FIRM OF M/S. PEARE LAL HARI SINGH versus THE STATE OF PUNJAB & ANOTHER

Citation: [1959] 1 S.C.R. 438 · Decided: 07-04-1958 · Supreme Court of India · Bench: SUDHI RANJAN DAS · Disposal: Appeal(s) allowed

Judgment (excerpt)

• 
Pandit Br1narsi 
na, 
v. 
The State of 
Illadhya Pradesh 
Bose ]. 
April 7, 
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 
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 assess-
ment 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 Govern-
ment: 
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. 
• 
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• 
\ 
.. .• 
• 
s.c.R. 
SUPREME COURT 1tl!JPORTS 
439 
Rule 33 which provides that the materials brought to the site 
shall become the property of the Government but that when the 
works are finally completed the surplus materials shall revert and 
become the property of the contractor, has for its object that 
materials of the right sort are used in the construction and has 
not the effect of converting what is a lump sum contract for con-
struction of buildings into a contract for the sale of materials 
used therein. 
• State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., 
[r959] S.C.R. 379, followed. 
Tripp v. Armitage, (r8~9) 4 M. & W. 687 and Reid v. Macbeth 
~ Gray, [r904] A.C. 223, relied on . 
ORIGINAL JURISDICTION: Petition No. 128 of 1957. 
Petition under Article 32 of the Constitution of 
India for enforcement of Fundamental Rights. 
Gopal Singh, for the petitioner. 
N.°S. Bindra and T. M. Sen, for the respondents. 
1958. April 7. The Judgment of the Court was 
delivered by 
VENKATARAMA AIYAR J.-This is a petition under 
Art. 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 Gene:cal 
Sales Tax Act, 1948 (East Pb. XLVI of 1948), herein-
after referred to as the Act, imposing a tax on the 
supply of materials in construction works treating it 
as a sale. 
It will. be convenient at this stage to refer to the 
relevant provisions of the Act. Section 2(c) defines 
" contract " as meaning, 
" Any agreement for carrying out for cash cir 
deferred payment or other valuable consideration-
(i) the construction, fitting out, improvement, or 
repair of· any building, road, bridge or other immov-
able property; or 
• 
(ii) the installation or repair of any machinery 
affixed to a building or other immovable property 
. 
. ', 
"Dealer" is defined ins. 2(d) as any person engaged 
in the business of selling or supplying goods; 
~ection 2(h) defines " sale " as meaning " any transfer 
• 
• 
Peare Lal 
Hari Singh 
v. 
The State of 
Punjab 
V enkatarama 
Aiyar ]. 
• 
• 
Peare Ltil 
Hari Sirigh 
v. 
The .':itaft nf 
Punjab 
Venkatrira111a 
Aiyar ]. 
440 
SUPREME COURT R:gPORTS 
[l959j 
of property in goods for cash or deferred payment 
or other valuable consideration, including a transfer of 
property in good

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