THE STATE OF MADRAS vs GANNON DUNKERLEY & CO.,(MADRAS) LTD.

The Supreme Court held that the Madras Legislature's power to impose sales tax under Entry 48 of List II in the Government of India Act, 1935 does not extend to the value of materials used in building contracts, as these contracts are agreements for work and not for the sale of goods. The Court clarified that 'sale of goods' must be interpreted in accordance with the Sale of Goods Act, 1930, and that in a building contract, there is no separate sale of materials, thus rendering the provisions of the Madras General Sales Tax (Amendment) Act, 1947 ultra vires. The appeal was dismissed, affirming the High Court's ruling.