THE STATE OF MADRAS versus GANNON DUNKERLEY & CO., (MADRAS) LTD.

Citation: [1959] 1 S.C.R. 379 · Decided: 01-04-1958 · Supreme Court of India · Bench: SUDHI RANJAN DAS · Disposal: Dismissed

Cited by 4 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

S.C.R. 
SUPREME COURT REPORTS 
379 
the event of the appeal being dismissed or decided 
r958 
against them. 
Having regard to . the undertakings' b 1 1- 1. h 
1 
. 
· 
a u a 
J urama 
given, as also the fact that execution of the decree 
and A.noiher 
in suit No. 483/4400 of the Co~u~t of Small Causes, 
v. · · 
Bombay has been delayed long enough, · we are Nandrani Shivram 
unable to accede to the request made by the appel-
and Others 
lants. 
·The appeal is accordingly dismissed with costs. 
• 
Appeal dismissed. 
THE STATE OF MADRAS 
v . 
GANNON DUNKERLEY & CO., 
(MADRAS) LTD. 
(S. R. DAS c. J., VENKATARAMA AIYAR, s. K. DAS,' 
A. K. SARKAR and VIVIAN BosE JJ.) 
Sales Tax-Building contracts-Tax on supply of materials in 
construction works_-·State's pou·er of taxation-" Sale of good~"·, 
Meaning of-Legislative practice-N aiure of agreement in building 
contracts-Indian Sale of Goods Act, I9JO (III of I9JO), s. 4~ 
]'vfadras General Sales Tax Act, I939 (Mad. IX of I939L as amend-
ed by Madras Act XXV of .I947, ss. 2(c)(h)(i), Explanation I(i), 
r. 4(3)--Government of India Act, I935 (26 Geo. 5, Ch. 2), s. ro7, 
Sch. Jl II, List II, Entry 48. 
The responde~t company, doing business, inter alia, in the. 
construction of buildings, roads and other .works was assessed to 
sales tax by the sales tax authorities who SO\lght to indude.· 
the value of the materials used in the execution of building con~ 
tracts within the taxable turnover of the respondent. The vaii-. 
dity of the assessment was challenged by the respondent .\vlio' 
contended that the power of the Madras Legi~laljire to impose a. 
tax on· sales under Entry 48 in List II in Sch. VII of the. Governc 
ment of India Act, 1935, did not extend to imposing a tax 'on tlie, 
value of materials used in construction works, as there was no 
transaction of sale in respect of those goods, and that the provi-
sions introduced in the Madras General Sales Tax Act, 1939, by 
the Maaras General Sales Ta·x (Amendment) Act, 1947, authorfs~ 
ing the imposition of such tax were ultra vi res. 
The Sales Tax 
Appellate Tribunal.rejected the respondent's contention but, on 
..
Imam], 
April I. 
380 
SUPREME COURT REPORTS 
[1959] 
I958 
revision, the High Court took the view that the expression "sale 
of goods" had the same meaning in Entry 48 which it has in the 
The State of 
Indian Sale"of Goods Act, 1930, that the construction contracts of 
Madras 
·the respondent were agreements to execute works to be paid for 
v. 
according to measurements at the rates specified in the schedule 
Gannon Diutkevlf:y thereto, and \Vere not contracts for sale of the· materials used 
& Co.. 
therein, and that further, they were entire and indivisible and 
(Madras) Ltd. 
could not be broken up into a contract for sale of materials and a 
contract for payment for work done. Accordingly, it held th~t 
the impugned provisions introduced by the Madras General Sales 
Tax (Amendment) Act, 1947, were ultrp vires the powers of the 
Provincial Legislature. On appeal to the Supreme Court: 
Held, (1) On the true interpretation of the expression "sale . 
of goods " there must be an agreement between the parties for 
the sale of the very goods in which eventually property passes. 
Poppatlal Shah v. The State of Madras, [1953] S.C.R. 677 and 
The State of Bombay v. The United Motors (India) Ltd., [1953] 
S.C.R. 1069, relied on. 
In a building contract, the agreement between the parties is 
that the contractor should construct the building according to the 
specifications contained in the agreement, and in consideration 
therefor receive payment as provided therein, and in such an 
agreement there is neither a contract to sell the materials used 
in the construction, nor does property pass therein as moveables. 
(2) The expression" sale of goods" was, at the time when the 
Government of India Act, 1935, was enacted, a term of well-
recognised legal.import in the general law relating to sale of goods 
and in the legislative practice relating to that topic and must be 
interpreted in Entry 48 in List II in Sch. VII of the Act as having 
the same meaning as in the sale of Goods Act, 1930. 
The Sales Tax Officer, Pilibhit v. Messrs. Budh Prakash Jai 
Prakash, [1955] l S.C.R. 243, relied on. 
(3) In a building contract which is one, entire and indivisible, 
there is no sale of goods· and it is not within the competence 
of ·the Provincial Legislature under Entry 48 in List II in Sch. 
VII of the Government of India Act, 1

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