Page 78 - GSTL_3rd September 2020_Vol 40_Part 1

12 GST LAW TIMES [ Vol. 40
that the content of the concepts remain static. Courts must move
with the times. But the 46th Amendment, does not give a licence for
example to assume that a transaction is a sale and then to look
around for what could be the goods. The word “goods” has not
been altered by the 46th Amendment. That ingredient of a sale con-
tinues to have the same definition. The second respect in which
Gannon Dunkerley has survived is with reference to the dominant
nature test to be applied to a composite transaction not covered by
Article 366(29A). Transactions which are mutant sales are limited to
the clauses of Article 366(29A). All other transactions would have to
qualify as sales within the meaning of the Sale of Goods Act, 1930
for the purpose of levy of sales tax.
45. Of all the different kinds of composite transactions the drafters
of the 46th Amendment chose three specific situations, a works con-
tract, a hire-purchase contract and a catering contract to bring with-
in the fiction of a deemed sale. Of these three, the first and third in-
volve a kind of service and sale at the same time. Apart from these
two cases where splitting of the service and supply has been consti-
tutionally permitted in sub-clauses (b) and (f) of clause (29A) of Ar-
ticle 366, there is no other service which has been permitted to be so
split. For example the clauses of Article 366(29A) do not cover hos-
pital services. Therefore, if during the treatment of a patient in a
hospital, he or she is given a pill, can the sales tax authorities tax the
transaction as a sale? Doctors, lawyers and other professionals ren-
der service in the course of which can it be said that there is a sale of
goods when a doctor writes out and hands over a prescription or a
lawyer drafts a document, and delivers it to his/her client? Strictly
speaking with the payment of fees, consideration does pass from
the patient or client to the doctor or lawyer for the documents in
both cases.
46. The reason why these services do not involve a sale for the
purposes of entry 54 of List II is, as we see it for reasons ultimately
attributable to the principles enunciated in Gannon Dunkerley’s case
MANU/SC/0152/1958 : (1958) 9 STC 353 (SC), namely, if there is
an instrument of contract which may be composite in form in any
case other than the exceptions in Article 366(29A), unless the trans-
action in truth represents two distinct and separate contracts and is
discernible as such, then the State would not have the power to
separate the agreement to sell from the agreement to render service,
and impose tax on the sale. The test therefore for composite con-
tracts oilier than, those mentioned in Article 366(29A) continues to
be - did the parties have in mind or intend separate rights arising
out of the sale of goods. If there was no such intention there is no
sale even if the contract could be disintegrated. The test for deciding
whether a contract falls into one category or the other is as to what
is “the substance of the contract”. We will, for the want of a better
phrase, call this the dominant nature test.
** ** **
50. We agree, after the 46th Amendment the sale elements of those
contracts which are covered by the six sub-clauses of clause (29A) of
Article 366 are separable and may be subjected to sale tax by the
States under entry 54 of List II and there is no question of the domi-
nant nature test applying.
51. What are the “goods” in a sales transaction, therefore, remains
primarily a matter of contract and intention. The seller and such
purchaser would have to be ad idem as to the subject matter of sale
or purchase. The court would have to arrive at the conclusion as to

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