Pre-commencement contract turnover exempt from sales tax under saving proviso; written contract not required.

Contract work turnover was treated as exempt from sales tax under the saving proviso to Section 4(1) of the Orissa Sales Tax Act because the agreement was entered into, and work had already begun, before the notified commencement date. The proviso was applied to sales involved in executing contracts existing on or before that date, and the Department's reliance on the tender acceptance date was rejected on the evidence. The exemption was held not to depend on the contract being written, since the tax attached to the contractor's turnover and not to the form of the agreement. The penalty could not stand, and assessment consequences were set aside.

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Issues: Whether the petitioner's contract works turnover was exempt from sales tax under the proviso to Section 4(1) of the Orissa Sales Tax Act because the contract was entered into before the Act came into force.

Analysis: The Act was brought into force for the relevant provisions only from 1 August 1947 by notification, whereas the contract work had commenced and payments had been made before that date. The proviso to Section 4(1) expressly saved sales involved in the execution of contracts entered into on or before the notified date. The fact that the Department treated the tender acceptance date as decisive was not accepted, because the evidence showed that the work was being performed under an existing agreement before the Act commenced. The proviso did not require the contract to be written, and the tax was on the contractor's turnover, not on the form of the contract.

Conclusion: The turnover arising from the contract was exempt from taxation, and the penalty imposed could not stand.

Final Conclusion: The petition succeeded, the assessment and penalty were set aside, and refund of any tax already paid was directed.

Ratio Decidendi: A contract entered into before the commencement date notified under the taxing statute falls within a saving proviso exempting sales involved in its execution, and the exemption is not confined to written contracts.

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