1961 (12) TMI 65 - SC - VAT and Sales Tax

Court upholds sales tax levy on building materials, dismisses challenge under Sales Tax Act. Competence affirmed for imposition.

Bhaiyalal Shukla Versus The State of Madhya Pradesh and Others

Bhaiyalal Shukla Versus The State of Madhya Pradesh and Others - [1962] 13 STC 236 (SC)   Issues Involved:1. Levy of sales tax on building materials supplied by the petitioner.2. Validity of the Central Provinces and Berar Sales Tax Act as applied to Vindhya Pradesh.3. Repeal of the Vindhya Pradesh Sales Tax Ordinance, 1949.4. Competence of the Vindhya Pradesh Legislature to impose sales tax.5. Equal protection under Article 14 of the Constitution in the context of different sales tax laws within Madhya Pradesh.Issue-wise Detailed Analysis:1. Levy of Sales Tax on Building Materials Supplied by the Petitioner:The petitioner, a contractor for the Public Works Department in Rewa Circle, challenged the levy of sales tax on building materials supplied during the construction of buildings, roads, and bridges from 1953-54 to 1958-59. He sought a refund for the amount already paid for the first year and contested the pending assessments for the remaining years. The contention was based on the decisions in *The State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd.* and *Pandit Banarsidas v. The State of Madhya Pradesh*, which held that sales tax could not be levied on building materials used in works contracts.2. Validity of the Central Provinces and Berar Sales Tax Act as Applied to Vindhya Pradesh:The Central Provinces and Berar Sales Tax Act, 1947, was extended to Vindhya Pradesh by Notification No. S.R.O. 6 dated December 29, 1950. The petitioner argued that the extension was invalid due to the decision in the *Delhi Laws Act case*, which declared part of the notification ultra vires. However, the respondents maintained that the Act was validly extended and enforced by subsequent legislative actions, including the Part C States (Miscellaneous Laws) Repealing Act, 1951, and the Vindhya Pradesh Laws (Validating) Act, 1952.3. Repeal of the Vindhya Pradesh Sales Tax Ordinance, 1949:The Vindhya Pradesh Sales Tax Ordinance, 1949, was repealed by the Part C States (Miscellaneous Laws) Repealing Act, 1951, effective from December 29, 1950. The petitioner contended that the repeal was invalid, and thus, the Central Provinces and Berar Sales Tax Act could not have been validly extended. The judgment clarified that the repeal was valid and effectively removed the Ordinance, making way for the extension of the Central Provinces and Berar Sales Tax Act.4. Competence of the Vindhya Pradesh Legislature to Impose Sales Tax:The petitioner argued that the Vindhya Pradesh Legislature lacked the competence to impose sales tax on building materials in works contracts, as per the ruling in *Gannon Dunkerley's case*. The court held that the Central Provinces and Berar Sales Tax Act was extended by the Central Government under the authority of Parliament, which had plenary powers in relation to Part C States. Thus, the Act did not suffer from the limitations applicable to State Legislatures and was valid.5. Equal Protection Under Article 14 of the Constitution:The petitioner argued that the existence of different sales tax laws within the newly formed State of Madhya Pradesh violated the equal protection clause of Article 14. The court rejected this argument, stating that the differentiation arose from historical reasons. The validity of such geographical classifications based on historical reasons had been upheld in previous judgments, including *M.K. Prithi Rajji v. The State of Rajasthan* and *The State of Madhya Pradesh v. The Gwalior Sugar Co. Ltd. and Others*.Conclusion:The writ petitions were dismissed, and the court upheld the validity of the Central Provinces and Berar Sales Tax Act as applied to Vindhya Pradesh. The court found no merit in the arguments regarding the competence of the Vindhya Pradesh Legislature and the alleged violation of Article 14. No order as to costs was made.