Statutory definition of contract controls sales tax exemption, and pre-commencement sales remained taxable under the Act.

The Act's definition of "contract" in section 2(b) governed the proviso to section 4(1) because the context was not repugnant, so the exemption for sales made in execution of pre-commencement contracts could not be read in the general sense of the Indian Contract Act. The Supreme Court authorities on works contracts did not displace the statutory definition; they only restricted taxation of indivisible works contracts on notional material value. The assessee therefore failed on the first issue. The sales were also held taxable under Explanation II to section 2(g), as they related to the pre-Constitution period and fell within the statutory explanation. The reference was answered against the assessee and in favour of the Revenue.

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Issues: (i) Whether the word "contract" in the proviso to section 4(1) of the Central Provinces and Berar Sales Tax Act, 1947, is to be construed in its general sense under the Indian Contract Act or in the restricted sense given in section 2(b) of that Act; (ii) whether the sales of Rs. 13,05,449-3-0 were liable to sales tax under Explanation II to section 2(g) of the Central Provinces and Berar Sales Tax Act, 1947.

Issue (i): Whether the word "contract" in the proviso to section 4(1) of the Central Provinces and Berar Sales Tax Act, 1947, is to be construed in its general sense under the Indian Contract Act or in the restricted sense given in section 2(b) of that Act.

Analysis: The proviso to section 4(1) exempts sales made in execution of a contract entered into before commencement of the Act. The Act itself defines "contract" in section 2(b) in relation to specified building, installation, repair, and overhaul contracts. The Court held that, unless the subject or context is repugnant, the defined meaning applies to the same expression in the proviso. The Supreme Court decisions on works contracts were held not to have struck down the statutory definition of "contract"; they only prevented tax on an indivisible building or works contract from being assessed on notional material value. The proviso could still operate where the contract is one covered by the statutory definition and is not indivisible.

Conclusion: The word "contract" in the proviso to section 4(1) must be interpreted according to section 2(b) of the Act, against the assessee.

Issue (ii): Whether the sales of Rs. 13,05,449-3-0 were liable to sales tax under Explanation II to section 2(g) of the Central Provinces and Berar Sales Tax Act, 1947.

Analysis: The second question was not pressed, and on the facts the sales were found to be covered by Explanation II to section 2(g). The Court also noted that the sales related to the pre-Constitution period and were taxable on the basis of the nexus theory.

Conclusion: The sales of Rs. 13,05,449-3-0 were liable to tax under Explanation II to section 2(g), in favour of the Revenue.

Final Conclusion: The reference was answered against the assessee and in favour of the Revenue on both questions, with costs awarded to the Department.

Ratio Decidendi: Where a sales tax statute defines "contract" for its own purposes, that definition governs the exemption proviso unless the context requires otherwise, and exemption for pre-commencement contracts is unavailable to sales outside the statutory definition.

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