Appeals Nos253 to 255 of 1955
Appeals from the judgment and decree dated November 30 1954 of the former Nagpur High Court in Misc
Petitions Nos 245 279 and 308 of 1954
N C Chatterjee and G C Mathur for the appellant in C A No 253 of 1955
G C Mathur for the appellant in C A Nos 254 and 255 of 1955
B Sen section B Sen and 1
N Shroff for the respondents in C A Nos 253 and 254 of 1950 and for the State of Madhya Pradesh Intervener
C 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 section Bindra and T M Sen for the State of Punjab Intervener
April 3
The judgment of section R Das C J Venkatarama Aiyar section 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 against the judgment of the High Court of Nagpur in 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 1947 hereinafter referred to as the Act imposing sales tax on materials used in construction works
It will be convenient to refer to these provisions at this stage
Section 2b of the Act defines  contract  as including  any agreement for carrying out for cash or deferred payment or other valuable consideration the construction fitting out improvement or repair of any building road bridge or other immovable property or the installation or repair of any machinery 430 affixed to a building or other immovable property 
Section 2c of the Act defines  dealer  as including a person who carries on the business of supplying goods
In section 2 d  goods  are defined as including  all materials articles and commodities whether or not to be used in the construction fitting out improvement or repair of immovable property 
Section 2g 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 valuable consideration including a transfer of property in goods made in course of the execution of a contract but does not include a mortgage hypothecation charge or pledge and the word purchase  shall be construed accordingly
 Section 2h 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 section 2j as including the aggregate amount of the sale price received or receivable by a dealer in respect of the supply of goods in the carrying out of any contract
The charging section is section 4a 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
Rule 4 of the Sales Tax Rules 1947 provides that  in calculating the sale price for the purpose of sub cl
ii of cl
h of section 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 exceeding 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 constituted under the Act called upon the contractors within the State to furnish returns in respect of their receipts 431 from contract works for the purpose of assessment of sales tax to which the appellants replied by instituting the proceedings out of which the present appeals arise
The appellant in Civil Appeal No 253 of 1955 is a contractor doing business in the construction of buildings and roads for the Military and Public Works Department in the State of Madhya Pradesh and he filed M P No 245 of 1954 challenging the validity of the assessment which the respondents proposed to make on two grounds
He contended firstly that the Provincial Legislature had authority under Entry 48 of List 11 Sch
VII of the Government of India Act 1935 to impose tax only on sale of goods that the 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
11 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 section 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 11 subject to the conditions and exceptions if any set out in the corresponding entry in the third column thereof
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
11 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 an Adaptation Order of 1950 the words State Government were substituted for Crown and item 33 became Goods sold to or by the State Government  In exercise of 432 the power conferred by section 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 of 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 section 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 Jabalpur 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 255 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 learned Judges held that the expression  sale of goods in Entry 48 was wide enough to coverall transactions in which property in the moveables passed from one person to another for money and that accordingly 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 into the matter and that the definition of  price  in section 2 h ii and r 4 framed pursuant thereto were ultra vires 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 except as to the definition of  price  in section 2 h ii and r 4 of the Sales Tax Rules 1947
It is against this judgment that the above appeals have been preferred on a certificate granted by the High Court under article 1321 of the Constitution
Two contentions have been urged in support of the appeals  1 that the Provincial Legislature 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 vs Gannon Dunkerley  Co 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  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 goods  in Entry 48 is construed in the sense which it has in the  that might render the impugned provisions of the Act ultra vires only in respect of a building contract which is one and indivisible 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 sale of materials even construing that word in its 1  55 434 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 vs Gannon Dunkerley  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 the authorities under the Act to determine whether the agreement in question is on its true construction a combination of an agreement to sell 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 pro ceed 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 bad 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 contracts 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 Legis lature and cannot be left to the determination of an outside authority
While a power to execute a law it was argued could be delegated to the executive the power to make it must be exercised by the Legislature itself and reliance was placed on the observations in Hampton J R  Co vs United States 2 Panama Refining Co vs Ryan 3 and Schechter vs United States 4 as supporting this position
It was also contended that the grant of a power to an outside authority to 1  2    629
3    458
4   435 repeal or modify a provision in a statute passed by the legislature was unconstitutional and that in consequence the impugned notification was bad in that in reversal of the policy laid down by the legislature in Act XVI of 1949 that sales to Government should be excluded from the operation of the Act it withdrew the exemption which had been granted thereunder and the observations in re The etc
1 and the decision in Rajnarain Singh vs 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 may 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 vs Appollo Candle Company Limited the question arose as to whether section 133 of the Customs Regulation Act of 1879 of New South Wales 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 It is argued that the tax in question has been 1   787 982 984 3 2  436 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 they have entrusted to him
In these circumstances their Lordships are of opinion that the judgment of the Supreme Court was wrong in declaring Section 133 of the Customs Regulation Act of 1879 to be beyond the power of the Legislature
 In Syed Mohamed  Co vs The State of Madras 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 be 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 competent 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 that the delegation of authority under section 5 vi war within permissible constitutional limits
In Hampton J R  Co vs United States 2 which was cited on behalf of the appellant the question arose whether section 315b 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 necessary for carrying out the policies declared in the statute was an unconstitutional delegation and the decision was that such delegation was not unconstitutional
We are therefore of the opinion that the power conferred on the State Government by section 62 to amend the schedule relating to exemption is in consonance with the accepted legislative practice relating to the topic and is not unconstitutional
1 1952 3 STC 367 2    629
437 The contention of the appellant that the notification in question is ultra vires must in our opinion fail on another ground
The basic assumption on which the argument of the appellant proceeds is that the power to amend the schedule conferred on the Government under section 62 is wholly independent of the grant of exemption under section 61 of the Act and that in consequence while an exemption under section 61 would stand an amendment thereof by a notification under section 62 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 State Government
Section 61 therefore cannot have an operation independent of section 62 and an exemption granted thereunder is conditional and sub ject to any modification that might be issued under section 62
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 48 in List 11 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 prohibition 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 nothing 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 will bear their own costs throughout 438 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 section 62 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


Summary:
Respondent No 1 the owner of a public service vehicle made an application to the Regional Transport Authority for the grant of a special permit  under section 636 of the Motor vehicles Act 1939
The Regional Transport Authority rejected the said application on the ground that the provisions of the Karnataka Contract Carriages Acquisition Act 1976 prohibited the grant of such permit
Aggrieved by the aforesaid order of refusal respondent No 1 filed a writ petition in the High Court and a Single Judge of the High Court allowed writ petition and directed the Regional Transport Authority to consider the application of responded No1 for the grant of a special permit
The Regional Transport Authority preferred a writ appeal
The Division Bench of the High Court taking the view that the intention of the legislature was that only a public service vehicle in relation to which a special permit held been issued when the 1976 Act came into force and which was not operating as a stage carriage should be acquired held that a public service vehicle in relation to which a special permit had not been issued when the Act came into force would not come within the definition of contract carriage under section 3g of the Act and the prohibition contained in section 20 of the Act against the grant of contract carriage permit would not extend to the grant of special PG NO 1038 PG NO 1039 permit under sub section 6 of section 63 of the 
The Division Bench dismissed the appeal
The Regional Transport Authority appealed by special leave to this Court
On the question whether after the coming into force of the Karnataka Contract Carriages Acquisition Act 1976 a special permit under section 636 of the can be granted under the Act
Allowing the appeals HELD 1
Section 14 read with Section 203 of the Karnataka Contract Carriages Acquisition Act 1976 confers a monopoly on the Karnataka State Road Transport Corporation to run vehicles as contract carriages
1050A 2
Section 14 read with section 203 of the Act clearly prohibits the grant of renewal of any permit for the running of any contract carriage
1049C 3
The High Court was not therefore right in its view that a public service vehicle in relation to which a special permit had not been issued when the Act came into force would not come within the definition of contract carriage  in section g and the prohibition contained in Section 20 of the Act against the grant of contract carriage permit cannot extend to grant of special permit under Section 636 of the 
1050B C 4
Under clauses i and ii of Section 3g of the Act if a special permit under Section 636 or a temporary permit under Section 621 or sub section  I C of Section 68 F of the has been issued it will came within the purview of the definition of contract carriage 
1046C D 5
If a special permit under Section 621 or under Section 636 of the was in force on January 30 1976 in respect of a stage carriage such a stage carriage will not be a contract carriage  within the meaning of Section 3g of the Act
1046 D 6
Whether the expression has been  occurring in a provision of a statute denotes transaction prior to the enactment of the statute in question or a transaction after the coming into force of the statute will depend upon the intention of the Legislature to be gathered from the provision in which the said expression occurs or from the other provisions of the statute
1046H 1047A PG NO 1040 In the instant case the words has been  contemplate the issuance of a special permit or a temporary permit as preferred to in clauses i and ii of Section 3g of the Act after the enactment of the Act which is clear from exclusion clause ii of Section 3g which excludes a stage carriage from the definition of contract carriage  if special permits issued under section 621 or Section 636 of the were in force on January 30 1976
1049F 7
The words contract carriage  occurring in Section 3m must be read in the light of the definition as contained in section 3g of the Act
So read it is manifest that section 14 read with section 203 of the Act clearly bars the making of any application for a permit or for renewal of an existing permit for the running of a vehicle whether a contract carriage or a stage carriage as a contract carriage
1049D E State of Karnataka vs Shri Ranganatha Reddy
and Athlumney Ex pate Wilson referred to