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PETITIONER: THE STATE OF MADRAS

       Vs.

RESPONDENT: GANNON DUNKERLEY & CO.,(MADRAS) LTD.

DATE OF JUDGMENT: 01/04/1958

BENCH: AIYYAR, T.L. VENKATARAMA BENCH: AIYYAR, T.L. VENKATARAMA BOSE, VIVIAN DAS, SUDHI RANJAN (CJ) DAS, S.K. SARKAR, A.K.

CITATION:  1958 AIR  560            1959 SCR  379

ACT:        Sales  Tax-Building contracts-Tax on supply of materials  in        construction  works--State’s  Power of  taxation-"  Sale  of        goods ", Meaning of-Legislative practice-Nature of agreement        in  building,  contracts  Sale of Goods Act,  1930  (III  of        1930), S. 4 Madras General Sales Tax Act, 1939 (Mad.  IX  of        1939), as amended by Madras Act XXV Of 1947, SS. 2(c)(h)(i),        Explanation 1(i), r. 4(3)-Government of India Act, 1935  (26        Geo. 5, Ch. 2), S. 107, Sch.  VII, List II, Entry 48.

HEADNOTE: The  respondent company, doing business, inter alia, in  the construction  of  buildings,  roads  and  other  works   was assessed  to  sales  tax by the sales  tax  authorities  who sought  to include, the value of the materials used  in  the execution of building contracts within the taxable  turnover of  the  respondent.   The validity of  the  assessment  was challenged by the respondent who contended that the power of the Madras Legislature to impose a tax on sales under  Entry 48  in List II in Sch.  VII of the Government of India  Act, 1935,  did  not  extend to imposing a tax on  the  value  of materials  used  in  construction works,  as  there  was  no transaction of sale in respect of those goods, and that  the provisions  introduced in the Madras General Sales Tax  Act, 1939, by the Madras General Sales Tax (Amendment) Act, 1947, authorising  the  imposition of such tax were  ultra  vires. The  Sales Tax Appellate Tribunal rejected the  respondent’s contention but, on 380 revision, the High Court took the view that the expression " sale  of goods " had the same meaning in Entry 48  which  it has  in  the  Indian  Sale of  Goods  Act,  1930,  that  the construction contracts of the respondent were agreements  to execute  works to be paid for according to  measurements  at the  rates specified in the schedule thereto, and  were  not contracts  for sale of the materials used therein, and  that further,  they were entire and indivisible and could not  be broken  up  into  a contract for sale  of  materials  and  a contract  for payment for work done.  Accordingly,  it  held

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that  the  impugned  provisions  introduced  by  the  Madras General  Sales Tax (Amendment) Act, 1947, were  ultra  wires the powers of the provincial Legislature.  On appeal to  the Supreme Court: Held,  (1)  On the true interpretation of the  expression  " sale  of  goods  " there must be an  agreement  between  the parties  for the sale of the very goods in which  eventually property passes. Poppatlal Shah v. The State of Madras, [1953] S.C.R. 677 and The  State  of  Bombay v. The United  Motors  (India)  Ltd., II9531 S.C.R. 1069, relied on. In a building contract, the agreement between the parties is that the contractor should construct the building  according to  the  specifications contained in the agreement,  and  in consideration therefor receive payment as provided  therein, and in such an agreement there is neither a contract to sell the  materials:used in the construction, nor  does  property pass therein as moveables. (2)  The expression " sale of goods" was, at the  time  when the  Government of India Act, 1935, was enacted, a  term  of wellrecognised  legal import in the general law relating  to sale  of goods and in the legislative practice  relating  to that topic and must be interpreted in Entry 48 in List II in Sch.   VII of the Act as having the same meaning as  in  the sale of Goods Act, 1930. The Sales Tax Officeyr Pilibhit v. Messrs.  Budh Prakash jai Pyakash, [1955] 1 S.C.R. 243, relied on. (3)In   a  building  contract  which  is  One,  entire   and indivisible, there is no sale of goods and it is not  within the competence of the Provincial Legislature under Entry  48 in  List  11 in Sch.  VII of the Government  of  India  Act, 1935, to impose a tax on the supply of the materials used in such a contract treating it as sale. Pandit Banaysi Das v. State of Madhya Pradesh, (1955) 6 S.T. C.  93, Bhuramal v. State of Rajasthan, A. I. R.  1957  Raj. 104, Mohamad Khasim v. State of Alysoye, A. 1. R. 1955  MYs. 41 and Gannon Dunkeyley & Co. v. Sales Tax officer, A. I. R. 1957 Ker. 146, disapproved. Jubilee  Engineeying Co. Ltd. v. Sales Tax Offence .  I.  R. 1956 Hyd. 79, approved. (4)The Madras General Sales Tax Act is a law relating not to sale  of goods but to tax on sale of goods and  consequently the 381 Madras  General Sales Tax (Amendment) Act, 1947, is not  bad under  s. 107 of the Government of India Act, 1935,  On  the ground  that it had not been reserved for the assent of  the Governor-General. D.   Saykar ’ Bros. v. Commercial Tax Officer, A. I. R. 1957 Cal. 283, disapproved.

JUDGMENT: CIVIL  APPELLATE JURISIDICTION: Civil Appeal No.  ---210  of 1956. Appeal  from the judgment and order dated April 5, 1954,  of the Madras High Court in Civil Revision Petition No. 2292 of 1952, arising out of the judgment and order dated August 11, 1952, of the Sales Tax Appellate Tribunal, Madras, in T.  A. No. 863 of 1951. 1958.  Jan. 22, 23, 24 ; Feb. 4, 5, 6, 7, 10, 11. V.K  T. Chari, Advocate General for the State of Madras  and R.  H.  Dhebar, for the appellant.  The  provisions  of  the Constitution  Act which confer legislative powers should  be

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construed  liberally.  see  Navinchandra  Mafatlal  v.   The commissioner  of income Tax, [1955] 1 S. C. R. 829 it 833  ; Broken  Hill  south  Ltd. v. Commissioner  of  Taxation,  v. stronach  (55 337 at 379); Love v. Norman Wright  (Builders) Ltd.  ([1944] 1 K. B. 484); In re the Central Provinces  and Berar-  Act  No. XI V of 1938 ( [1939] F. C.  R.  18).   The words  " sale of goods " in Entry 48 have to be  interpreted in  a  wide  sense  and  not in  the  narrow  sense  of  the definition of sale of goods contained in the Indian Sale  of Goods  Act, 1930.  See lrving’s Commonwealth Sales  Tax  Law and   Practice,   at  pp.  62,  77.   The   Deputy   Federal COmmissioner of Taxation v. Stronach (55 C.L.R. 305); M.  R. Hornibrook (pty.  Ltd.) v. Federal Commissioner of  Taxation (62 C. L. R. 272 at 276). Mahabir Prasad, Advocate General for the State of Bihar  and R.  C.  Prasad, for the State of  Bihar  (Intervener).   The question is whether definition in the Sales Tax Act enlarges the  concept of sale of goods as in the Sale of  Goods  Act. The only requirement of a sale of goods is that there should be transfer of property in goods for valuable consideration. See  Hudson  on  Building  Contracts,  7th  Edn.,  p.   386. Building Contracts involve sale of materials. 382 S.M. Sikri, Advocate General for the State of Punjab,N.   S. Bindra  and T M. Sen, for the State of Punjab  (Intervener). The  words  "taxes on the sale of goods" in  Entry  48  mean taxes on a transaction the effect of Which is to transfer to a  person for valuable considers tion, all the rights of  an owner  in the goods.  Sale of goods need not necessarily  be in pursuance of a contract.  Even an auction sale is a  sale and can be subjected to sales tax.  Exchange is also a  sale of goods.  See Blackstone; Chalmers Sales of Goods Act, 12th Edn., pp. 3, 172; Benjamin on Sales 8th Ed., p. 2; Halsbury, Vol.  29, 2nd Edn., p. 5, see p. 6, footnote (c);  Williston on  Sales Vol. 1, revised Ed., p. 2, 433.  Sale has a  wider meaning and a prior agreement to sell goods is not necessary to constitute sale of goods.  See Great Western Railway  Co. v.  Commissioners of Inland Revenue, ([1894] 1 Q. B. 507  at 512, 515, 516); Kirkness v. Johib Hudson & Co. Ltd., ([1955] A.  C.  696 at 719, 737); Nalukuya v. Director  of  Lands  ( [1957]  A. C. 325 at 332) ; Ex-parte Drake, In re  Ware  ((I 877)  5 Ch.  D. 866 at 871); Blome Co. v. Ames  ((1937)  III A.L.  R.  940)  though a contrary view  has  been  taken  in Herlihy  Mid-Continent Co. v. Nudelman ( (1937) 115 A.L.  R. 485); Morgan v. Deputy Federal Commissioner of Land Tax,  N. S.  W.,  (  (1912) 15 C. L. R. 661  at  665).   The  entries conferring  legislative power are flexible and  elastic  and should be so construed as to include the extended and  wider meaning of the words used therein.  Entry 48 should  include not  only  what was understood as sales at the time  of  the enactment of the Government of India Act, 1935, but also all that  which  may  be regarded as sales later  on.   See  The Regulation and Control of Radio Communication in Canada,  In re ( [1932] A. C. 304 at 314); The King v. Brislan: Ex-parte Williams (54 C. L. R. 262 at 273, 283); Toronto  Corporation v.  Bell Telephone Company of Canada, ( [1905] A. C.  52  at 57); Attorney General v. Edison Telephone Company of  London (  (1880)  L.R.  6 Q. B. ]D. 244 at 254);  Nevile  Reid  and Company Ltd. v. The Commissioners of Inland Revenue (12  Tax Cas. 245 at 565, 567) ; Edwards v. A. G. for Canada,  [1930] A. C. 1.24 at 127, 134); Attorney-General for 383 Alberta  v. Attorney-General for Canada, ( [1947] A. C.  503 at  516, 517) ; Newcastle Breweries Ltd. v.  Inland  Revenue Commissioner,,?,  (96 L. J. K. B. 735); It is a  fallacy  to

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deduce from the proposition that because the contract is not an agreement to sell goods but a contract of work and labour no  sale  of  goods  takes place.  A  works  contract  is  a composite  transaction which can be split up and a  sale  of goods  in the sense of the Sales of Goods Act can  be  spelt out  of it and it is permissible for the State to do so  and to tax the sale of goods.  Benjamin on Sales, pp. 155,  156, 167  and  352; Seath v. Moore (11 App.  Cas. 350);  Reid  v. Macbeth  & Gray ( [1904] A. C. 223) ; Langford Property  CO. Ltd. v. Batten ( [1951] A. C. 786 at 813). C.   K. Daphtary, Solicitor General of India and T. M.  Sen, for the State of Mysore (Intervener).  Sale of goods   is nothing  but a transfer of property for a price, There  need not be any bargain or contract to sell-but the sale must  be voluntary.  See Apple by v. Myres (L.   R.  2 C. P.  651  at 658); Reeves v. Barlow (L.  R. 12 Q.    B.    436).      The composite  transaction of a works, contract can be split  up and the sale of goods therein be taxed. Sardar  Bahadur,  for  the  State  of  Kerala   (Intervener) supported the appellant. A.   V.   Viswanatha  Sastri,  R.  Ganapathy  Iyer  and   G. Gopalakrishnan,  for  the respondents.  The  powers  of  the legislatures  are limited and the Entries fix the bounds  of legislation.  See The Queen v. Buralh (5 I. A. 178 at  193); James  v. Commonwealth of Australia, ( [1936] A. C.  578  at 613, 633); In re The Central Provinces and Berar Act XIV  of 1938  ( [1939] F. C. R. 18, 36, 37).  In the absence of  any positive  directive  in the (Constitution Act  itself  or  a compelling  contest, Entries have to be interpreted  in  the light of existing law so as to be in conformity with it. The expression  "  sale  of  goods " was, at  the  time  of  the enactment  of the Government of India Act, 1935, a  term  of well  recognised legal import and it must be interpreted  in Entry 48 as having the same meaning as in the Sale of  Goods Act, 1930.  See 384 L’Union  St. Jacques De Montreal v. Be Lisle (L.R. 6 P.  (C. 31 at 36) ; Royal Bank of Canada v. Larue ( [1928] A. C. 187 at  196); Wallace Brothers and Co.  Ltd. v. Commissioner  of Income Tax, (75 I. A. 86 at 99); In re The Central Provinces and Berar Act XI V of 1938, ( [1939] F. C. R. 18 at 53,  54) ;  The State of Bombay v. F. N. Balsara, ( [1951] S.  (.  R. 682 at 705).  The expression ’sale of goods’ has always been understood by the Supreme Court in the sense, of the Sale of Goods  Act,  1930.   See Poppatlal Shah  v.  The,  State  of Madras, (11953] S. C. R. 677 at 683); The State of Bombay v. The  United  Motors (India) Ltd., ([1953] S. C. R.  1069  at 1082,  110, 1102); State of Travancore-Cochin  v.  Shanmugha Vilas Cashew Nut Factory, ([1954] S. C. R. 53 at 80); Bengal Immunity  Co., Ltd. v. The State of’ Bihar, ([1955] 2 S.  C. R. 603 at 698, 700, 704).  The , matter is concluded by  the decision  in The Sales Tax Officer, Pilibhit v.  Mls.   Budh Prakash Jai Prakas ( [1655] 1 S. C. R. 243 at 247) where  it has been specifically held that it would be proper to inter- pret  the  expression " sale of goods " in Entry 48  in  the sense in which it was raised in legislation both in  England and in India. The definition of " sale " given in the Madras General sales Tax Act, 1939, is in conflict with that given in the Sale of Goods  Act,  1930, and as sale of goods is  a  matter  which falls  within  Entry  10  of  the  (Concurrent  List,,   the definition  in  the Madras Act would be repugnant  and  void under  s.  107  of the (Government of India  Act,  1935.  D. Sarkar  & Bros. v. Commercial Tax Officer, (A.  I.  R.  1957 (Cal. 283).

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A works contract cannot be disintegrated into a contract for labour   and   a  sale  of  goods.    See   Inland   Revenue Commissioner’s v. The Duke of Westminster, [1936] A. (1.   I it  19,  24);  Bank of Chettinad  Ltd.  v.  Commissioner  of Income-Tax,  Madras,  (67 1. A. 394 at  400-401).   A  works contract  entire and indivisible; it is in no sense sale  of goods  or  of materials, nor is there any sale of  goods  or materials  "  chattels within the meaning of Entry  48.   In English  cases  a clear (distinction has been  made  between works  contract and sale of goods.  See Lee v. Griffin  (121 E.R. 716); Robinson v. 385 Graves,  ( [1935] 1 K. B. 579 at 590, 593); Love  v.  Norman Wright  (.Builders  Ltd.)  ([1944] 1  K.B.  484);  Tripp  v. Armitage, (150 E. R. 1597), Clark v. Bulmer (152 E.    R. 793); Appleby v. Myers (L.  R. 2 C. P. 651 at 658); Seath v. Moore (11 App.  Cas. 350 at 381); Reid v. Macbeth & Gray,  ( [1904]  A. C. 223).  See also Hudson on Building  Contracts, pp. 165, 386 and 388 Benjamin on Sales, pp. 352 to 355. Gopal Singh, for Gurbaksh Singh and M/s.  Uttam Singh Duggal &  Co.  (Interveners) and B. R. L. lyengar, for  the  United Engineering Co. (Intervener), supported the respondents. V.   V.  Raghavan, for the appellant, replied.   Legislative history  should  not be pushed too far.  See In  re  Central Provinces and Berar Act XI V of 1938 ( [1939] F. C. R. 18 at 54); Edwards v. A. G. for Canada ( [1930) A. C. 124 at 134); Wallace Brothers case (75 1. A. 86 at 99); Poppatlal Shah v. The  State  of  Madras, ( [1953] S. C.  R.  677).   A  works contract  can be split up. Viewed from the point of view  of the  contractor,  he sells materials  and  renders  service. There is a sale of goods in the contract. S.   M.  Sikri,  Advocate-General for the  State  of  Punjab (with  the permission of the Court).  Grant  of  legislative power   has  been  widely  interpreted.   See,   Continental Illinois  National  Bank & Trust Co. of Chicago  v.  Chicago Rock Island & Pacific Railway Co. (79 L. Ed. 1110 at  1124); South Carolina v. United States, (50    L. Ed. 262 at  269). Legislative history cannot be used  to cut down the  meaning of the Entry, but only   to  enlarge it.   Lefroys  Canadian Federal System, pp. 14, 15 and 18.  There is no  legislative practice with respect to " taxes on sale of goods ". 1958.  April 1. The Judgment of the Court was delivered by VENKATARAMA  AIYAR J.-This appeal arises out of  proceedings for  assessment of sales tax payable by the respondents  for the year 1949-1950, and it raises a question of considerable importance  on  the construction of Entry 48 in List  11  of Sch.  VII to the 49 386 Government  of  India  Act, 1935, " Taxes  on  the  sale  of goods." The  respondents  are a private limited  company  registered under  the  provisions of the Indian  Companies  Act,  doing business  in the construction of buildings, roads and  other works  and  in the sale of sanitary wares and  other  sundry goods.   Before  the  sales tax  authorities,  the  disputes ranged over a number of items, but we are concerned in  this appeal  with only two of them.  One is with reference  to  a sum  of  Rs.  29,51,528-7-4 representing the  value  of  the materials used by the respondents in the execution of  their works contracts, calculated in accordance with the statutory provisions  applicable thereto, and the other relates  to  a sum  of  Rs.  1,98,929-0-3 being  the  price  of  foodgrains supplied by the respondents to their workmen. It  will  be  convenient  at this  stage  to  refer  to  the

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provisions  of the Madras General Sales Tax Act, 1939  (Mad. IX of 1939), in so far as they are relevant for the  purpose of the present appeal.  Section 2(h) of the Act, as it stood when  it  was enacted, defined " sale " as meaning  "  every transfer  of the property in goods by one person to  another in the course of trade or business for cash or for  deferred payment  or  other valuable consideration ".  In  1947,  the Legislature  of Madras enacted the Madras General Sales  Tax (Amendment)  Act  No. XXV of 1947  introducing  several  new provisions in the Act, and it is necessary to refer to  them so  far as they are relevant for the purpose of the  present appeal.   Section 2(c) of the Act had defined " goods  "  as meaning   "  all  kinds  of  movable  property  other   than actionable  claims, stocks and shares and securities and  as including  all materials, commodities and articles", and  it was  amended  so  as  to include materials  "  used  in  the construction,   fitting  out,  improvement  or   repair   of immovable  property  or in the fitting out,  improvement  or repair of movable property The definition of " sale " in  s. 2(h) was enlarged so as to include " a transfer of  property in goods involved in the execution of a works contract".  In the definition of " turn- 387 over  "  in s. 2(i), the following  Explanation  (1)(i)  was added: "  Subject to such conditions and restrictions, if  any,  as may be prescribed in this behalf- the amount for which goods are sold shall, in relation to  a works  contract, be deemed to be the amount payable  to  the dealer for carrying out such contract, less such portion  as may  be  prescribed of such amount, representing  the  usual proportion  of the cost of labour to the cost  of  materials used in carrying out such contract." A  new  provision was inserted in s. 2(ii)  defining  "works contract"  as  meaning "any agreement for carrying  out  for cash or for deferred payment or other valuable consideration the construction, fitting out, improvement or repair of  any building,  road, bridge or other immovable property  or  the fitting  out, improvement or repair of any movable  property ".  Pursuant  to the Explanation (1)(i) in s.  2(i),  a  new rule, r. 4(3), was enacted that " the amount for which goods are sold by a dealer shall, in relation to a works contract, be  deemed  to  be  the amount payable  to  the  dealer  for carrying  out  such contract less a sum not  exceeding  such percentage  of  the amount payable as may be  fixed  by  the Board  of  Revenue, from time to time for  different  areas, representing the usual proportion in such areas of the  cost of labour to the cost of materials used in carrying out such contract,     subject    to    the     following     maximum percentages............  and  then follows a  scale  varying with the nature of the contracts. It  is  on  the  authority  of  these  provisions  that  the appellant  seeks  to  include in the turnover  of  the  res- pondents the sum of Rs. 29,51,528-7-4 being the value of the materials used in the construction works as determined under r. 4(3).  The respondents contest this claim on the ground I that the power of the Madras Legislature to impose a tax  on sales  under  Entry  48  in List II  in  Sch.   VII  of  the Government  of India Act, does not extend to imposing a  tax on  the  value of materials used in works, as  there  is  no transaction of sale in respect of those goods, and that  the provisions 388 introduced by the Madras General Sales Tax (Amendment)  Act, 1947,  authorising  the  imposition of such  tax  are  ultra

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vires.   As  regards  the  sum  of  Rs.  1,98,929-0-3,   the contention  of the respondents was that they were not  doing business  in the sale of foodgrains, that they had  supplied them  to the workmen when they were engaged in  construction works in out of the way places, adjusting the price therefor in  the wages due to them and that the amounts  so  adjusted were  not liable to be included in the turnover.  The  Sales Tax Appellate Tribunal rejected both these contentions,  and held that the amounts in question were liable to be included in the taxable turnover of the respondents. Against  this  decision,  the  respondents  preferred  Civil Revision  Petition  No. 2292 of 1952 to the  High  Court  of Madras.  That was heard by Satyanarayana Rao and Rajagopalan JJ. who decided both the points in their favour.  They  held that the expression "sale of goods" had the same meaning  in Entry  48 which it has in the Indian Sale of Goods Act  (III of 1930), that the construction contracts of the respondents were agreements to execute works to be paid for according to measurements at the rates specified in the schedule thereto, and were not contracts for sale of the materials used there- in,  and that further, they were entire and indivisible  and could not be broken up into a contract for sale of materials and  a contract for payment for work done.  In  the  result, they  held  that the impugned provisions introduced  by  the Amendment  Act No. XXV of 1947, were ultra vires the  powers of  the Provincial Legislature, and that the claim based  on those provisions to include Rs. 29,51,528-7-4 in the taxable turnover  of  the respondents could not be  maintained.   As regards the item of Rs. 1,98,929-0-3 they held that the sale of  foodgrains to the workmen was not in the course  of  any business of buying or selling those goods, that there was no profit  motive  behind  it, that the  respondents  were  not dealers  as  defined  in  s. 2(d)  of  the  Act,  and  that, therefore, the amount in question was not liable to be taxed under  the  Act.   In  the result,  both  the  amounts  were directed  to  be excluded from the taxable turnover  of  the respondents.  Against this                   389 decision,  the  State of Madras has  preferred  the  present appeal on a certificate granted by the High Court under Art. 133(1) of the constitution Before  us, the learned Advocate-General of Madras  did  not press  the appeal in so far as it relates to the sum of  Rs. 1,98,929-0-3,   and  the  only  question,  therefore,   that survives  for our decision is as to whether  the  provisions introduced by the Madras General Sales Tax (Amendment)  Act, 1947  and  set out above are ultra vires the powers  of  the Provincial  Legislature  under  Entry 48 in  List  II‘.   As provisions  similar  to those in the Madras  Act  now  under challenge  are  to be found in the sales tax laws  of  other States, some of those States, Bihar, Punjab, Mysore,  Kerala and  Andhra  Pradesh,  applied for  and  obtained  leave  to intervene in this appeal, and we have heard learned  counsel on their behalf.  Some of the contractors who are interested in  the  decision of this question,  Gurbax  Singh,  Messrs. Uttam Singh Duggal and United Engineering Company, were also granted leave to intervene, and learned counsel representing them have also addressed us on the points raised. The  sole  question  for determination  in  this  appeal  is whether  the provisions of the Madras General Sales Tax  Act are  ultra vires, in so far as they seek to impose a tax  on the  supply  of  materials in execution  of  works  contract treating  it as a sale of goods by the contractor,  and  the answer  to it must depend on the meaning to be given to  the words " sale of goods " in Entry 48 in List II of Sch.   VII

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to  the  Government of India Act, 1935.  Now, it  is  to  be noted  that while s. 311(2) of the Act defines " goods "  as including  " all materials, commodities and articles  ",  it contains no definition of the expression " sale of goods  ". It  was  suggested  that  the word  "  materials  "  in  the definition  of " goods " is sufficient to take in  materials used  in  a works contract.  That is so;  but  the  question still  remains  whether there is a sale of  those  materials within the meaning of that word in Entry 48.  On that, there has  been sharp conflict of opinion among the  several  High Courts.   In Pandit Banarsi Das v. State of  Madhya  Pradesh (1), a Bench of the Nagpur High Court held, (1)  [1955] 6 S.T.C. 93. 390 differing  from the view taken by the Madras High  Court  in the  judgment now under appeal, that the provisions  of  the Act  imposing a tax on the value of the materials used in  a construction  on the footing of a sale thereof  were  valid, but  that  they  were  bad in so  far  as  they  enacted  an artificial rule for determination of that value by deducting out  of the total receipts a fixed percentage on account  of labour charges, inasmuch as the tax might, according to that computation,  conceivably  fall on a portion of  the  labour charges  and that would be ultra vires Entry 48.  A  similar decision  was  given  by  the High  Court  of  Rajasthan  in Bhuramal  v.  State Of Rajasthan(1).  In Mohamed  Khasim  v. State of Mysore (2), the Mysore High Court has held that the provisions  of  the Act imposing a tax  on  construction  of works are valid, and has further upheld the determination of the  value of the materials on a percentage basis under  the rules.  In Gannon Dunkerley & Co. v. Sales Tax Officer  (3), the Kerala High Court has likewise affirmed the validity  of both  the provisions imposing tax on construction works  and the  rules  providing  for  apportionment  of  value  on   a percentage basis.  In Jubilee Engineering Co., Ltd. v. Sales Tax  officer (1) the Hyderabad High Court has  followed  the decision of the Madras High Court, and held that the  taxing provisions   in  the  Act  are  ultra  vires.   The   entire controversy,  it will be seen, hinges on the meaning of  the words ’,sale of goods " in Entry 48, and the point which  we have now to decide is as to the correct interpretation to be put on them. The contention of the appellant and of the States which have intervened  is that the provisions of a  Constitution  which confer   legislative   powers  should  receive   a   liberal construction,  and that, accordingly, the expression "  sale of  goods  " in Entry 48 should be interpreted  not  in  the narrow and technical sense in which it is used in the Indian Sale  of  Goods Act, 1930, but in a broad sense.   We  shall briefly refer to some of the authorities cited in support of this position.  In (1)  A.I.R. 1957 Raj. 104. (2)  A.I.R. I055 MYS. 41 (3)  A.I.R. 1957 Ker. 146. (4)  A.I.R. 1956 Hyd. 79.           391 British  Coal  Corporation  v. King (1),  the  question  was whether s. 17 of the Canadian Statute, 22 & 24, Geo.  V,  c. 53, which abolished the right of appeal to the Privy Council from  any  judgment or order of any court  in  any  criminal case, was intra vires its powers under the, Constitution Act of  1867.   In  answering it in  the  affirmative,  Viscount Sankey L. C. observed: "  Indeed, in interpreting a constituent or organic  statute such  as the Act, that construction most beneficial  to  the

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widest  possible  amplitude of its powers must  be  adopted. This  principle  has  been again clearly laid  down  by  the Judicial Committee in Edwards v. A. G. for Canada (2) ". In  James  v.  Commonwealth of Australia  (3),  Lord  Wright observed  that a Constitution must not be construed  in  any narrow  and pedantic sense.  In In re the Central  Provinces and Berar Act No. XIV of 1938 (4), discussing the principles of interpretation of a constitutional provision, Sir Maurice Gwyer C. J. observed: " I conceive that a broad and liberal spirit should  inspire those  whose duty it is to interpret it; but I do not  imply by  this  that  they  are free to  stretch  or  pervert  the language  of the enactment in the interests of any legal  or constitutional theory, or even for the purpose of  supplying omissions or of correcting supposed errors.  A Federal Court will  not strengthen, but only derogate from, its  position, if  it seeks to do anything but declare the law; but it  may rightly  reflect  that a Constitution of a Government  is  a living  and organic thing, which of all instruments has  the greatest  claim  to be construed ut res  magis  valeat  quam pereat." The  authority most strongly relied on for the appellant  is the  decision of this Court in Navinchandra Mafatlal v.  The Commissioner  of Income-tax, Bombay City (5), in  which  the question  was  as to the meaning of the word " income  "  in Entry  54  of  List  1.  The  contention  was  that  in  the legislative  practice of both England and India,  that  word had been understood as (1)  [1935] A.C. 500, 518. (2)  [1930] A.C. 124, 136. (3)  [1936] A.C. 578, 614. (4)  [1939] F.C.R. j8,37. (5) [1955] 1 S.C.R. 829, 833, 836. 392 not  including  accretion in value to capital, and  that  it should  therefore  bear the same meaning in  Entry  54.   In rejecting this contention, this Court observed that the  so- called  "  legislative  practice was  nothing  but  judicial interpretation  of  the  word ’income as  appearing  in  the fiscal  statutes", that in " construing an entry in  a  List conferring   legislative   powers   the   widest    possible construction according to their ordinary meaning must be put upon the words used therein ", and that the cardinal rule of interpretation  was  " that words should be  read  in  their ordinary,  natural and grammatical meaning, subject to  this rider that in construing words in a constitutional enactment conferring  legislative power the most liberal  construction should  be  put  upon the words so that the  same  may  have effect in their widest amplitude." The learned Advocate-General of Madras also urged in further support  of  the above conclusion that the provisions  of  a Constitution  Act  conferring powers of taxation  should  be interpreted   in  a  wide  sense,  and  relied  on   certain observations  in  Morgan v. Deputy Federal  Commissioner  of Land  Tax,  N.  S.  W. (1) and Broken  Hill  South  Ltd.  v. Commissioner  of  Taxation (N.S. W.)(2) in  support  of  his contention.   In  Morgan v. Deputy Federal  Commissioner  of Land  Tax, N.S. W. (1), the question was as to the  validity of a law which had enacted that lands belonging to a company were  deemed to be held by its shareholders as joint  owners and  imposed  a land tax on them in respect of  their  share therein.  In upholding the Act, Griffith C. J. observed : "  In  my  opinion,  the  Federal  Parliament  in  selecting subjects of taxation is entitled to take things as it  finds them in re rum nature, irrespective of any positive laws  of

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the  States prescribing rules to be observed with regard  to the  acquisition or devolution of formal title to  property, or  the institution of judicial proceedings with respect  to it." In Broken Hill South Ltd. v. Commissioner of Taxation, N.   S. W. (2), the observations relied on are the following: (I)  (19I2) 15 C.L.R. 661, 666.  (2) (1937) 56  C.L.R.  337, 379. 393 "In any investigation of the constitutional powers of  these great  Dominion legislatures, it is not proper that a  court should  deny  to  such a legislature the  right  of  solving taxation  problems unfettered by a priori  legal  categories which  often derive from the, exercise of legislative  power in the same constitutional unit." On  these  authorities, the contention of the  appellant  is well-founded that as the words " sale of goods " in Entry 48 occur in a Constitution Act and confer legislative powers on the  State  Legislature in respect of a  topic  relating  to taxation,  they must be interpreted not in a restricted  but broad  sense.  And that opens up questions as to  what  that sense is, whether popular or legal, and what its connotation is  either in the one sense or the other.   Learned  counsel appearing  for the States and for the assessees have  relied in  support of their respective contentions on  the  meaning given to the word " sale " in authoritative text-books,  and they  will now be referred to.  According, to Blackstone,  " sale or exchange is a transmutation of property from one man to another, in consideration of some price or recompense  in value.    "   This  passage  has,  however,   to   be   read distributively  and  so read, sale would  mean  transfer  of property for price.  That is also the definition of " sale " in Benjamin on Sale, 1950 Edn., p. 2. In Halsbury’s Laws  of England,  Second Edn., Vol. 29, p. 5, para.  I, we have  the following: " Sale is the transfer of the ownership of a thing from  one person   to   another  for  a  money   price.    Where   the consideration  for the transfer consists of other goods,  or some  other  valuable consideration, not  being  money,  the transaction  is  called exchange or barter; but  in  certain circumstances it may be treated as one of sale. The  law  relating  to contracts of exchange  or  barter  is undeveloped,  but  the courts seem inclined  to  follow  the maxim  of civil law, permutatio vicina est emptioni, and  to deal with such contracts as analogous to contracts of  sale. It  is clear, however, that statutes relating to sale  would have no application to transactions by way of barter." 59 394 In Chaliner’s Sale of Goods Act, 12th Edn., it is stated  at p.  3  that  " the essence of sale is the  transfer  of  the property  in a thing from one person to another for a  price ",  and  at  p.  6  it is  pointed  out  that  "  where  the consideration  for the transfer...... consists of the  deli- very of goods, the contract is not a contract of sale but is a  contract of exchange or barter ". In Corpus  Juris,  Vol. 55, p. 36, the law is thus stated: "  Sale " in legal nomenclature, is a term of precise  legal import, both at law and in equity, and has a well defined  " legal  signification,  and  has been said to  mean,  at  all times, a contract between parties to give and pass rights of property for money, which the buyer pays or promises to  pay to the seller for the thing bought or sold.  " It is added that the word "sale" as used by the  authorities " is not a word of fixed and invariable meaning, but may  be

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given a narrow. or broad meaning, according to the  context. "  In  Williston on Sales, 1948 Edn., " sale  of  goods"  is defined  as " an agreement whereby the seller transfers  the property  in goods to the buyer for a  consideration  called the  price " (p. 2). At p. 4439 the learned author  observes that  " it has doubtless been generally said that the  price must  be payable in money ", but expresses his opinion  that it  may  be any personal property.  In  the  Concise  Oxford Dictionary, " sale " is defined as " exchange of a commodity for money or other valuable consideration, selling ". It  will be seen from the foregoing that there is  practical unanimity  of opinion as to the import of the word " sale  " in  its  legal sense, there being only  some  difference  of opinion in America as to whether price should be in money or in money’s worth, and the dictionary meaning is also to  the same  effect.  Now, it is argued by Mr. Sikri,  the  learned Advocate-General  of Punjab, that the word " sale "  is,  in its popular sense, of wider import than in its legal  sense, and  that is the meaning which should be given to that  word in  Entry 48, and he relies in support of this  position  on the observations in Nevile Reid and Company Ltd. 395 v.   The  Commissioners  of Inland Revenue (1).   There,  an agreement  was entered into on April 12, 1918, for the  sale of  the  trading  stock  in  a  brewery  business  and   the transaction  was  actually completed on June 24,  1918.   In between  the two dates, the Finance Act, 1918, had(  imposed excess  profits  tax,  and  the  question  was  whether  the agreement dated April 12, 1918, amounted to a sale in  which case the transaction would fall outside the operation of the Act.  The Commissioners had held that as title to the  goods passed only on June 24, 1918, the agreement dated April  12, 1918,  was only an agreement to sell and not the sale  which must  be held to have taken place on June 24, 1918, and  was therefore  liable to be taxed.  Sankey J. agreed  with  this decision, but rested it on the ground that as the  agreement left some matters still to be determined and was, in certain respects, modified later, it could not be held to be a  sale for the purpose of the Act.  In the course of the  judgment, he  observed that " sale " in the Finance Act should not  be construed  in  the light of the provisions of  the  Sale  of Goods  Act,  but  must  be understood  in  a  commercial  or business sense. Now, in its popular sense, a sale is said to take place when the bargain is settled between the parties, though  property in  the  goods  may not pass at that  stage,  as  where  the contract relates to future or unascertained goods, and it is that  sense that the learned Judge would appear to have  had in his mind when he spoke of a commercial or business sense. But apart from the fact that these observations were obiter, this Court has consistently held that though the word " sale "  in  its  popular sense is not restricted  to  passing  of title,   and  has  a  wider  connotation  as   meaning   the transaction of sale, and that in that sense an agreement  to sell  would,  as one of the essential ingredients  of  sale, furnish  sufficient nexus for a State to impose a tax,  such levy could, nevertheless, be made only when the  transaction is  one  of sale, and it would be a sale only  when  it  has resulted  in  the passing of property in the  goods  to  the purchaser.   Vide Poppatlal Shah v. The State  of  Madras(2) and The State of Bombay v. (1) (1922) 12 Tax Cas. 545. (2) [1953) S.C R. 677, 683. 396 The  United Motors (India) Ltd. (1).  It has also been  held

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in The Sales Tax Officer, Pilibhit v. Messrs.  Budh  Prakash Jai  Prakash (2) that the sale contemplated by Entry  48  of the  Government  of India Act was a   transaction  in  which title to the goods passes and a mere executory agreement was not a sale within that Entry.  We must accordingly hold that the  expression  "  sale of goods " in Entry  48  cannot  be construed  in  its  popular  sense,  and  that  it  must  be interpreted  in  its legal sense.  What its  connotation  in that  sense  is,  must now be ascertained.   For  a  correct determination  thereof, it is necessary to digress  somewhat into the evolution of the law relating to sale of goods. The concept of sale, as it now obtains in our jurisprudence, has  its  roots  in the Roman law.  Under  that  law,  sale, emptio venditio, is an agreement by which one person  agrees to  transfer  to another the exclusive  possession  (vacuagn possesionem tradere) of something (merx) for  consideration. In  the  earlier  stages of its  development,  the  law  was unsettled whether the consideration for sale should be money or  anything  valuable.   By  a  rescript  of  the  Emperors Diocletian and Maximian of the year 294 A.D., it was finally decided that it should be money, and this law is embodied in the  Institutes  of  Justinian, vide  Title  XXIII.   Emptio venditio is, it may be noted, what is known in Roman law  as a  consensual  contract.  That is to say,  the  contract  is complete when the parties agree to it, even without delivery as  in contracts re or the observance of any formalities  as in contracts verbis and litteris.  The common law of England relating  to sales developed very much on the lines  of  the Roman  law  in insisting on agreement  between  parties  and price as essential elements of a contract of sale of  goods. In his work on " Sale ", Benjamin observes: "  Hence it follows that, to constitute a valid sale,  there must be a concurrence of the following elements, viz., (1)  Parties competent to contract; (2) mutual assent; (3) a thing,  the  absolute  or  general  property  in  which   is transferred from the seller to the buyer; and (1) [1953] S.C.R. 1069,1078. (2) [1955] 1 S.C.R. 243.                     397 (4)a price in money paid or promised.  " (Vide 8th Edn.,  p. 2). In 1893 the Sale of Goods Act, 56 & 57 Vict. c. 71  codified the  law on the subject, and s. 1 of the Act which  embodied the rules of the common law runs as follows: I.-(I)  " A contract of sale of goods is a contract  whereby the  seller transfers or agrees to transfer the property  in goods  to  the buyer for a money consideration,  called  the price.   There  may be a contract of sale between  one  part owner and another. (2)A contract of sale may be absolute or conditional. (3)Where under a contract of sale the property in the  goods is transferred from the seller to the buyer the contract  is called a sale; but where the transfer of the property in the goods  is to take place at a future time or subject to  some condition thereafter to be fulfilled the contract is  called an agreement to sell. (4)An agreement to sell becomes a sale when the time elapses or  the  conditions  are  fulfilled  subject  to  which  the property  in the goods is to be transferred." Coming to  the Indian law on the subject, s. 77 of the Indian Contract Act, 1872,  defined " sale " as " the exchange of property for  a price involving the transfer of ownership of the thing  sold from the seller to the buyer ". It was suggested that  under this  section  it was sufficient to constitute a  sale  that there  was a transfer of ownership in the thing for a  price

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and that a bargain between the parties was not an  essential element.  But the scheme of the Indian Contract Act is  that it  enacts in ss.  I to 75 provisions applicable in  general to all contracts, and then deals separately with  particular kinds of contract such as sale, guarantee, bailment,  agency and partnership, and the scheme necessarily posits that  all these transactions are based on agreements.  We then come to the Indian Sale of Goods Act, 1930, which repealed Ch.   VII of the Indian Contract Act relating to sale of goods, and s. 4  thereof is practically in the same terms as s. I  of  the English Act.  Thus, according to the law both of England and of India, in order to constitute a sale it is necessary 398 that  there should be an agreement between the  parties  for the  purpose of transferring title to goods which of  course presupposes capacity to contract, that it must be  supported by  money  consideration,  and  that  as  a  result  of  the transaction  property  must  actually  pass  in  the  goods. Unless all these elements are present, there can be no sale. Thus,  if  merely  title to the goods passes but  not  as  a result  of  any  contract between the  parties,  express  or implied, there is no sale.  So also if the consideration for the transfer was not money but other valuable consideration, it  may then be exchange or barter but not a sale.   And  if under  the  contract  of sale, title to the  goods  has  not passed,  then  there  is  an agreement to  sell  and  not  a completed sale. Now,  it  is the contention of the respondents that  as  the expression  "  sale  of goods " was at  the  time  when  the Government  of  India  Act  was enacted,  a  term  of  well- recognised legal import in the general law relating to  sale of  goods and in the legislative practice relating  to  that topic  both in England and in India, it must be  interpreted in Entry 48 as having the same meaning as in the Indian Sale of Goods Act, 1930, and a number of authorities were  relied on in support of this contention.  In United States v.  Wong Kim Ark (1), it was observed: "  In this, as in other respects, it must be interpreted  in the  light of the common law, the principles and history  of which   were  familiarly  known  to  the  framers   of   the Constitution.  The language of the Constitution, as has been well said, could not be understood without reference to  the common law." In South Carolina v. United States (2), Brewer J. observed: "To  determine the extent of the grants of power,  we  must, therefore,  place ourselves in the position of the  men  who framed  and adopted the Constitution, and inquire what  they must  have understood to be the meaning and scope  of  those grants.  " A more recent pronouncement is that of Taft C. J. who said: (1)  (1898) 169 U. S. 649, 654 ; 42 L. Ed. 890, 893. (2)  (1905) 199 U-S. 437; 50 L. Ed. 262, 265. 399 "  The  language of the Constitution cannot  be  interpreted safely except by reference to the common law and to  British institutions as they were when the instrument was framed and adopted.   The statesmen and lawyers of the Convention,  who submitted it to the, ratification of the Conventions of  the thirteen states, were born and brought up in the  atmosphere of the common law, and thought and spoke in its  vocabulary" Ex-parte Grossman (1). In  answer to the above line of authorities,  the  appellant relies on the following observations in Continental Illinois National  Bank and Trust Company of Chicago v. Chicago  Rock Island & Pacific Railway Company (1):

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"  Whether a clause in the Constitution is to be  restricted by  the  rules of the English law as they existed  when  the Constitution  was  adopted  depends upon the  terms  or  the nature  of  the particular clause in  question.   Certainly, these  rules have no such restrictive effect in  respect  of any  constitutional grant of governmental power  (Waring  v. Clarke  (3) ), though they do, at least in  some  instances, operate   restrictively  in  respect  of  clauses   of   the Constitution  which guarantee and safeguard the  fundamental rights and liberties of the individual, the best examples of which, perhaps, are the Sixth and Seventh Amendments,  which guarantee the right of trial by jury." It  should,  however, be stated that the law  is  stated  in Weaver on Constitutional Law, 1946 Edn., p. 77 and  Crawford on  Statutory Construction, p. 258 in the same terms  as  in South Corolina v. United States (4).  But it is  unnecessary to  examine  minutely  the precise scope  of  this  rule  of interpretation  in American law, as the law on  the  subject has  been  stated clearly and authoritatively by  the  Privy Council  in  construing the scope of the provisions  of  the British North America Act, 1867.  In L’Union St. Jacques  De Montreal v. Be Lisle (5), the question was whether a law  of Quebec (1)  (1925) 267 U.S. 87; 69 L. Ed. 527, 530. (2)  (1935) 294 U.S. 648, 669 ; 79 L. Ed.  1110, 1124. (3)  (1847) 5 How. 441 ; 12 L. Ed. 226. (4)  (1905) 199 U.S. 437 ; 5o L. Ed. 262, 265. (5)  (1874) L.R. 6 P.C. 31, 36. 400 providing  for relief to a society in a state  of  financial embarrassment  was  one  with respect to  "  bankruptcy  and insolvency ". In deciding that it should be determined on  a consideration  of what was understood as included  in  those words in their legal sense, Lord Selborne observed : "  The words describe in their known legal sense  provisions made by law for the administration of the estates of persons who may become bankrupt or insolvent, according to rules and definitions  prescribed  by  law, including  of  course  the conditions  in  which  that  law  is  to  be  brought   into operation,  the  manner in which it is to  be  brought  into operation, and the effect of its operation." On  this test, it was held that the law in question was  not one  relating  to bankruptcy.  In Royal Bank  of  Canada  v. Larue  (1), the question was whether s. 11, sub-s. (10),  of the Bankruptcy Act of Canada under which a charge created by a  judgment on the real assets of a debtor was postponed  to an  assignment made by the debtor of his properties for  the benefit  of his creditors was intra vires the powers of  the Dominion  Legislature,  as being one in respect of  "  bank- ruptcy  and insolvency " within s. 91, sub-cl. (21), of  the British North America Act.  Viscount Cave L. C. applying the test  laid  down in L’Union St. Jacques De  Montreal  v.  Be Lisle  (2),  held  that the impugned provision  was  one  in respect of bankruptcy. In  The Labour Relations Board of Saskatchewan v. John  East Iron  Works Ltd. (3), the question arose under s. 96 of  the British  North America Act, 1867, under which the  Governor- General  of the Dominion had power to appoint judges of  the superior  district  and  county  courts.   The  Province  of Saskatchewan enacted the Trade Union Act, 1944,  authorising the  Governor  of  the Province  to  constitute  the  Labour Relations  Board for the determination of  labour  disputes. The  question  was  whether this provision  was  invalid  as contravening  s.  96 of the British North America  Act.   In holding that it was not, Lord

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(1) [1928] A.C. 187.       (2) (1874) I,.R. 6 P.C. 3I, 36. (3)[1949] A.C. 134. 401 Simonds  observed that the courts contemplated by s.  96  of the  Act  were those which were generally understood  to  be courts  at the time when the Constitution Act  was  enacted, that  labour courts were then unknown, and that,  therefore, the  reference to judges, and courts in s. 96 could  not  be interpreted as comprehending a tribunal of the character  of the Labour Relations Board.  In Halsbury’s Laws ’of England, Vol. 11, para. 157, p. 93, the position is thus summed up: " The existing state of English law in 1867 is relevant  for consideration  in determining the meaning of the terms  used in  conferring power and the extent of that power, e. g.  as to customs legislation." Turning next to the question as to the weight to be attached to  legislative  practice  in  interpreting  words  in   the Constitution, in Croft v. Dunphy (1), the question was as to the  validity  of certain provisions in a  Canadian  statute providing  for  the  search of  vessels  beyond  territorial waters.  These provisions occurred in a customs statute, and were  intended  to  prevent evasion  of  its  provisions  by smugglers.   In affirming the validity of these  provisions, Lord Macmillan referred to the legislative practice relating to customs, and observed: "  When  a power is conferred to legislate on  a  particular topic  it  is  important, in determining the  scope  of  the power,  to  have  regard to what is  ordinarily  treated  as embraced  within  that  topic in  legislative  practice  and particularly in the legislative practice of the State  which has conferred the power." In Wallace Brothers and Co. Ltd. v. Commissioner of  Income- tax,  Bombay  City and Bombay Suburban  District  (2),  Lord Uthwatt observed: "  Where Parliament has conferred a power to legislate on  a particular   topic  it  is  permissible  and  important   in determining  the  scope  and meaning of the  power  to  have regard to what is ordinarily treated as embraced within that topic  in  the legislative practice of the  United  Kingdom. The point of the (1) [1933] A.C. 156, 165.   (2) (1948) L.R. 75 I.A. 86, 99. 51 402 reference  is emphatically not to seek a pattern to which  a due  exercise of the power must conform.  The object  is  to ascertain  the general conception involved in the  words  in the enabling Act." In  In  re The Central Provinces and Berar Act No. XI  V  of 1938 (1), in considering whether a tax on the sale of  goods was a duty of excise within the meaning of Entry 45, in List I of Sch.  VII, Sir Maurice Gwyer C.    J.  observed  at  p. 53: "  Lastly,  I  am entitled to look at the  manner  in  which Indian  legislation preceding the Constitution Act had  been accustomed  to provide for the collection of excise  duties; for  Parliament must surely be presumed to have  had  Indian legislative  practice  in  mind  and,  unless  the   context otherwise   clearly  requires,  not  to  have  conferred   a legislative power intended to be interpreted in a sense  not understood by those to whom the Act was to apply." In The State of Bombay v. F. N. Balsara (2), in  determining the meaning of the word " intoxicating liquor " in Entry  31 of  List  11 of Sch.  VII to the Government  of  India  Act, 1935,  this Court referred to the legislative practice  with reference  to that topic in India as throwing light  on  the

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true scope of the entry. (Vide pp. 704 to 706). On  the  basis  of the above  authorities,  the  respondents contend  that  the  true interpretation to  be  put  on  the expression " sale of goods " in Entry 48 is what it means in the  Indian Sale of Goods Act, 1930, and what it has  always meant  in the general law relating to sale of goods.  It  is contended   by   the  appellants   quite   rightly-that   in interpreting  the  words of a Constitution  the  legislative practice  relative  thereto is not conclusive.   But  it  is certainly  valuable  and might  prove  determinative  unless there are good reasons for disregarding it, and in The Sales Tax  Officer, Pilibhit v. Messrs.  Budh Prakash Jai  Prakash (3), it was relied on for ascertaining the meaning and  true scope  of the very words which are now under  consideration. There,  in deciding that an agreement to sell is not a  sale within Entry 48, this Court referred to the provisions (1) [1939] F.C.R. 18, 37.     (2) [1951] S.C.R. 682. (3) [1955] 1 S.C.R. 243. 403 of the English Sale of Goods Act, 1893, the Indian  Contract Act,  1872,  and  the Indian Sale of Goods  Act,  1930,  for construing the word "sale" in that Entry and observed: "Thus, there having existed at the time of the( enactment of the Government of India Act; 1935, a well-defined and  well- established  distinction between a sale and an agreement  to sell, it would be proper to interpret the expression "  sale of goods " in entry 48 in the sense in which it was used  in legislation  both in England and India and to hold  that  it authorises  the  imposition of a tax only when  there  is  a completed sale involving transfer of title." This  decision,  though  not decisive of  the  present  con- troversy,  goes  far  to  support  the  contention  of   the respondents  that  the words " sale of goods " in  Entry  48 must  be  interpreted in the sense which they  bear  in  the Indian Sale of Goods Act, 1930. The  appellant  and  the  intervening  States  resist   this conclusion on the following grounds: (1)  The provisions of the Government of India Act, read  as a  whole, show that the words " sale of goods " in Entry  48 are  not to be interpreted in the sense which they  have  in the Indian Sale of Goods Act, 1930; (2)  The legislative practice relating to the topic of sales tax  does not support the narrow construction sought  to  be put on the language of Entry 48; (3)  The  expression  " sale of goods " has in law  a  wider meaning than what it bears in the Indian Sale of Goods  Act, 1930,  and  that is the meaning which must be put on  it  in Entry 48; and (4)  the language of Entry 48 should be construed  liberally so  as  to  take in new concepts of  sales  tax.   We  shall examine these contentions seriatim. (1)  As  regards the first contention, the argument is  that in  the  Government  of India Act,  1935,  there  are  other provisions which give a clear indication that the expression "  sale of goods " in Entry 48 is not to be  interpreted  in the  sense which it bears in the Indian Sale of  Goods  Act, 1930.  That is an argument open 404 to  the appellant, because rules of interpretation are  only aids  for ascertaining the true legislative intent and  must yield  to the context, where the contrary  clearly  appears. Now, what are the indications contra ? Section 311(2) of the Government  of India Act defines " agricultural income "  as meaning " agricultural income as defined for the purposes of the  enactments relating to Indian income-tax ". It is  said

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that  if the words " sale of goods " in Entry 48 were  meant to  have the same meaning as those words in the Indian  Sale of Goods Act, that would have been expressly mentioned as in the  case  of definition of agricultural  income,  and  that therefore  that  is not the meaning which should be  put  on them in that Entry. In  our opinion, that is not the inference to be drawn  from the  absence of words linking up the meaning of the  word  " sale  " with what it might bear in the Indian Sale of  Goods Act.  We think that the true legislative intent is that  the expression  "  sale of goods " in Entry 48 should  bear  the precise and definite meaning it has in law, and that meaning should  not  be left to fluctuate with the definition  of  " sale  " in laws relating to sale of goods which might be  in force for the time being.  It was then said that in some  of the  Entries, for example, Entries 31 and 49, List  11,  the word it sale " was used in a wider sense than in the  Indian Sale of Goods Act, 1930.  Entry 31 is " Intoxicating liquors and  narcotic  drugs,  that  is  to  say,  the   production, manufacture,  possession,  transport, purchase and  sale  of intoxicating  liquors, opium and other narcotic  drugs.   ". The  argument  is  that  "  sale "  in  the  Entry  must  be interpreted  as including barter, as the policy of  the  law cannot be to prohibit transfers of liquor only when there is money consideration therefor. But this argument proceeds  on a misapprehension of the principles on which the Entries are drafted.  The scheme of the drafting is that there is in the beginning of the Entry words of general import, and they are followed  by  words having reference to  particular  aspects thereof.   The operation of the general words,  however,  is not cut down by reason of the fact that there are  sub-heads dealing with specific aspects.  In 405 Manikkasundara  v.  R.  S.  Nayudu(1)  occur  the  following observations pertinent to the present question : " The subsequent words and phrases are not intended to limit the  ambit of the opening general term or phrase but  rather to  illustrate  the  scope and objects  of  the  legislation envisaged as comprised in the opening term or phrase." A  law  therefore prohibiting any  dealing  in  intoxicating liquor,  whether by way of sale or barter or gift,  will  be intra  vires  the  powers conferred  by  the  opening  words without resort to the words " sale and purchase ". Entry  49 in  List II. is " Cesses on the entry of goods into a  local area  for consumption, use or sale therein ". It  is  argued that  the word " sale " here cannot be limited to  transfers for money or for even consideration.  The answer to this  is that the words " for consumption, use or sale therein "  are a  composite  expression meaning octroi duties, and  have  a precise  legal connotation, and the use of the word  "  sale therein " can throw no light on the meaning of that word  in Entry  48.   We are of opinion that the  provisions  in  the Government  of India Act, 1935, relied on for the  appellant are too inconclusive to support the inference that " sale  " in  Entry  48 was intended to be used in a  sense  different from that in the Indian Sale of Goods Act. (2)  It is next urged that, for determining the true meaning of the expression " Taxes on the sale of goods " in Entry 48 it  would not be very material, to refer to the  legislative practice  relating to the law in respect of sale  of  goods. It  is argued that " sale of goods " and " taxes on sale  of goods " are distinct matters, each having its own incidents, that  the scope and object of legislation in respect of  the two  topics are different, that while the purpose of  a  law relating to sale of goods is to define the rights of parties

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to  a  contract, that of a law relating to tax oil  sale  of goods  is to bring money into the coffers of the State,  and that,  accordingly, legislative practice with  reference  to either topic cannot be of much assistance with reference  to the other.  Now, it is trite that the object and (1)  [1946] F.C.R. 67, 84. 406 scope  of the two laws are different, and if there  was  any difference  in  the legislative practice with  reference  to these  two topics, we should, in deciding the question  that is now before us, refer more appropriately to that  relating to  sales tax legislation rather than that relating to  sale of goods.  But there was, at the time when the Government of India  Act was enacted, no law relating to sales tax  either in  England  or  in India.  The first sales tax  law  to  be enacted in India is the Madras General Sales Tax Act,  1939, and that was in exercise of the power conferred by Entry 48. In England, a purchase tax was introduced for the first time only  by  the  Finance Act No. 2  of  1940.   The  position, therefore,   is  that  Entry  48  introduces  a   topic   of legislation  with respect to which there was no  legislative practice. In  the  absence of legislative practice with  reference  to sales  tax  in this country or in England, counsel  for  the appellant and the States sought support for their contention in  the  legislative  practice  of  Australia  and   America relating to that topic.  In 1930, the Commonwealth Sales Tax Act was enacted in Australia imposing a tax on retail sales. A   question  ARose,  Whether  a  contractor  who   supplied materials in execution of a works contract could be taxed as on a sale of the materials.  In Sydney Hydraulic and General Engineering Co. v. Blackwood & Son (1), the Supreme Court of New South Wales held that the agreement between the  parties was  one to do certain work and to supply certain  materials and  not  an agreement for sale or delivery  of  the  goods. Vide Irving’s Commonwealth Sales Tax Law and Practice,  1950 Edn.,  p.  77.   In 1932,  the  Legislature  intervened  and enacted in the Statute of 1930, a new provision, s. 3(4), in the following terms: "  For the purpose of this Act, a person shall be deemed  to have sold goods if, in the performance of any contract  (not being  a contract for the sale of goods) under which he  has received, or is entitled to receive, valuable consideration, he supplies goods the property in which (whether as goods or in some other form) passes, under the terms of the contract, to some other person." (1)  8 N.S.W.S.R. 407 After  this, the question arose in M. R.  Hornibrook  (Pty.) Ltd.  v.  Federal  Commissioner  of  Taxation(1)  whether  a contractor   who   fabricated  piles  and   used   them   in constructing  a  bridge was liable to pay sales tax  on  the value of the piles.  The majority of the( Court held that he was.   Latham  C.  J. put his decision on  the  ground  that though  there  was, in fact, no sale of the  piles,  in  law there  was  one by reason of s. 3(4) of the Act.   Now,  the judgment  of the learned Chief Justice is really adverse  to the appellant in that it decides that under the general  law and  apart from s. 3(4) there was no sale of  the  materials and  that it was only by reason of the deeming provision  of s.  3(4)  that it became a taxable sale.  The  point  to  be noted is that under the Australian Constitution the power to legislate  on  the  items mentioned in s.  51  of  the  Con- stitution  Act  is vested Exclusively  in  the  Commonwealth Parliament.  Item (ii) in s. 51 is " Taxation; but so as not

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to discriminate between States or parts of States ". Subject to  this condition, the power of Parliament is  plenary  and absolute, and in exercise of such a power it could impose  a tax  on the value of the materials used by a  contractor  in his  works  contracts;  and it could  do  that  whether  the transaction  amounts  in fact to a sale or not.   It  is  no doubt brought under the Sales Tax Act, it being deemed to be a  sale;  but that is only as a matter of  convenience.   In fact, two of the learned Judges in M.’ R. Hornibrook  (Pty.) Ltd.  V. Federal Commissioner of Taxation (1)  rested  their decision  on  the ground that the use of  materials  in  the construction  was itself taxable under the Act.   But  under the  Government of India Act, the Provincial Legislature  is competent to enact laws in respect of the matters enumerated in  Lists II and III, and though the entries therein are  to be  construed liberally and in their widest  amplitude,  the law  must,  nevertheless,  be  one  with  respect  to  those matters.  A power to enact a law with respect to tax on sale of  goods  under Entry 48 must, to be intra  vires,  be  one relating  in  fact to sale of goods,  and  accordingly,  the Provincial Legislature cannot, in the purported exercise  of its power (1)  (1939) 62 C.L.R. 272. 408 to tax sales, tax transactions which are not sales by merely enacting that they shall be deemed to be sales. The  position in the American law appears to be the same  as in  Australia.  In Blome Co. v. Ames (1), the Supreme  Court of Illinois held that a sales tax was leviable on the value, of  materials used by a contractor in the construction of  a building  or  a fixture treating the transaction as  one  of sale of those materials.  But this decision Was overruled by a later decision of the same Court in Herlihy  Mid-Continent Co.  v.  Nudelman  wherein it was held  that  there  was  no transfer of title to the materials used in construction work as  goods, and that the provisions of the Sales Tax Act  had accordingly no application.  This is in accordance with  the Generally  accepted  notion  of sale  of  goods.   This,  of course,  does not preclude the States in exercise  of  their sovereign  power from imposing tax on construction works  in respect  of materials used therein.  Thus, position is  that in 1935 there was no legislative practice relating to  sales tax  either  in England or India, and that  in  America  and Australia,  tax on the supply of materials  in  construction works was imposed but that was in exercise of the  sovereign powers of the Legislature by treating the supply as a  sale. But  apart, from such legislation, the expression  "sale  of goods  " has been construed as having the meaning  which  it has in the common law of England relating to sale of  goods, and it has been held that in that sense the use of materials in  construction works is not a sale.  This rather  supports the conclusion that sale " in Entry, 48 must be construed as having  the same meaning which it has in the Indian Sale  of Goods Act, 1930. (3)  It is next contended by Mr. Sikri that though the  word "  sale " has a definite sense in the Indian Sale  of  Goods Act,  1930,  it  has a wider sense in law  other  than  that relating  to sale of goods, and that, on the principle  that words  conferring legislative powers should be construed  in their  broadest amplitude, it would be proper  to  attribute that sense to it in Entry (1) (1937) 111 A.L.R. 940. (2) (1937) 115 A.L.R. 485. 409 48.It  is  argued that in its wider sense the  expression  "

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sale  of  goods " means all transactions  resulting  in  the transfer of title to goods from one person to another,  that a, bargain between the parties was not an essential  element thereof, and that even involuntary sales, would fall  within its  connotation.  He relied in support of this position  on various  dicta  in  Ex Parte Drake In  re  Ware  (1),  Great Western Railway Co. v. Commissioners of Inland Revenue  (2), The  Commissioners of Inland Revenue v. Newcastle  Breweries Ltd. (3), Kirkness v. John Hudson & Co. Ld. (4) and Nalukuya v.  Director of Lands, Native Land Trust Board of Fiji  (5). In  Ex Parte Drake In re Ware (1), the question was  whether an  unsatisfied  decree  passed  in  an  action  on  detinue extinguished  the  title of the decree-holder to  the  thing detained.   In  answering it in the negative, Jessel  M.  R. observed: " The judgments in Brinsmead v. Harrison and especially that of Mr. Justice Willes, shew that the theory of the  judgment in an action of detinue is that it is a kind of  involuntary sale of the Plaintiff’s goods to the Defendant." He went on to state that such sale took place when the value of the goods is paid to the owner.  In Great Western Railway Co.  v.  Commissioners  of Inland Revenue  (2),  an  Act  of Parliament had provided for the dissolution of two companies under  a scheme of amalgamation with a third  company  under which  the  shareholders were to be given  in  exchange  for their shares in the dissolved companies, in the case of  one company,  stock  in the third company in  certain  specified proportions,  and in the other, discharge of  debentures  on shares  already  held  by them in the  third  company.   The question was whether a copy of the Act had to be stamped  ad valorem as on conveyance on sale under the first schedule to the Stamp Act, 1891.  The contention of the company was that there was no sale by the shareholders of their shares to it, and (1) (1877) 5 Ch. D. 866.(2) (1894) 1 Q.B. 507, 512, 515. (3) (1927) 12 Tax Cas. 927.(4) [1955] A.C. 696. (5) [1957] A.C. 325.(6) (1872) L.R. 7 C.P. 347.      52 410 that   the   provision  in  question  had   accordingly   no application.  In rejecting this contention, Esher M. R. observed: "  Turning  to  the  Stamp  Act, the  words  used  are  ’  a conveyance on sale’.  Does that expression mean a conveyance where  there  is a definite contract of  purchase  and  sale preceding it ? Is that the way to construe the Stamp Act, or does  it  mean a conveyance the same as if it  were  upon  a contract of purchase and sale ? The latter seems to me to be the meaning of the phrase as there used. Kay L. J. said: " And we must remember that the Stamp Act has nothing to  do with contracts or negotiations; it stamps a conveyance  upon a  sale,  which is the instrument by which the  property  is transferred upon a sale.  " This  is a decision on the interpretation of the  particular provision  of  the  Stamp  Act,  and  is  not  relevant   in determining the meaning of sale under the general law.  And, if  anything,  the observations above quoted  emphasise  the contrast  between the concept of sale under the general  law and  that which is embodied in the particular  provision  of the Stamp Act. In   The  Commissioners  of  Inland  Revenue  v.   Newcastle Breweries  Ltd.(1),  the  point  for  decision  was  whether payments  made  by the Admiralty to the  respondent  company which  was  carrying on business as brewers, on  account  of

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stocks  of  rum  taken over by  it  compulsorily  under  the Defence  of Realm Regulations were liable to be assessed  as trade  receipts to excess profits duty.  The  contention  of the  company was that the acquisition by the  Admiralty  was not  a sale, that the payments made were not price of  goods sold but compensation for interference with the carrying  on of  business by it, and that accordingly the  amounts  could not be held to have been received in the course of trade  or business.  In rejecting this contention, Viscount Cave L. C. observed: "If the raw rum had been voluntarily sold to other  traders, the price must clearly have come into the computation of the Appellant’s profits, and the (1)  (1927) 12 Tax Cas. 927. 411 circumstance  that  the sale was compulsory and was  to  the Crown makes no difference in principle.  " In  Kirkness v. John Hudson & Co. Ltd. (1), the  facts  were that railway wagons belonging to the respondent company were taken  over  by  the Transport  Commission  compulsorily  in exercise  of the powers conferred by s. 29 of the  Transport Act, 1947, and compensation was paid therefor.  The question was  whether  this amount was liable to  income-tax  on  the footing  of  sale  of  the  wagons  by  the  company.    The contention  on  behalf of the Revenue  was  that  compulsory acquisition being treated as sale under the English law, the taking  over  of  the wagons  and  payment  of  compensation therefor  must  also  be regarded as  sale  for  purpose  of income-tax.   Lord Morton in agreeing with  this  contention observed: "........  the question whether it is a correct use  of  the English language to describe as a ’sale’ a transaction  from which the element of mutual assent is missing is no doubt an interesting one.  I think, however, that this question loses its  importance  for  the purpose of the  decision  of  this appeal  when  it  is realized that for the  last  100  years transactions by which the property of A has been transferred to  B, Oil payment of compensation to the owner but  without the consent of the owner, have been referred to many  times, in Acts of Parliament, in opinions delivered in this  House, in  judgments of the Court of Appeal and the High  Court  of Justice,  and  in  textbooks  as a  sale  ’-generally  as  a compulsory sale "  The  case of Newcastle Breweries Ld.  v.  Inland  Revenue Commissioners  (2 ), referred to later, affords  a  striking modern instance of the use of the word I sale’ as applied to compulsory taking of goods ’................................ "  In  these  circumstances, whether this use  of  the  word ’sale’  was  originally  correct or  incorrect,  I  find  it impossible  to  say  that the only  construction  which  can fairly be given to the word ’ sold ’ in section 17(1) (a) of the Income Tax Act, 1945, is to limit it to a transaction in which the element of mutual assent is present.  " (1)  [1955] A.C. 696. (2) (1927) 96 L.J.K. B. 735. 412 But  the  majority  of the House came to  a  different  con- clusion, and held that the element of bargain was  essential to constitute a sale, and to describe compulsory taking over of property as a sale was a misuse of that word. In Nalukuya v. Director of Lands, Native Land Trust Board of Fiji, Intervener (1), it was held by the Privy Council  that compensation money payable on the compulsory acquisition  of land was covered by the words " the purchase money  received in  respect of a sale or other disposition of native land  "

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in s. 15 of the Native Land Trust Ordinance, c. 86 of  1945, Fiji.   The decision, however, proceeded on  the  particular terms  of the statute, and does not affect the  decision  in Kirkness v. John Hudson & Co. Ltd. (2) that mutual assent is an element of a transaction of sale. It  should  be  noted  that the main  ground  on  which  the decision of Lord Morton rests is that compulsory acquisition of  property had been described in the legislative  practice of  Great  Britain  as compulsory  sales.   The  legislative practice of this country, however, has been different.   The Land Acquisition Act, 1894, refers to the compulsory  taking over  of immovable property as acquisition.  In List  11  of the  Government  of India Act, this topic  is  described  in Entry  9  as  " compulsory acquisition  of  land".   In  the Constitution,  Entry  42 in List III is  "  acquisition  and requisition of property ". The ratio on which the opinion of Lord  Morton  is based has no place in the  construction  of Entry  48,  and the law as laid down by the majority  is  in consonance with the view taken by this Court that bargain is an  essential  element  in  a  transaction  of  sale.   Vide Poppatlal  Shah v. The State of Madras (3) and The State  of Bombay  v.  The  United  Motors (India)  Ltd.  (4).   It  is unnecessary  to discuss the other English cases cited  above at  any  length, as the present question  did  not  directly arise for decision therein, and the decision in Kirkness  v. John  Hudson  &  Co. Ld. (2) must be held  to  conclude  the matter. Another contention presented from the same point (1)  [1957] A.C- 325. (3)  [1953] S.C.R. 677, 683. (2)  [1955] A.C. 696. (4)  [1953] S.C.R. 1069, 1078. 413 of  view but more limited in its sweep is that urged by  the learned Solicitor-General of India, the Advocate General  of Madras and the other counsel appearing for the States,  that even  in the view that an agreement between the parties  was necessary  to  constitute a sale, that  agreement  need  not relate to the goods as such, and that it would be sufficient if  there  is an agreement between the parties  and  in  the carrying out of that agreement there is transfer of title in movables   belonging   to   one  person   to   another   for consideration.   It  is argued that Entry 48  only  requires that  there  should be a sale, and that  means  transfer  of title  in  the goods, and that to attract the  operation  of that Entry it is not necessary that there should also be  an agreement to sell those goods.  To hold that there should be an agreement to sell the goods as such is, it is  contended, to add to the Entry, words which are not there. We are unable to agree with this contention.  If the words " sale of goods " have to be interpreted in their legal sense, that  sense can only be what it has in the law  relating  to sale of goods.  The ratio of the rule of interpretation that words  of  legal  import occurring in a  statute  should  be construed in their legal sense is that those words have,  in law,  acquired  a  definite and  precise  sense,  and  that, accordingly, the legislature must be taken to have  intended that   they  should  be  understood  in  that   sense.    In interpreting an expression used in a legal sense, therefore, we  have only to ascertain the precise connotation which  it possesses  in  law.  It has been already stated  that,  both under the common law and the statute law relating to sale of goods  in England and in India, to constitute a  transaction of  sale there should be an agreement, express  or  implied, relating  to  goods to be completed by passing of  title  in

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those goods.  It is of the essence of this concept that both the  agreement  and  the  sale should  relate  to  the  same subject-matter.    Where  the  goods  delivered  under   the contract are not the goods contracted for, the purchaser has got  a  right to reject them, or to accept  them  and  claim damages  for breach of warranty.  Under the law,  therefore, there  cannot  be  an  agreement relating  to  one  kind  of property and 414 a  sale as regards another.  We are accordingly  of  opinion that on the true interpretation of the expression " sale  of goods  " there must be an agreement between the parties  for the  sale  of the very goods in  which  eventually  property passes.   In a building contract, the agreement between  the parties  is that the contractor should construct a  building according to the specifications contained in the  agreement, and  in consideration therefor receive payment  as  provided therein, and as will presently be shown there is in such  an agreement  neither a contract to sell the materials used  in the   construction,  nor  does  property  pass  therein   as movables.  It is therefore impossible to maintain that there is  implicit in a building contract a sale of  materials  as understood in law. (4)  It   was  finally  contended  that  the  words   of   a Constitution   conferring   legislative  power   should   be construed in such manner as to make it flexible and  elastic so  as  to enable that power to be exercised in  respect  of matters  which might be unknown at the time it  was  enacted but  might  come into existence with the march of  time  and progress  in  science,  and  that  on  this  principle   the expression " sale of goods " in Entry 48 should include  not only  what  was  understood  as sales at  the  time  of  the Government  of India Act, 1935, but also whatever  might  be regarded  as  sale in the times to come.  The  decisions  in Attorney General v. Edison Telephone Company of London  (1), Toronto Corporation v. Bell Telephone Company of Canada (2), The Regulation and Control of Radio Communication in Canada, In  re (3) and.  The King v. Brislan: Ex Parte Williams  (4) were quoted as precedents for adopting such a  construction. In  Attorney General v. Edison Telephone Company  of  London (1), the question was whether the Edison Telephone  Company, London,   had   infringed   the   exclusive   privilege   of transmitting  telegrams  granted to the  Postmaster  General under  an  Act of 1869 by installation of  telephones.   The decision turned on the construction of the definition of the word " telegraph " in the Acts of (1)  (1880) L.R. 6 Q.B.D. 244. (2)  [1905] A.C. 52. (3)  [1932] A.C. 304. (4)  (1935) 54 C.L.R. 262. 415 1863  and  1869.   It was contended  for  the  Company  that telephones  were  unknown at the time when those  Acts  were passed and therefore could not fall within the definition of "telegraph".   The  Court negatived this contention  on  the ground  that the language of the definition was wide  enough to include telephones. Toronto Corporation v. Bell Telephone Company  of Canada (1) is a decision on s. 92(10)(a) of  the British  North America Act, 1867, under which  the  Dominion Parliament  had  the exclusive competence to  pass  laws  in respect  of  "  lines of steam  or  other  ships,  railways, canals,   telegraphs,  and  other  works  and   undertakings connecting  the  province with any other or  others  of  the provinces  or extending beyond the limits of the  province". The  question  was whether a law incorporating  a  telephone

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company  and conferring on it powers to enter  upon  streets and  highways  vested in a municipal corporation  was  intra vires the powers of the Dominion Parliament under the  above provision,  and  whether in consequence a  provision  in  an Ontario   Act  requiring  the  consent  of   the   municipal authorities  for  the carrying out of those  operations  was ultra  vires.   It was held by the Privy  Council  that  the Parliament of Canada was competent to enact the impugned law under  s. 92(10)(a) and that, therefore, it  prevailed  over the  Provincial Act.  This decision, however, would seem  to have   been  reached  on  the  words  "  other   works   and undertakings " in the section. In  The,  Regulation and Control of Radio  Communication  in Canada, In re (2), the question was whether broadcasting was covered  by  the expression "telegraph and other  works  and undertakings  "  in s. 92(10)(a) of  the  Constitution  Act, 1867.   The Privy Council answered it in the affirmative  on the grounds, firstly, that broadcasting was an " undertaking connecting  the province with other provinces and  extending beyond  the  limits of the province and, secondly,  that  it fell  within the description of telegraph ". In The King  v. Bristan:  Ex Parte Williams (3), the question was whether  a law of the Commonwealth (1) [1905] A.C. 52.         (2) [1932] A.C. 304. (3)  (1935) 54 C.L.R. 262. 416 Parliament  with respect to radio broadcasting was one  with respect to " Postal, telegraphic, telephonic and other  like services  "  under s. 51(5) of the  Australian  Commonwealth Act, and it was answered in the affirmative. The  principle  of these decisions is that when,  after  the enactment  of a legislation, new facts and situations  arise which  could  not  have  been  in  its  contemplation,   the statutory  provisions could properly be applied to  them  if the words thereof are in a broad sense capable of containing them.  In that situation, " it is not ", as observed by Lord Wright in James v. Commonwealth of Australia (1), " that the meaning of the words changes, but the changing circumstances illustrate and illuminate the full import of that meaning ". The  question then would be not what the framers  understood by those words, but whether those words are broad enough  to include  the  new  facts.  Clearly, this  principle  has  no application  to  the  present case.  Sales  tax  was  not  a subject which came into vogue after the Government of  India Act, 1935.  It was known to the framers of that statute  and they made express provision for it under Entry 48.  Then  it becomes merely a question of interpreting the words, and  on the principle, already stated, that words having known legal import  should be construed in the sense which they  had  at the time of the enactment, the expression " sale of goods  " must  be construed in the sense which it has in  the  Indian Sale of Goods Act. A  contention  was also urged on behalf of  the  respondents that even assuming that the expression " sale of goods "  in Entry 48 could be construed as having the wider sense sought to  be given to it by the appellant and that the  provisions of  the  Madras  General Sales Tax Act  imposing  a  tax  on construction  contracts  could be sustained as  within  that entry in that sense, the impugned provisions would still  be bad  under  s. 107 of the Government of India Act,  and  the decision in D. Sarkar & Bros. v. Commercial Tax Officer  (2) was  relied on in support of this contention.  Section  107, so far as is material, runs as follows: (1) [1936] A.C. 578, 614. (2) A.1.R. 1957 Cal. 283.

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417 107-(1) " If any provision of a Provincial law is  repugnant to  any  provision  of a Dominion  law  which  the  Dominion Legislature is competent to enact or to any provision of  an existing  law with respect to one of the matters  enumerated in  the  Concurrent Legislative List, then, subject  to  the provisions of this section, the Dominion law, whether passed before or after the Provincial law, or, as the case may  be, the  existing  law,  shall prevail and  the  Provincial  law shall, to the extent of the repugnancy, be void. (2)  Where  a  Provincial  law with respect to  one  of  the matters  enumerated  in  the  Concurrent  Legislative   List contains  any  provision repugnant to the provisions  of  an earlier Dominion law or an existing law with respect to that matter,  then, if the Provincial law, having  been  reserved for  the consideration of the Governor-General has  received the assent of the Governor-General, the Provincial law shall in  that  Province prevail, but  nevertheless  the  Dominion Legislature  may at any time enact further legislation  with respect to the same matter." Now, the argument is that the definition of " sale given  in the  Madras General Sales Tax Act is in conflict  with  that given  in the Indian Sale of Goods Act, 1930, that the  sale of  goods  is  a  matter falling  within  Entry  10  of  the Concurrent  List,  and that, in consequence, as  the  Madras General  Sales  Tax (Amendment) Act, 1947, under  which  the impugned pro-visions had been enacted, had not been reserved for the assent of the Governor-General as provided in s. 107 (2),  its  provisions are bad to the extent  that  they  are repugnant  to the definition of " sale " in the Indian  Sale of Goods Act, 1930.  The short answer to this contention  is that the Madras General Sales Tax Act is a law relating  not to  sale of goods, but to tax on sale of goods, and that  it is not one of the matters enumerated in the Concurrent  List or over which the Dominion Legislature is competent to enact a  law, but is a matter within the exclusive  competence  of the  Province under Entry 48 in List II.  The only  question that can arise with reference to 53 418 such  a  law  is whether it is within the  purview  of  that Entry.  If it is, no question of repugnancy under  s.  107 can arise.  The decision in D. Sarkar & Bros. v.  Commercial Tax Officer(1) on this point cannot beaccepted as sound. It now remains to deal with the contention pressed on us  by the  States  that even if the supply of  materials  under  a building  contract  cannot be regarded as a sale  under  the Indian  Sale of Goods Act, that contract is  nevertheless  a composite agreement under which the contractor undertakes to supply   materials,  contribute  labour  and   produce   the construction, and that it is open to the State in  execution of  its  tax  laws  to split  up  that  agreement  into  its constituent  parts,  single out that which  relates  to  the supply of materials and to impose a tax thereon treating  it as  a sale.  It is said that this is a, power  ancillary  to the  exercise  of the substantive power to  tax  sales,  and reliance  is  placed  on  the  observations  in  The  United Province v. Atiqa Begum (2) and Navinchandra Mafatlal v. The Commissioner of Income-tax, Bombay City (3) at p. 836.   The respondents  contend that even if the agreement between  the parties  could be split up in the manner suggested  for  the appellant, the resultant will not be a sale in the sense  of the  Indian  Sale  of  Goods Act, as there  is  in  a  works contract neither an agreement to sell materials as such, nor does property in them pass as movables.

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The  nature and incidents of works contracts have  been  the subject  of  consideration  in  numerous  decisions  of  the English courts, and there is a detailed consideration of the points   now  under  discussion,  in  so  far  as   building contracts,  are concerned, in Hudson on Building  Contracts, 7th Ed., pp. 386-389 and as regards chattels, in Benjamin on Sale,  8th Ed., pp.’ 156-168 and 352-355.  It  is  therefore sufficient to refer to the more important of the cases cited before us. In Tripp v. Armitage (4), one Bennett, a builder, had entered into an agreement with certain trustees to build a hotel.  The agreement provided inter alia that (1)  A.I.R. 1957 Cal. 283. (3)  [1955] 1 S.C.R. 829, 833, 836. (2) [1940] F.C.R. 110, 134. (4) (1839) 4 M & W. 687 ; 15o E.R. 1597. 419 the articles which were to be used for the structure had  to be  approved by the trustees.  Subsequently, Bennett  became bankrupt,  and  the  dispute was between  his  assignees  in bankruptcy,  and  the trustees as regards title  to  certain wooden sash-frames which had been approved on behalf of  the trustees  but had not yet been fitted in the building.   The trustees  claimed them on the ground that property  therein, had passed to them when once they had approved the same.  In negativing this contention, Lord Abinger C. B. observed: "..  ............  this is not a contract for the  sale  and purchase  of goods as movable chattels; it is a contract  to make  up  materials, and to fix them ; and  until  they  are fixed, by the nature of the contract, the property will  not pass." Parke B. observed: "............ but in this case, there is no contract at  all with  respect  to  these particular  chattels-it  is  merely parcel  of  a larger contract.  The contract  is,  that  the bankrupt  shall build a house; that he shall  make,  amongst other  things, window-frames for the house, and fix them  in the house’ subject to the approbation of a surveyor; and  it was never intended by this contract, that the articles so to be fixed should become the property of the defendants, until they were fixed to the freehold." In  Clark  v.  Bulmer  (1), the  plaintiff  entered  into  a contract  with  the defendant " to build an  engine  of  100 horse  power  for the sum of E. 2,500, to be  completed  and fixed by the middle or end of December ". Different parts of the  engine were constructed at the plaintiff’s  manufactory and  sent  in parts to the defendant’s colliery  where  they were fixed piecemeal and were made into an engine.  The suit was  for the recovery of a sum of E. 3,000 as price for "  a main  engine  and  other goods sold  and  delivered  ".  The contention  of the defendant was that there was no  contract of  sale, and that the action should have been one for  work and labour and material used in the course of that work  and not for price of goods (1)  (1843) 11 M & W. 243; 152 E- R. 793. 420 sold and delivered.  In upholding this contention, Parke  B. observed : "  The  engine was not contracted for to  be  delivered,  or delivered,  as  an  engine,  in  its  complete  state,   and afterwards affixed to the freehold; there was no sale of it, as  an entire chattel, and delivery in that character ;  and therefore  it  could not be treated as an  engine  sold  and delivered.   Nor could the different parts of it which  were used in the construction, and from time to time fixed to the freehold,  and therefore became part of it, be deemed  goods

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sold  and delivered, for there was no contract for the  sale of  them as moveable goods; the contract was in effect  that the plaintiff was to select materials, make them into  parts of an engine, carry them to a particular place, and put them together, and fix part to the soil, and so convert them into a  fixed engine on the land itself, so as to pump the  water out of a mine." In Seath v. Moore(1), the facts were similar to those in   Tripp v. Armitage (2).  A firm of engineers, A.    Campbell & Son, had entered into five agreements with the appellants, T.  B. Seath  and  Co., who were ship-builders to  supply  engines, boilers  and machinery required for vessels to be  built  by them.  Before the completion of the contracts, A. Campbell & Son  became  bankrupt, and the dispute was  as  regards  the title  to  machinery and other articles which  were  in  the possession of the insolvents at the time of their bankruptcy but which had been made for the purpose of being fitted into the  ships of the appellants.  It was held by the  House  of Lords approving Tripp v. Armitage(2) that there had been  no sale of the machinery and parts as such, and that  therefore they vested in the assignee.  For the appellant, reliance is placed  on the following observations of Lord Watson  at  p. 380: The English decisions to which I have referred appear to  me to establish the principle that, where it appears to be  the intention,  or in other words the agreement, of the  parties to a contract for building a, ship, that a particular  stage of  its construction, the :vessel, so far as then  finished, shall be appropriated to (1)  (1886) 11 App.  Cas. 35o. (2)  (1839) 4 M & W. 687; 15o E.R. 1597. 421 the contract of sale, the property of the vessel as soon  as it  has  reached that stage of completion will pass  to  the purchaser, and subsequent additions made to the chattel thus vested  in  the  purchaser  will,  accessione,  become   his property.  " It is to be noted that even in this passage the title to the parts  is  held to pass not under any contract  but  on  the principle  of  accretion.   The  respondents  rely  on   the following  observations  at p. 381 as  furnishing  the  true ground of the decision "  There  is  another principle which appears to  me  to  be deducible from these authorities and to be in itself  sound, and  that  is, that materials provided by  the  builder  and portions   of  the  fabric,  whether  wholly  or   partially finished,  although intended to be used in the execution  of the  contract,  cannot be regarded as  appropriated  to  the contract, or as ’ sold’, unless they have been affixed to or in a reasonable sense made part of the corpus.  That appears to me to have been matter of direct decision by the Court of Exchequer  Chamber in Wood v. Bell(1).  In Woods v.  Russell (2)  the  property of a rudder and some  cordage  which  the builder  had bought for the ship was held to have passed  in property to the purchaser as an accessory of the vessel; but that  decision was questioned by Lord Chief Justice  Jervis, delivering the judgment of the Court in Wood v. Bell(1), who stated  the real question to be ’what is the ship, not  what is  meant for the ship’, and that only the things  can  pass with the ship I which have been fitted to the ship and  have once  formed  part of her, although afterwards  removed  for convenience I assent to that rule, which appears to me to be in accordance with the decision of the Court of Exchequer in Tripp v Armitage (3)".  In  Reid v. Macbeth & Gray (4), the facts were that a  firm

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of  ship-builders  who  had agreed to build  a  ship  became bankrupt.  At the date of the bankruptcy, there was lying at railway stations a quantity of iron ’and steel plates  which were intended to be fixed in the (1)  (1856)  6 E. & B. 355; 119 E.R. 669.  (4)  [1904]  A.C. 223. (2)  (1822) 5 B. & Al. 942 ; 106 E. R. 14 36. (3)  (1839) 4 M & W. 687; 150 E.R. I597. 422 ship.   The dispute was between the assignee  in  bankruptcy and  the shipowners as to the title to these  articles.   It was held by the House of Lords following Seath v. Moore  (1) and in particular the observations of Lord Watson at p.  381 that  the  contract was one for the purchase of  a  complete ship, and that under that contract no title to the  articles in  question  passed  to  the  shipowners.   The   following observations  of Lord Davey are particularly appropriate  to the present question : " There is only one contract--a contract for the purchase of the ship.  There is no contract for the sale or purchase  of these  materials  separatism  ; and unless you  can  find  a contract  for the sale of these chattels within the  meaning of the Sale of Goods Act, it appears to me that the sections of that Act have no application whatever to the case." If  in  a works contract there is no sale  of  materials  as defined  in the Sale of Goods Act, and if an action  is  not maintainable for the value of those materials as for  price, of   goods  sold  and  delivered,  as  held  in  the   above authorities,  then  even a disintegration  of  the  building contract  cannot yield any sale such as can be  taxed  under Entry 48. The  decision in Love v. Norman Wright (Builders)  Ld.  (2), cited by the appellant does not really militate against this conclusion.  There, the defendants to the action had  agreed with the Secretary of State to supply blackout curtains  and curtain rails, and fix them in a number of police  stations. In  their turn, the defendants had entered into  a  contract with the plaintiffs that they should prepare those  curtains and rails and erect them.  The question was whether the sub- contract was one for sale of goods or for work and services. In deciding that it was the former, Goddard L. J. observed : "  If  one orders another to make and fix curtains   at  his house the contract is one of sale though work and labour are involved  in the making and fixing, nor does it matter  that ultimately the property was to pass to the War Office, under the head contract.  As (1) (1886) 11 App.  Cas. 350. (2) [1944] 1 K.B. 484, 487. 423 between  the plaintiff and the defendants the former  passed the property in the goods to the defendants who passed it on to the War Office.  " It  will be seen that in this case there was no question  of an agreement to supply materials as parcel of a contract  to deliver  a  chattel;  the  goods to  be  supplied  were  the curtains  and  rails which were the  subject-matter  of  the contract itself.  Nor was there any question of title to the goods passing as an accretion under the general law, because the  buildings where they had to be erected belonged not  to the  defendants  but  to the Government,  and  therefore  as between  the parties to the contract, title could pass  only under their contract. The  contention that a building contract contains within  it all  the elements constituting a sale of’ the materials  was sought  to  be established by reference to the form  of  the

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action, when the claim is in quantum meruit.  It was  argued that if a contractor is prevented by the other party to  the contract  from  completing  the  construction  he  has,   as observed by Lord Blackburn in Appleby v. Myres (1), a  claim against  that party, that the form of action in such a  case is  for  work done and materials supplied, as  appears  from Bullen  & Leake’s Precedents of Pleadings, 10th Ed., at  pp. 285-286,  and that showed that the concept of sale of  goods was  latent  in  a building contract.  The  answer  to  this contention  is that a claim for quantum, meruit is  a  claim for  damages for breach of contract, and that the  value  of the  materials  is a factor relevant only  as  furnishing  a basis for assessing the amount of compensation.  That is  to say, the claim is not for price of goods sold and  delivered but for damages.  That is also the position under s. 65  of’ the Indian Contract Act. Another difficulty in the way of accepting the contention of the appellant as to splitting up a building contract is that the property in materials used therein does not pass to  the other  party to the contract as movable property.  It  would so pass if that was the agreement between the parties.   But if there was no (1)  (1867) L.R. 2 C.P. 651. 424 such  agreement  and the contract was only  to  construct  a building, then the materials used therein would be come  the property  of  the other party to the contract  only  on  the theory  of  accretion.   The  position  is  thus  stated  by Blackburn J. at pp. 659-660 in Appleby v. Myres (1): "  It  is quite true that materials worked by one  into  the property  of another become part of that property.  This  is equally  true,  whether  it be fixed  or  movable  property. Bricks  built into a wall become part of the  house;  thread stitched  into a coat which is under repair, or  planks  and nails  and pitch worked into a ship under repair,  become  a part of the coat or the ship. When  the work to be executed is, as in the present case,  a house,  the  construction imbedded on the  land  becomes  an accretion  to it on the principle quicquid  plantatur  solo, solo  cedit and it vests in the other party not as a  result of  the contract but as the owner of the land.  Vide  Hudson on Building Contracts, 7th Edn. p. 386.   It is argued  that the maxim, what is annexed    to  the  soil  goes  with  the soil, has not been accepted as     a  correct  statement  of the  law  of  this country, and reliance is  placed  on  the following  observations  in the Full Bench decision  of  the Calcutta  High  Court  in  Thakoor  Chunder  Poramanick   v. Ramdhone Bhuttacharjee (2) : We  think it should be laid down is a general rule that,  if he  who makes the improvement is not a mere trespasser,  but is  in  possession  under any bona fide title  or  claim  of title,  he  is  entitled either  to  remove  the  materials, restoring  the land to the state in which it was before  the improvement  was  made, or to obtain  compensation  for  the value  of  the building if it is allowed to remain  for  the benefit  of the owner of the soil,-the option of taking  the building, or allowing the removal of the material, remaining with  the  owner  of the land in those cases  in  which  the building,  is  not  taken down by  the  builder  during  the continued ance of any estate he may possess." The statement of the law was quoted with approval (1) (1867) L.R. 2 C.P. 651. (2) (1866) 6W.R. 228. 425 by  the Privy Council in Beni Ram v. Kundan Lall (1) and  in

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Narayan   Das  Khettry  v.  Jatindranath  (2).   But   these decisions  are  concerned with rights of  persons  who,  not being  trespassers, bona fide put up constructions on  lands belonging to others, and as to such persons the  authorities lay down that the maxim recognised in English law,  quicquid plantatur solo, solo cedit has no application, and that they have  the right to remove the superstructures, and that  the owner  of the land should pay compensation if he  elects  to retain  them.   That exception does not apply  to  buildings which are constructed in execution of a works contract,  and the law with reference to them is that the title to the same passes  to  the owner of the land as an  accretion  thereto. Accordingly,  there  can  be no question  of  title  to  the materials  passing as movables in favour of the other  party to  the contrat.  It may be, as was suggested by Mr.  Sastri for  the  respondents, that when the thing  to  be  produced under  the contract is moveable property, then any  material incorporated into it might pass as a movable, and in such  a case  the conclusion that no taxable sale will  result  from the disintegration of the contract can be rested only on the ground that there was no agreement to sell the materials  as such.   But we are concerned here with a building  contract, and  in the case of such a contract, the theory that it  can be broken up into its component parts and as regards one  of them  it can be said that there is a sale must fail both  on the grounds that there is no agreement to sell materials  as such, and that property in them does not pass as movables. To sum up, the expression " sale of goods " in Entry 48 is a nomen juris, its essential ingredients being an agreement to sell  movables  for  a price and  property  passing  therein pursuant  to that agreement.  In a building  contract  which is, as in the present case, one, entire and indivisible  and that  is its norm, there is no sale of goods, and it is  not within  the competence of the Provincial  Legislature  under Entry 48 to (1)  (1899) L. R. 26 1. A. 58. 54 (2) (1927) L.  R. 54 T. A. 218, 426 impose  a tax on the supply of the materials used in such  a contract treating it as a sale. This  conclusion  entails  that  none  of  the  legislatures constituted  under  the Government of India Act,  1935,  was competent  in the exercise of the power conferred by s.  100 to  make laws with respect to the matters enumerated in  the Lists,  to impose a tax on construction contracts  and  that before  such  a  law could be enacted  it  would  have  been necessary to have had recourse to the residual powers of the GovernorGeneral  under  s. 104 of the Act.  And it  must  be conceded  that a construction which leads to such a.  result must, if that is possible, be avoided.  Vide  Manikkasundara v.  R. S. Nayudu (1).  It is also a fact that acting on  the view  that Entry 48 authorises it, the States  have  enacted laws  imposing  a tax on the supply of  materials  in  works contracts,  and have been realising it, and  their  validity has  been affirmed by several High Courts.  All  these  laws were  in  the statute book when the Constitution  came  into force, and it is to be regretted that there is nothing in it which  offers a solution to the present question.  We  have, no  doubt,  Art.  248  and Entry 97  in  List  I  conferring residual power of legislation on Parliament, but clearly  it could not have been intended that the Centre should have the power  to  tax  with respect to  works  constructed  in  the States.  In view of the fact that the State Legislatures had given  to  the expression " sale of goods " in  Entry  48  a

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wider  meaning than what it has in the Indian Sale of  Goods Act, that States with sovereign powers have in recent  times been  enacting laws imposing tax on the use of materials  in the construction of buildings, and that such a power  should more  properly  be lodged with the States  rather  than  the Centre,  the  Constitution  might have  given  an  inclusive definition  of  "  sale " in Entry 54 so  as  to  cover  the extended sense.  But our duty is to interpret the law as  we find  it, and having anxiously considered the  question,  we are  of opinion that there is no sale as such  of  materials used  in  a  building  contract,  and  that  the  Provincial Legislatures had no competence to impose a tax thereon under Entry 48, (1)  [1946] F.C.R. 67. 84. 427 To  avoid  misconception, it must be stated that  the  above conclusion  has  reference  to works  contracts,  which  are entire and indivisible, as the contracts of the  respondents have  been held by the learned Judges of the Court below  to be.   The  several forms which such kinds of  contracts  can assume  are set out in Hudson on Building Contracts,  at  p. 165.   It  is  possible that the parties  might  enter  into distinct  and  separate contracts, one for the  transfer  of materials for money consideration, and the other for payment of  remuneration for services and for work done.  In such  a case,  there  are really two agreements, though there  is  a single instrument embodying them, and the power of the State to separate the agreement to sell, from the agreement to  do work  and render service and to impose a tax thereon  cannot be  questioned,  and  will stand untouched  by  the  present judgment. In  the  result,  the appeal fails, and  is  dismissed  with costs. Appeal dismissed.