Indivisible works contracts not subject to sales tax; assessment quashed, but mandamus for refund declined.

Entire and indivisible works contracts were held not liable to sales tax as sales, following the Supreme Court principle in Gannon Dunkerley. The court found no basis to treat any part of the turnover as a separate sale of materials, so the levy on the works-contract turnover was illegal and unsustainable. A writ of mandamus for refund was declined because refund was not treated as automatic and the State could raise objections such as limitation, but the assessment orders themselves were quashed in the interest of justice.

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Issues: (i) Whether sales tax could be levied on the petitioner's turnover arising from entire and indivisible works contracts. (ii) Whether, in the circumstances, the assessment orders could be quashed and a writ of mandamus issued for refund of the tax collected.

Issue (i): Whether sales tax could be levied on the petitioner's turnover arising from entire and indivisible works contracts.

Analysis: The turnover admitted by the State related to works contracts which were entire and indivisible. There was no case that any part of the turnover represented distinct contracts for sale of materials, or that the contracts could be split into separate sale components. In view of the pronouncement of the Supreme Court in Gannon Dunkerley, such indivisible works contracts were not liable to be taxed as sales.

Conclusion: The levy of sales tax on the petitioner's works-contract turnover was illegal and unsustainable.

Issue (ii): Whether, in the circumstances, the assessment orders could be quashed and a writ of mandamus issued for refund of the tax collected.

Analysis: A mandamus for refund was not treated as a matter of course, because the claim for refund was not based on enforcement of a statutory duty and the State could raise lawful defences, including limitation or other objections. The petition was also presented long after the impugned assessments. However, since the assessment orders were plainly unsustainable and section 18-A of the Madras General Sales Tax Act made it doubtful whether any other effective proceeding was available, the interest of justice required the orders themselves to be set aside.

Conclusion: The writ of mandamus for refund was refused, but the assessment orders were quashed.

Final Conclusion: The tax assessments on the petitioner's indivisible works contracts were held unlawful, and the impugned assessment orders were set aside, though direct refund by mandamus was declined.

Ratio Decidendi: Sales tax cannot be levied on an entire and indivisible works contract as if it were a contract of sale, and when the underlying assessment is unsustainable, the court may quash the assessment even if it declines to command refund by mandamus.

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