Single and indivisible works contracts are not sales of goods; conditional exemption powers may validly be modified.

A single and indivisible works contract does not involve a sale of the materials used in execution, because the constitutional expression "sale of goods" carries the same meaning as under the Sale of Goods Act, 1930; the State could not therefore tax such materials by treating them as a separate sale under Entry 48. The notification withdrawing the exemption for goods sold to the Government was held to be a valid exercise of delegated power, since the exemption scheme was conditional and the executive was authorised to modify the schedule within the legislative policy. The levy on works contracts was restrained, while the exemption notification was upheld.

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Issues: (i) Whether materials used in a single and indivisible works contract could be treated as a sale of goods so as to attract tax under Entry 48 of List II, Seventh Schedule, of the Government of India Act, 1935; (ii) Whether the notification issued under section 6(2) of the Central Provinces and Berar Sales Tax Act, 1947, withdrawing the exemption in favour of goods sold to the Government was an unconstitutional delegation of legislative power.

Issue (i): Whether materials used in a single and indivisible works contract could be treated as a sale of goods so as to attract tax under Entry 48 of List II, Seventh Schedule, of the Government of India Act, 1935.

Analysis: The expression "sale of goods" in the relevant constitutional entry was held to bear the same meaning as in the Sale of Goods Act, 1930. On that construction, a building or works contract which is single and indivisible does not involve a sale of the materials used in execution of the work. The State Legislature could not therefore, by treating the supply of materials in such a contract as a sale, extend its taxing power beyond the entry.

Conclusion: This issue was answered against the State and in favour of the appellants. Tax could not be levied on materials used in a single and indivisible works contract under Entry 48.

Issue (ii): Whether the notification issued under section 6(2) of the Central Provinces and Berar Sales Tax Act, 1947, withdrawing the exemption in favour of goods sold to the Government was an unconstitutional delegation of legislative power.

Analysis: The power to amend the exemption schedule was treated as a permissible delegation relating to the working details of the taxation scheme. The exemption under section 6(1) was construed as conditional and subject to modification under section 6(2), and the notification was held to operate within the legislative framework rather than to alter an essential feature of the enactment.

Conclusion: This issue was answered against the appellants and in favour of the State. The notification was held to be intra vires and valid.

Final Conclusion: The impugned levy could not be sustained in relation to single and indivisible works contracts, and the proceedings seeking to tax such contracts were restrained, while the validity of the exemption notification was upheld.

Ratio Decidendi: Under the relevant constitutional entry, a single and indivisible works contract does not amount to a sale of the materials used in its execution, and a conditional exemption scheme may validly authorise the executive to modify the exempted items within the legislative policy.

Concurring Opinion: Bose, J. agreed with the result on the taxing power issue but preferred to leave open the validity of the power under section 6(2) to amend the schedule, expressing no opinion on that question.

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