CARL STILL G. M. B. H. & ANOTHER versus THE STATE OF BIHAR AND OTHERS

Citation: [1962] 2 S.C.R. 81 · Decided: 19-04-1961 · Supreme Court of India · Bench: T.L. VENKATARAMA AIYYAR · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

2 S.C.R. SUPR:ffiME COURT Rll:POR1'S 
81 
quote what we said in Sahi's case (supra), remarkable 
for their disturbing implications. 
For these reasons, we allow the application with 
costs and a writ will now issue as directed. 
Petition allowed. 
CARL STILL G. m. b. H. & ANOTHER 
v. 
THE STATE OF BIHAR AND OTHERS 
(S. K. DAS, J. L. KAPUR, M. HIDAYATULLAH, 
J.C. SHAH and T. L. VENKATARAMA ArYAR, JJ.) 
Sales Tax-Construction works-Interpretation of contract-
Supply of materials-Legality of tax thereon-SaZ.s Tax authoritieJ; 
taking proceedings to levy tax-Writ petition to 
~uash proceedings 
-Maintainability-Bihar Sales Tax Act, r947 (Bihar I9 of r947), 
s. 2-Constitution of India, Arts. 226, 227. 
On December 19, 1953, the appellant, a company registered 
in West Germany, entered into a contract with a company in 
India to set up a complete coke oven battery ready for produc-
tion as well as by-products plants at Sindri in the State of 
Bihar, agreeing to erect and construct buildings, plants and 
machinery and deliver and supply accessories and articles from 
Germany and also locally from India, an.d render services fully 
described in the First Schedule, for an all inclusive price of 
Rs. 2,31,50,000. The contract provided that in case the con-
tractor failed to complete the works within the period specified 
therein the Indian company might take possession of the works 
and the materials which would become its property and com-
plete the works and deduct from the agreed price the expenses 
incurred in such completion. Under cl. l5(ii) of the contract 
all materials brought by the contractor upon the site shall im-
mediately b.ecome the company's property, hut such of them as 
during the progress of the works were rejected by the company 
ceased to be Company's property, and after the coke oven and by-
products plants had been constructed the contractor was entitled 
to remove the surplus materials. The clause further provided that 
the company shall not be liable for any loss if the materials were 
destroyed by fire or otherwise. Under the Bihar Sales Tax Act, 
1947, in a contract for execution of works, the materials used 
11 
Bishan Das 
v. 
State of Punjab 
S. K. Das j. 
82 
SUPREME COURT REPOHTS 
[1962] 
z96z 
therein are treated as sold by the contractors and their value is 
taken as the sale price liable to be taxed. The execution of 
Carl Still 
the works was completed in 1955 as provided in the agreement 
G. m. b. H. 
and on March 20, 1956, the sales tax authorities issued a notice 
v. 
to the appellant to the effect that it was liable to pay tax for 
State of Bihar the three years 1952 to 1955. under the provisions of the Act. 
The appellant representtd that it had only supplied materials in 
execution of works contract, that there was no sale of any goods 
or materials by it and that the proceedings for taxing this 
supply of materials as if they had been sold were illegal. The 
sales tax authorities having proceeded _to take further steps to 
levy the tax in spite of its representations, the appellant filed a 
petition before the High Court of Patna under Arts. 226 and 227 
of the Constitution of India for quashing the proceedings. The 
High Court took the view that under cl. lj(ii) of the contract in 
question the property in the materials was to pass to the Indian 
company as soon as they were brought on the site, and that, in 
effect, amounted to a sale of those materials by the appellant to 
the company. The Court, however, dismissed the petition on 
the ground that the facts had not yet been fully investigated 
and that it would be open to the sales tax authorities to investi-
gate the facts and upon the proper construction of the contract 
come to the finding whether and if so to what extent, the appel-
lant was liable to pay sales tax. 
Held (Shah, J., dissenting): (1) that on its proper construc-
tion the agreement dated December 19, 1953, was a contract 
entire and indivisible for the construction of specified works for 
a lump sum and not a contract of sale of materials as such and 
that the sales tax authorities had no right to impose a tax on 
the materials supplied in execution of that contract on the foot-
ing that such supply was a sale. 
The State of Madras v. Gannon Dunkerley & Co. (Madras) 
Ltd., [1959] S.C.R. 379 and Peare Lat Hari Singh v. The State 
·,,, 
of Punjab, [1959] S.C.R. 438, followed. 
(2) that where proceedings are taken befcre a tribunal 
under a provision of law, which 

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