Case: Carl Still G.M.B.H. &amp; Another Vs. State of Bihar &amp; Others

It follows that the agreement dated December 19, 1953, being a contract for the construction of works, one and indivisible, the respondents have no right to impose a tax on the materials supplied in execution of that contract on the footing that such supply is a sale.11. It is next contended for the respondents that, whatever the merits of the contentions based on the construction of the contract, the proper forum to agitate them would be the authorities constituted under the Act to hear and decide disputes relating to assessment of tax, that it was open to the appellants to satisfy those authorities that there have been no sales such as are liable to be taxed, that indeed they were bound to pursue the remedies under the Act before they could invoke the jurisdiction of the Court under Art. 226 and that the learned Judges of the High Court were, therefore, right in declining to entertain the present petitions. It is true that if a statute sets up a Tribunal and confides to it jurisdiction over certain matters and if a proceeding is properly taken before it in respect of such matters, the High Court will not, in the exercise of its extraordinary jurisdiction under Art. 226, issue a prerogative writ so as to remove the proceedings out of the hands of the Tribunal or interfere with their course before it. But it is equally well settled that, when proceedings are taken before a Tribunal under a provision of law, which is ultra vires, it is open to a party aggrieved thereby to move the court under Art. 226 for issuing appropriate writs for quashing them on the ground that they are incompetent, without his being obliged to wait until those proceedings run their full course. That has been held by this Court in State of Bombay v. The United Motors (India) Ltd., 1953 SCR 1069 at p. 1077 : (AIR 1953 SC 252 at p. 256), Himmatlal Harilal Mehta v. State of M. P., 1954 SCR 1122 at p. 1127 : (AIR 1954 SC 403 at p. 405) and The Bengal Immunity Co. Ltd. v. The State of Bihar, (1955) 2 SCR 603 at pp. 617, 619, 764-766 : ((S) AIR 1955 SC 661 at pp. 668, 669, 726-727). The position that emerges is that, if the proceedings before the Sales Tax Officer are founded on the provisions of the Act, which authorizes the levy of the tax on the supply of materials in construction contracts, then they must in view of the decision in 1939 SCR 379 : (AIR 1958 SC 560 ) be held to be incompetent and quashed. But if the proceedings relate to any extent to sales otherwise than under the contract, then the enquiry with respect to them must proceed before the authorities under the Act and the application under Art. 226 must fail.12. We must now examine the true scope of the proceedings before the Sales Tax Officer in the light of the above principles. We start with this that the Act contains provisions imposing a tax on the supply of materials under a construction contract. The appellants were indisputably engaged in construction works under the agreement dated December 19, 1953, and it is not suggested that they were carrying on any independent business as dealers in the State of Bihar. Presumably, therefore, when the sales tax authorities took proceeding against them, it was in respect of materials supplied by them under their contract dated December 19, 1953. When the appellants, in response to the notice issued by the third respondent, contested their liability to be taxed, it was on the ground that the supplies of materials under the contract were not sales. When the appellants next moved the court under Art. 226 for quashing the proceedings, they urged that the provisions of the Act, in so far as they purported to impose a tax on the materials supplied in the performance of the contract, as if they were sold, were ultra vires. If the respondents sought to tax the appellants on the footing that sales of materials were effected outside the contract, it was their duty to have put that case forward in answer to the petition. They did nothing of the kind. They did not file even a counter-statement. At the time of the argument when faced with the decision of this Court in 1959 SCR 379 : (AIR 1958 SC 560 ) their entire case was that the agreement between the parties should be construed as involving a sale of materials, and that their value could be ascertained from the invoices, account books and the course of dealings between the parties. No contention was urged that there were sales of materials which fell outside the agreement between the appellants and the Owner. The learned Judges of the High Court in dismissing the petitions made it clear that the investigation before the sales tax authorities must be as regards their liability to pay sales tax "upon proper construction of the contract." In this Court also, the respondents seek in their statement to maintain the liability of the appellants only on the basis of the contract, reliance being placed on Cl. 15 already referred to and on S. 9 of the Sale of Goods Act. There is no claim that the appellants are liable on the basis of sales falling outside the agreement. It was stated before us for the appellants, and not contradicted by the respondents, that the Sindri Fertilisers and Chemicals (Private) Ltd., is a company controlled by the Government. If that is so, the respondents were at all times in possession of facts which would have shown whether the appellants entered into any transaction de hors the agreement, and it is significant that at no stage have they alleged any such facts. We are satisfied that the proceedings have at all stages gone on the footing that the liability of the appellants arose under the contract and not otherwise.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]8. It is clear from the above clauses that the subject matter of the agreement was the installation of the coke oven battery and its accessories, that the sum of Rs. 2,31,50,000 was the price agreed to be paid for the execution of those works, and that there was no agreement for the sale of materials, as such by the appellants to the owner. In other words, the agreement in question is 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.The argument based on S. 9 of the Sale of Goods Act is, in our opinion, equally unsound. What that section enacts is that where there is a contract of sale of movables but the price is not mentioned, it has to be fixed either in the manner provided in the agreement or by having regard to the course of dealings between the parties, and where that is not possible, the buyer has to pay the seller a reasonable price. But the section presupposes that there is a contract of sale of goods, and, as held in 1959 SCR 379   : AIR 1958 SC 560  ) such a contract requires that there must have been an agreement between the parties for the sale of the very goods in which eventually property passes. If, as held by us, Cl. 15 does not embody an agreement for the sale of materials as such, there is no contract of sale with respect to them and S. 9 of the Sale of Goods Act can have no application.The contention, therefore, that Cl. 15 of the agreement could be read as amounting to a contract of sale of materials, and that the price therefor could be fixed as provided in S. 9 of the Sale of Goods Act by recourse to the account books of the appellants or the invoices or the course of dealings between them and the owner,must be rejected as untenable. It follows that the agreement dated December 19, 1953, being a contract for the construction of works, one and indivisible, the respondents have no right to impose a tax on the materials supplied in execution of that contract on the footing that such supply is ais true that if a statute sets up a Tribunal and confides to it jurisdiction over certain matters and if a proceeding is properly taken before it in respect of such matters, the High Court will not, in the exercise of its extraordinary jurisdiction under Art. 226, issue a prerogative writ so as to remove the proceedings out of the hands of the Tribunal or interfere with their course before it. But it is equally well settled that, when proceedings are taken before a Tribunal under a provision of law, which is ultra vires, it is open to a party aggrieved thereby to move the court under Art. 226 for issuing appropriate writs for quashing them on the ground that they are incompetent, without his being obliged to wait until those proceedings run their full course. That has been held by this Court in State of Bombay v. The United Motors (India) Ltd., 1953 SCR 1069     at p. 1077 : (AIR 1953 SC 252   at p. 256), Himmatlal Harilal Mehta v. State of M. P., 1954 SCR 1122     at p. 1127 : (AIR 1954 SC 403   at p. 405) and The Bengal Immunity Co. Ltd. v. The State of Bihar, (1955) 2 SCR 603     at pp. 617, 619, 764-766 : ((S) AIR 1955 SC 661   at pp. 668, 669, 726-727). The position that emerges is that, if the proceedings before the Sales Tax Officer are founded on the provisions of the Act, which authorizes the levy of the tax on the supply of materials in construction contracts, then they must in view of the decision in 1939 SCR 379 : (AIR 1958 SC 560  ) be held to be incompetent and quashed. But if the proceedings relate to any extent to sales otherwise than under the contract, then the enquiry with respect to them must proceed before the authorities under the Act and the application under Art. 226 mustthe respondents sought to tax the appellants on the footing that sales of materials were effected outside the contract, it was their duty to have put that case forward in answer to the petition. They did nothing of the kind. They did not file even a counter-statement. At the time of the argument when faced with the decision of this Court in 1959 SCR 379   : (AIR 1958 SC 560  ) their entire case was that the agreement between the parties should be construed as involving a sale of materials, and that their value could be ascertained from the invoices, account books and the course of dealings between the parties. No contention was urged that there were sales of materials which fell outside the agreement between the appellants and the Owner. The learned Judges of the High Court in dismissing the petitions made it clear that the investigation before the sales tax authorities must be as regards their liability to pay sales tax "upon proper construction of the contract." In this Court also, the respondents seek in their statement to maintain the liability of the appellants only on the basis of the contract, reliance being placed on Cl. 15 already referred to and on S. 9 of the Sale of Goods Act. There is no claim that the appellants are liable on the basis of sales falling outside the agreement. It was stated before us for the appellants, and not contradicted by the respondents, that the Sindri Fertilisers and Chemicals (Private) Ltd., is a company controlled by the Government. If that is so, the respondents were at all times in possession of facts which would have shown whether the appellants entered into any transaction de hors the agreement, and it is significant that at no stage have they alleged any such facts. We are satisfied that the proceedings have at all stages gone on the footing that the liability of the appellants arose under the contract and not