ 438 SUPREME COUitT REPORTS [1959) BosE J.-I agree except that I prefer not to express an opinion about the validity of the power conferred on the State Government by s. 6(2) of the Central Provinces and Berar Sales Tax Act, 1947, to amend the schedule in the way in which it has been amended here. I would leave that open for future decision. _Appeals allowed._ FIItl\I OF M/S. PEAitE LAL HAitl SINGH _**Bose**_ _]._ _**April**_ **7,** _v._ THE STATE OF PUNJAB & ANOTHEit (S. It. DAS C. J., VENKATARAMA AIYAR, s. K. DAS, A. K. SARKAR and VIVIAN BosE JJ.) _Sales_ _Tax-Building_ _contracts-State's power_ _of_ _taxation_ _on_ _supply of materials in construction_ _works-Whether building contract_ _comprises a distinct agreement for sale_ _of_ _materials-East_ _Punjab_ _General Sales_ _Tax_ _Act, z948 (East Punjab_ _XLVI_ _of_ _z948),_ _ss._ _;<d)(j),_ _4(z)-Government_ _of_ _India Act, z935_ _(26_ _Geo._ _5_ _Ch._ _2),_ _Sch._ _VII,_ _List_ _II, Entry 48._ The petitioners who were building contractors in the State of Punjab were assessed to tax by the sales tax authorities on the **supply of materials in** **construction works treating** **it** **as a sale,** acting under the provisions of the East Punjab General Sales Tax Act, 1948. The petitioners challenged the legality of the assessment proceedings on the grounds, inter alia, that the legislature of the Province of Punjab had, under Entry 48 in List II of Sch. VII to the Government of India Act, 1935, no power to **impose tax on the supply of materials in** **construction works as** **there was no sale in** **fact or in la\v of those materials, and that** **the provisions of the Act which sought to** **do** **it were** _**·ultra vires.**_ **'fhe assessing authorities contended that on a true construction of** the building con~act entered into by petitioners with the Govern**ment it** **comprised a distinct agreement for the sale of materials** and particularly relied on r. 33 of the rules appearing in the printed General Conditions of Contracts issued by the Government: _Held,_ that there was no sale as such of the material~ used in the construction·s by the petitioners and that no tax could be levied thereon. \ .. .•