STATE OF ORISSA & OTHERS v. • THE TITAGHUR PAPER MILLS COMPANY LTD.

-A STATE OF ORISSA & OTHERS

v• • THE TITAGHUR PAPER MILLS COMPANY LTD. B &ANR.

March I, 1985

(V.D. c I TULZAPURKAR, AMARENDRA NATH SEN AND • - - - .. D.P. MADON, JJ.]

Ori.1sa Sale~ Tax Act 1947-Sec!ions 38 and 5 (!)-Scope of-Notifications levying purchase tax on hainboos agreed to be served and standing trees agreed to be sevred-Whether ultra vires the Act-Whether create new class of goods no( known to /aw-U'hether atnount lo tax on itnmovable property-And not on D goods-notifications issued in supersession of all previous notifications on the subject-Whether wipe out all tax liability accruing under previous .notifications.

"Timber" 'and "logs"-Whether mean the same thing.

Ba1nboo contract-Nature of-Whether an ea},·enienl.

E lnterpretation-Natu1·e and 1n1.11i•1g ;Jj .1 docunient-·Whether can be detcrn1ined by th.e end·result-Court-1/ co11J,J go inrO policy 1natters.

Constitution of India-Article 141-Co11/lirti11g views of the Supretnc Court nn same point-View of larger Bench to be ft/lowed in pr<'ference to view of smaller Bench.

F Scctio:1 3B of the Orissa Sales Tax Act 1947 empowers the State Govern· ment to declare from time to time any goods or class of goods to be liable to tax on turnov~r of purchases. The proviso provides that no ta.'!; shall be payable on the sales ?f such g)Jds or class of g.Jods declared under this section. Section 5(1) prior to its amendrnent by the Orissa Sales Tax (Amendtnent) Ordinance, 1977 provides that the tax payable by a d~aler under the Orissa Act should be levied on his taxable turnover at such rate not ex:ceeding thirteen percent and ' G subj~ct to such conditions as the State Government might from time to time by notific:ttion specify.

On May 23, 1977 the State Government issued two notifications. Notifica· tion No. SRO 372/77 was made under section 3B amending the earlier notifica· tion dated April 23, 1976. This notification made standing trees and bamboos H agreed to be severed Jiabli; to tax on the turnover of purchase with effect from

ORISSA v. TITAGHUR .PAPEI!. MILLS 27 June 1, 1977. Notification SRO No. 373/77 issued under the first proviso . . to. A sec,ion 5(1) of the Orissa Act amende~ with effect fron1.June 1, 1977 the second. of the two notificatioo.s of April 23, 1976 and direc.ted that. th~ tax payable by, a dealer under the Orissa Act on account of purchase of bamboos agreed to be, severed and standing trees agreed to be severed wOuid be at the rate'o~ 10~,- .·

On December 29, 1977 the Orissa Sales Tax (Am~ndm~nt) ()rdlriance, 1977 was promulgated amending the Orissa Act ·with effeCt from Ja,rtuarY, 1978.: With effect from the sar'ne date two notifications SRO .~o- 900{77 ,and SRb Nq:.~ 901/77 were issued; the first notification which was issued under the provision·s of section 3B ana in supersession of all previous· notificUtions on 'the subject: - declared that the goods mentioned in ColumO. (2) ·of th~ sch_edule to the·n.~tifi~ •· cation were liable to be taxCd on the turnover' of Pu'rchase with ~ffec~ frO~ ~ ~·· January 1, 1978. Entries 2 and 17 in the schedule of this notification spc9ified c "bamb:-os agreed to be severed" and "standing trees agreed tO be severed" , respectively. Notification No. 901/77 issued under section 5 (1) wls in super- ses~ion of all previous notifications in that regard. The State GOvcrnm~nt, by this notification, directed that with effect fronl January 1, 19?8 the tax pay'ab!e by a dealer under the Orissa Act on account of purchase of goods specified in column (2) of the schedule to the notification would be at the rate sPeciti'ed · D against it in colu1nn (3) thereof. The rate of purchase tax for bamboos agreed·; to be severed and standing trees agreed to "be severed was prescribed at 10%. The Ordinance ~as repealed and replaced by Orissa Sales Tax ·(AmendmeOt) Act of 1978.

A large: number of writ petitions were filed before the High Cou_rt impugn~ ing the notifica1ions dated May 23, 1977 and December 29, · 1977. One. grotip E of petitioners consisled of those who had entered into agreements with the State for the felling, cutting, obtaining and re1noving bamboos from forest areas for the manufacture of paper· (blmboo contracts), and thci other' group -consisted of those who had entered into agreements for the purchase of 'standiOg trees (Timber Co'ntracts). - ·

The bamboo conlracts were a grant of exclusive right and licence to fell, - F cut and remove bamboos from the forest. Under the terms of auction the respondent was bound to pay a minimum royalty irrespective of the qUantity of bamboos cut and removed. The Governor· of the State was ·calICd ·the "grantof~· ! ·. ·of the licence. The bamboo contracts were in respect of different areas for: · "periods ranging from 11to14 years with an option to renew the agree'ments for· t further periods. '

The respondent in-CA No. 219/82 contended before· the High CoUtf that , the subject matter of the .Bamboo· contract was not a sale or poi-chase of ioods · but was a lease of immovable property or in any event was a creation of an inte· rest in i-omovable property by Way of-grant profit a jJrendre which amou~tcd to an cas~ment under the Indian Basements Act 1882 and that for that reason· the royalty payable under the bamboo contracts could not be made exigib!e·to either· sales tax or purchase tax and that the impugned provisions Or the n-otfric~tions were ultra vire-s t-he Act. It was also contended that the bamboo contract was 1 :

stiPREJ.IE COuRt REPORT~ (19S5] ~ S.C.k

A ~ works contract and for this reason also the transaction was not exigible to sales tax or purchase tax, and since the two notifications of December 29, 1977 were expressed to. be made in supersession of all earlier notifications on the s~bject, the liability to sales tax under the said notifications of May 23, 1977 was "'Ped out.

B In Civil Appeal No. 220/82 the bids of the respondent firm at auctions Reid by the Government in respect of trees standing in forest areas were accept- ed aod on confirmation of the ·bids by the competent authority it antered into aareements with the Government for felling and removing such trees. The f~5pondent, in turn,, sold the trees felled by it in the form of Jog5 to others. At th.e relevant time the respondent was successful at five auction sales and on ratification or the bids entered into five separate agreements (timber contracts) for fellina and removing the trees standing in the forest areas.

After the issue of the notifications of May 23, 1977 the respondent filed a writ petiti'?n in the High Court against the State and the Sales Tax and Forest Authorities contending (l) that the levy of purchase tax on standing timber agreed to be severed was beyond the legislative competence of the Stat~ Legis- lature and (2) the notifications imposed a tax both at the point of sale and at the point of purchase and for this reason were invalid and ultra vires the Act. It. was also contended that timber contracts were works contracts and the amounts payable under them were not exigible either to purchase tax or sales tat.

The High Court a11ow~d all the ·writ petitions and quashed the impugned notifications.

In appeal to the Supreme Court the State contended that the subject matter of the impugned provisions is "goods" within the n1eaning of the tenn in the Sale£of Goods Acfaod the Orissa Act, and that what was made exigible to tax under the impugned provisions notifications, was a completed purchase of ll<>ods.

' 0Ri~SA v. TITAGHUR PAPER MiLLS 29 purchase of goods." The addition of the word "purchase" in Entry 54 permits the State Legislature t.o levy a purchase tax and does not confine its taxing power merely to levying sales.tax. [62F ·;HJ '

(b) A cantena of decisions of this Court had held that the expression ..sale of goods" had been used in the Goverqment of India Act; 193~ in the same sense in which it is used in the Sale of Goods Act, 1930 and that it authorised the imposition of a tax only when there was a completed sale involving transfer of title to the goods. While construing Entry 54 in List II of the Seventh Schedule to th,: c0n5titution interpretation was adopted and any attempt by th~ State Leghlature to give that expression an artificial meaning or an enlarged meaning or to bring within its scope what would not be comprehended within that expression would be unconstitutional and ultra c vires. [631' ; 64G-H ; 63G)

State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. [1959] SCR 379; The Sales Tax Officer, Pilibhit v. Messrs Budh Prakash Jai Prakash [1955] I SCR 243, 247.

Bhopal Sug~r Industries Ltd., M.P. & A11r. 11. D P. Dube, Sales Tax Officer, D Bhopal Region, Bhopal & Anr., AIR 1964 SC 1037; KL. Johar & Co, v. Deputy Co1nmercial Tax Officer [1965] 2 SCR 112; Joi11t Co1nnierciOl -Tax Officer, Harbour Div. II Madras v. Young Men's Indian Associall'on (Reg.) Madras & Anr. [1970] 3 SCR 680; State of Maharashtra .& Anr. v. Champa/al Kishanlal Mohta [1971) 1 SCR 46, followed. E (c) Although a State is free to impose a tax at one or more points in a series of sales or purchases in respect of the same goods, the Orissa Act has adopted a single point levy by enacting the proviso' to section 3B under which no tax is payable on the sale of goods or class of goods declared -under that section to be liable to tax on the turnover o( purchases. The proviso to section 8 states that "the same goods shall not be taxed at more than one point in the same series of sales or , purchases by successive dealers." Therefore, where in a series of sales or purchases tax is levied at a particular point neither sales tax nor purchase tax_ can be levied at !!Ilother point in th;same series. (65C-EJ.

(d) Since any attempt on the part of the State to impose by legislation tax on sales or purchases in respect of what would not be "sale" or a "sale of goods" under the Sale of Goods Act, 1930 is unconstitutional, any attempt by it to do so in. the exercise of its power of making subordinate legislation, would be equally unconstitutional. Similarly, where any rule or notification travels beyond the ambit of the parent Act, it would be ultra vires the Act. Equally, sales tax authorities purporting to act under the Act or under any rule made or notifica. tion issued thereunder cannot travel beyond the scope of such Act, rule or notification." Thus, the sales 'ta11: authoritie~ under the Orissa Act cannot assess· to sales tax or purchase tax, a transaction which is not a sale or purchase of H

SUPREME COURT RE~PORTS [1985] :i s.c.R. goods or assess to sales tax any goods or class of goods which are liable to purchase tax or a~sess to tax, whether sales tax or purchase tax, goods at another point in the same series o.f sales or purchases of those goods by successive dealers who are liable to be taxed at a different point in that series. [65G-H; 56A-C]

B (2) Thfre is no substance in the argun1ent of the respondent that by the impugned provisions a new class of goods, not known to law, had been created. The definition of the expression "goods"' in both the Sale of Goods Act and the Orissa Act which is almost in identical terms, includes "things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale." [66E ; G-H] c (a) An examination of the definitions of movable property and inunov~ able property given in the General Clauses Act, Registration Act and Transfer of Property Act, show that things attached to the earth are "immovable property." The term "attached to earth" means "rooted in the earth as in the case of trees and shrubs." Thus, while tre::s rooted in the earth arc irnmovable property as being things attached to the earth,by reason of the definition of the D term "imovable property" in variolls statutes namely- the General Clauses Act and the Orissa General Clau.;;cs Act and the RegistratiJn Act read with the definition of the expression "attached to the earth" given in the Transfer of Property Act, standing timber is ''movable property" by reason of its exclusion from the definition of "immovable property" in the Transfer of Property Act and the Registration Act and by being expressly included within the meaning of th~ tern1 "movable property" given in the E Registration Act. [67E ; 68F ; 68G-H ; 69A]

(b) Theiterm "standing timber.. · ha'i been judicially recognised as "a tr(.!e which h in a state fit for the purposes of being used as wood for buildings, houses, bridges, windows, "whether on the tree or cut and seasoned'', thal is, a tre~ m~ant to be converted into timber so shortly that it could already be looked upon as timber for all practical purposes even though it is still stand· F ing. Thus, trees which are ready to be felled would be standing timber and therefore "movable property." While trees"(including bamboos) rooted in the earth being things attached to the earth are immovable property and if they are "standing timber", are 1novable property, trees (including bamboos} rooted in the earth which are - agreed to be severed before sale or under the contract of sale are not only movable property but also goods. [o9D-E ; 70B·C]

Smt. Shantabal ·v. State of Bombay & Ors. [1959] SCR, 265, 275-6, G followed.

(c) The distinction which existed in English Jaw between /ructus naturales (natural growth of soil regarded as part of the soil until severance) and fructus industriales (which are chattels considered as representing the Jabour and expense of the occupier and thing independent of the land) does not exist in .Indian law. In a case of this nature the only question that falls for conside· ration in Indian law is whether a transaction relates to "goods" or "movable u-

1) ORISSA V. TITACHUR PAPER MILLS 31 PL'Operty". If it is sa1e of immovable property, a document of the kind A specified in section 17 of the Registration Act is required_ to be compulsorily registered but a document relating to sale of goods or of movable property is not required to be registered. Secondly under Entry 54 of List II of the Seventh Schedule the State cannot levy a tax on the sale or purchase of any property other than goods. [71C-D] B

3Copy pinpoint3. The respondent's contention that the impugned provisions levied a purcha~e tax on immovable property and not on goods and that the State Government has t'ravelle_d beyond its taxing power has no merit. [71F]

_-{ (a) The High Court erred in holding that the impugned provisions amounted to levying a tax on an agreement to sell and not on actual sale or c purchase, th1t staading tr~es being unascerrained goods continued to be the property of the State Government until felled and therefore the title to such tree~ or b1mboo³ is transferred in favour of the Forest Contractor only when the trees or bamboos were felled and severed in accordance with the terms of the contract. There is a fallacy in the reasoning of the High Court in that the tligh Court read merely th:! descriptio1 of th(! goo.ds given in the impugned provision~ by itself and n1t in conjunction with their governing words. D [71G·H ; 72A-B]

(b) Tax levied under section 3B is not on goods declared under that section but on the turnover of purchases of such .goods. A reading of the notification, issued under sections 38.and 5(1) ~s a whole makes it clear that the taxable ev.!nt is not an agreement to sever standing trees or bamboos but the purchase of bamboos or standing trees agreed to be severed. [72C-DJ E (c) The use of the terms "agreed" in- the description of goods showed that there mnst be an agreement between the buyer and the seller and under this agreement standing trees as also bamboos mu5t be agreed to be severed. According to the definition of ·'goods" such severance may be either before sale or under the contract of sale, The Sale of Goods Act makes a distinction between sale and agreement to sell and provides that where there is a transfer F from the buyer to the seller of property in the goods which nre the ·subject matter of the agreement to sell, the contract of sale is a sale' but when the transfer of property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled it is an agreement to sell which becomes a sale when the time elapses or such conditions are fulfiled. In the first case the coptract is "executed contract" while in the second it is "executory." [72E ; 7JC-DJ-

(d) A conspectus of the relevant sections o, the Sale of Goods Act shows that a purchase would be con:iplete when the goods (in the case standing trees or bamboos) are specific goods. If these factors exist, then unless a different intention appears either from the terms of the contract or can be inferred from the conduct of the parties and other circumstances of ihe case, the property in such goods would pa<;s from the seller to the buyer when the contract is made an<.l it is immaterial whether the time of payment of the price or the time of ff

32 SUPREME COURT REPORTS [1985] 3 S.C.R.

taking their delivery (of standing trees agreed to be severed or bamboos agreed to be severed or both) is postponed. If, however, there is an unconditional contract for the sale of unascertained goods then unless a different intention appear!, the property in them would be transferred to the buyer when the goods are ascertained and it would be immaterial whether the time of payment of the price or the time of taking delivery of standing trees agreed to be severed or bamboos agreed to be severed or both is postponed. In either event,·the sale and purchase would be completed before severance. Therefore for the impugned provisions to apply the severance of the standing trees or bamboos must not be before sale but under the contract of sale, that is, after the sale _thereof is completed. The absence in the impugned provisions of the words "be_fore sale or under the contract of sale" thus made no di~erence. The subject matter of c the impugned provisions was ·goods and the - tax levied thereunder was on the completed 'purchase of goods. 76F-H ; 77 A-CJ

4Copy pinpoint4. The High Court has confused the question of interpretation of the impugned provisions with the interpretation of Timber Contracts and Bamboo Contracts. The question of the validity of the impugned provisions had nothing to do with the legality of any action taken thereunder to make exigible to tax a D particular transaction. If a notification is invalid, all action taken under it would be invalid also. Where on the other hand, a notification is valid, an action purported to be taken thereunaer contrary to the terms of that notifica~ tion would be bad in law without affecting in any manner the validity of the notification. Were the interpretation placed by the High Court on the Bamboo contracts and the Timber Contracts correct, the transactions covered bY them would not be liable to be ta,.ed under the impugned provisions and any attempt E or action by the State to do so w )uld be illegal but the validity of the impugned ··~ provisions would not be affected thereby. There is no merit in the challenge to the validity of the impugned provisions on the ground of their unconstitu· tiona!ity. [77D ; F-H ; 78A)

5, (a) The High Court also erred in its view that bamboos and trees agreed to be severed were the same as bamboos and timber after they were felled and that since bamboos and trees were liable to tax at the sale point, E taxation of the same goods at the purchase point amounted to double taxation a~d that this was contrary to the provisions of the Orisaa Act. [78CJ

(b) Not only does the Orissa Act· expressly forbid double taxation but it aJ<;o forbids the levying of tax at more than one point in the same series of sales or purchases by successive dealers. This is evident from the provisos to tions 3B and 8. Under the proviso to section 3B no tax is payable sales G s~c oods or class of goods declared under that section to be liable to tax on ~egturnover of purchases. Under the proviso to section 8 the same goods are not to be taxed at more than one point in the same series of sales or purchases by successive dealers. [78E~F]

(c) The two notifications of De~ember 29, 1977 were issued as a result of the Orissa Sales Tax (Amendment) Ordinance 1977 which later became lbe . ff

p. 33 Copy page pinpoint

Orissa Sales Tax (~mendment) Act, 1978, while the two notifications of A" May 23, 1977 were issued prior to the amendment. [79A]

(d) Prior to January I, 1978 under section 5(1) tax was payable by a dealer on his taxable turnover o"f sales as also purchases at a certain fixed per- centage. This rate applied both to sales tax and purchase tax. But the pur· chase tax was payable only on the turnover of purchases of goods declared· B under section 38. In respect of goods not so declared a dealer was liable to pay only sales tax. Under the proviso to this section, if goods were declared to be liable to purchase tax, no tax was payable on sales of such goods. Under section 5(1) the State Government was required to issue a notification only when it wanted to fix a rate of tax hia:her or lower than that specified in this· section. If no .such notification.was is'3ued then the tax payable, be it sales tax c or purchase tax. was to be at the rate mentioned in section S(l). Wher~. how· ever, any goods were declared under section 3B to be liable to tax- on the turnover of purchases, the notification prescribing a higher or lower rate of sales tax issued under the first proviso to section 5(1) would thereupon ·ceases to be observative by reason of the operation of the proviso to section 3B and it was not necessary to repeal expressly that notification. It was also not necessary for the State Government to issue a notification fixing the rate of purchase tax D unless it wanted to fix a rate higher or Jower than that specified in section 5(.1). Where no such notific1tion was issued, the rate of purchase tax would be the on.e which was mentioned in section 5(1). [79C-H]

(e) After January 1, 1978 no rate of tax was specified in the Orissa Act. Under section 5(1) the State Government is given powef to notify from time to time the rate of tax-sales tax or purchase tax by issuing notifications. The E notification dated December 29, 1977 issued under section 5(1) does not contain any entry in respect of ba1nboos or timber or in respect of bamboos agreed to be severed or standing trees agreed to be severed. If they were liable to sales -tax, they would fall under the residuary entry No. 101 and b~ liable to sales tax at the rate of Seven percent. If any goods feeling under the residuary entry or any Other entry in that notification are declared under section 3B to be liable to tax on the turnover of purchases, the residuary entry Or that particular entry would automatically cease to operate in respect of those goods by reason of the proviso to section 3B without there being aoy necessity to delete that particular entry or to amend the residuary entry by excluding those goods thereform. It would be necessary for the State Government to issue a notification sPecifying the ra"te of purchase tax on those goods because unlike what the position was ' prior to January 1, 1978, on and after that date toe new sub~section 5(1) does not specify any rate of tax but leaves it to the State Government to notify it from time to time. The High Court was in error in holding that the impugned provisions were ultra vires the Orissa Act as they amounted to "double taxation." [80A-E]

6Copy pinpoint6. (a) There was rro substance in the contention that the two notifications of December 29, 1977 having been made in supcrsession of all previous notific- ations issued on the subject their effect was to wipe out all tax liability which fJCcrued under the earlier notifications of May 23, 1977. (800-HJ H

34 SUPREME COURT REPORTS [1985] 3 S.C.R.

A (b) The word "supersession" in the notifications of December. 29, 1977 was used in the same sense as the words "repeal a!ld raplacement" and, there- fore, d_oes not have the effect of wiping out the tax liability under the previous notifications. AU that was done by using the words "in supersession of all previous notifications" in the Notifications of December 29, 1977, was to repeal and replace the· previous notifications and not to. wipe out any liability incurred B under the previous notifications. [146C-D]

(c) Both sections 3B and 5(1) in express terms conferred power upon the State Government to issue notificaiions from time to time. .Under these provi- sions the State Government can issue a notification and repeal and replace it by another not.ification. [SIC] c (d) The issuance of the notifications became necessary by reason of the change brought'about in the scheme of taxation in 1977. With effect from Jtinuary 1. 1978 unless a notification was issued specifying the rate of tax no dealer would be liable to pay any tax under the O~issa Act. Under the amen,ded section if the. State Government wanted to tax any goods or class of goods at a higher or lower rate it issued notifications specifications specifying such rate. Since no rate of tax was specified in the new section but was left to the State D Government to fix it, it was necessary to issue a notification .consolidating all previous notifications on the subject in respect of goods liable to purchase tax which the State Government did. [82E; 83A ; C; DJ

7Copy pinpoint7. (a) Timber contracts were not works contracts but were agreements to sell standing timber. [146D]

E (b) Timber contracts were not transsactions of sale or purchase of stanO· ing trees agreed to be severed. They were mc1ely agreements to sell such trees. The property in the trees passed to the respondent firm only in the trees which were felled, that is, in timber, after all the conditions of the contract had been complied with and after such timber was exa1nined and checl-.ed and removed from the contract area. The impugned provisions, therefore, did not apply to the transactions covered by the Timber Contracts. [98 A-B] F (c) A conspectus of the terms of the Sale Notice, the Special Condilions of Contract, the General Conditions of Contracr and the various statuto1 y provisions shows that the heading "sale notice of timber" as also the use of the words "timber and other forest products will be sold by public auction" are not determinative of the matter. The other terms and conditions of the contract make it clear that the Timber Contracts were not unconditional con· G tracts for the sale of goods in a deliverable state and the property in the trees specified in Schedule I of the Contract did not pas<; to the respondent firm when each of the contracts was made. The signing of the Timber Contracts did not result in a concluded contract because: each contract was conditiona·I upon the State Government ratifying the acceptance of the bid, the ratification order did not becon1e an unconditional contract for the sale of specific goods in a deliver~ able state for the respondent firm had no right to sever the trees and take them away before complying with the other conditions of the contract, namely, furni·

ORISSA V. TITAGHUR PAPER MiLLS 35 shing a Coupe Declaration Certificate within the prescribed time, registering the property mark or trade mark, making the security deposit and so on. Tois apart, the respondent firm was not at liberty to fell trees of his choice nor was he entitled to remove the felled trees by any route which it liked but only by specified routes. [95F-H; 96B-C; 97A-B]

(d) Although under rule 40 of the Orissa Forest Contract Rules 1966, Rules stipulates that the respondent, fi~m was not entitled to any compensation for loss ~ustained by reason of fire, tempe!lt, disease, natural calamity or any wrongful act of a third party this ·only showed that after a Timber Contract was concluded the risk passed to the respondent firm. Under 1ection 26 of the .Sale of Goods Act when the property is transferred to the buyer, the goods are nt the buyer's risk whether delivery had been made or ~not; but this section is qualified by the phrase uunless otherwise agreed." The limber Contr&cts in this case were subject to contract to the contrary. This is made clear by rule c 44 which states that "al! forest produce removed from a contract area in accordance with these rules shall be at the absolute disposal of the forest contractor." [97E-H]

8Copy pinpoint8. (a) On the question whether the words ~'timber" and "logs" mean the samething in commercial ipartance the no material had been produced by the partie!. Where a term has not been statutorily defined or D judicially interpreted and there is insufficient material on record as to the mean- ing of the words1 the Court must seek to ascertain its meaning in common parla ·1ce with such aid as is available to it. the court may take the aid of dictionaries In such cases to ascertain its meaning in common parlance. In doing so, the Court must bear in mind that a word is used in different senses according to its context and a dictionary gives. all the meanings of a word and the Court would have to select the particular meaning which would be relevant to the dontext in which it has to interpret that word. [104E; lOSB~C; 146G~HJ E ' (b) The Orissa Act does not define the term ''timber" or "Jogs.'' The statutory definition of "timber" given in the Orissa Forest Act, 1972 is that ~··. timber includes "trees fallen or felled and all wood cut up or sawn." T.he Madras Forest Act, 1882 and the Indian Forest Act 1927,the two Acts in force in the State of Orissa prior to the enactment of the Orissa Forest Act, 1972 too have not given any exhaustive definition of the term ''timber." But what is F apparent from these definilioni is that the word "timber" is not confined merely to felled trees in the forests. In subsequent Act like the Orissa Forest Produce (Control of Trade) Act, 1981 the concept that timber is not merely felled trees has been emphasised. Therefore a conspectus of the meanings given to the term 1 G "timber" in statutes, different dictionaries and as judicially interpreted by this Court as well as by some High Courts shows that it means "building material, generally wood, used for building of houses, ships etc. and the word is applied to wood of growing trees capable of being used for structural purposes. Hence, collectively to the tre,es themselves." A log according to the dictionaries means a bulky mass of wood now usually an unhewn portion of a felled tree or a length cut off for firewood. These lo¥s will be nothing more than wood cut up or ff

36 SUPREME COURT REPORTS (1985] 3 s.C.R· sawn and would be timber. Similarly, a beam is timber sawn in a particular A way. So too ratters would be timber logs put to a particular use. In ordinary parlaiice a plauk would be flattened and smoothed timber. [105C; F; l06C; 107A-D; Fl Mohanlal Vishram v. Commissioner of Sales Tax, Madhya Pradesh, Indore [1969] 24 STC JO] ; G. Ramaswamy and others v. The State of Andhra B Pradesh and others [1973] 32 STC 309, approved and

Krupasindhu Sahu & Sons v. State of Orissa [1975] 35 STC 270, overruled. j

9Copy pinpoint9. (a) Sales of dressed or sized logs having been assessed to sales tax, sales c to .the respondent Firm of timber by the State Government fro,11 which logs were 1--- made by the respondent firm cannot be made liable to sales tax as it would amount to levying tax at two points in the same series of sales by successive dealers, assuming that the retrospectively substituted definition of "dealer" in "' clause (c) of section 2 of the Orissa Sales Tax Act, 1947 is valid. [147B-C]

(b) Sales of logs by the respondent firm during "the period June 1, 1977 D and December 31. 1977 would be liable to tax at the rate of ten percent. Assum- ing that the sales had been assessed to tax at the rate of six percent as contended by reason of the period of limitation prescribed by section 12(8) of the Orissa \ . Act, the respOndent-firms assessment for the relevant period cannot be re-opened to reassess such sales at ten per cent. [1470-E]

JO. (a) The Bamboo Contract is not a lease of the contract area to the respondent company in CA 219/82. Nor is it a grant of an easement to the -->-.::- respondent Company, as it was not a grant of any right for the beneficial equip- ·- ment of any Of the respondent company. In ·addition to the right of entry there are other important rights flowing from the contract. It is a grant of a profit a prendre which in Indjan law is a benefit to arise out of land and thus creates an interest is immovable property. A profit a prendre is a benefit arising out of land and in view of section 3(26) of the General Clauses Act, it is "immovable property" within. the meaning of the Transfer of Property Act. [147F-H]

(b) T.here are countervailing factors which go to show that a Bamboo contract is hot a contract of sale of goods. It is a grant of exclusive right and licence to fell, cut, obtain and remove ban1boos. The person giving the grant the Governor of the State, is referred to as "granter"; the consideration payable is "royalty" which is not a term used in legal parlance for the price of goods sold. It is not an agreement to sell bamboos standing in th~: contract area with the accessary licence to enter upon such area for the purpose of felling and removing bamboos nor is it for a particular felling se.ason only. It is an agree- ment for a period ranging from fourteen, thirteen and eleven years with the option to renew the contract for further terms of twelves years. The payment of royalty has no relation to the actual quantity of bamboos cut and removed, The respondent company was bound to pay a minimum royalty and the royalty paid was always- in excess of the royalty due on the bamboos cut in the contract areas. The Bamboo contract conferred uron the respondent-company a "

ORiSSA v. TITAGHUR PAPER MiLLS

. benefit to arise out of land, na~ely, the right to cut and remove bamboos whiCh would grow from the soil coupled with several ancillary rights and Was. thus a grant of a profit a prendre. Being a profit a prendre or a benefit to· arise out of land any attempt on the part of the State Government to tax the amounts payable under the Bamboo Contract would not ~nly be ultra vires the Orissa Act but also unconstitutional as being beyond the State's taxio~ power under Entry 54 in List II in the Seventh Schedule to the Constitution of.India. [119C; E; 120B-D; 121<;)-H]

11Copy pinpoint11. The decision of Firm Chhotabhai Jethahhai Patel & Co. v. The State of Madhya Pradesh [1963] SCR 476 on which the appellant relied is not good law and hlls been overruled by decisions of larger Benches of this Court. (State of Madhya Pradesh v. Yakinuddin [1963] 3 SCR 13) [148Al c Mis Mohan/al flargovind of Jubbulpore v. CommiS.rioner pf Income Tqx C.P. & Berar Nagpur L.R. [1949] 76 !,A. 235; !LR 1949 Nagpur 892; AIR 1449 PC 311 · Ananda Behra and another v. The ~State of Orissa and another [1955] 2 SCR• 919 and Smt. Shantabai v. State of Bombay, & Orissa [1959] SCR 265, 275-6 referred to; and 'i

Board of Revenue Etc. v. A.M. Ansari Etc.[1916] 3 SCR 661, held D inapplicable.

12Copy pinpoint12. (a) The case of State of M.P. v. Orient Paper Mills Ltd. [1977] 2 SCR 1219 on which the appellant relied is not good 1aw as that decision was given per incurium and had laid down principles of interpretatiOn Which arc wrong in law. The basic and salient features of the agreement before the Court in Orient Paper Mills' Case were the same as in the case of Mahadeo v. State E of Bonibay and the Court was not justified in not adverting to that case arid the other cases referred to on the ground that these cases dealt with the general Jaw of real property. [142 H ; 143A] ·

(b} The enunciation of law made by the Court in·the Orient· Paper Mills case that a document should be so construed as t0 bring it within the ambit of ·-

..... a particular statute relevant for the purpose of the dispute before the court and that in order to do so, the Court could ]ook at only such of the ·clius'es of the do, ument as also to just one or more ~of the consequences flowing from he document which would fit in with the interpretation which the court want"d to.put on the document to make that. stalute applicable, is fraught with. consider- F •

able danger and mischief as it may expose documents to the personal .Prcdilic.. tions and philosophies of individual judges depending upon wheiher aCco~ciin'g to them it would be desirable that documents of the type.they have to construe G should be ma, e subject to a particular statute or not. [t39E-G]. . , . .. J /

(c) Secondly, in observing that the St.:>te Government, for reasons best known to it had "left the exploitation of the forest resources ·in part to the private sector" the court h d overlooked that it wa; a matter of policy for the State to decide whether such tran~actions should be entered ·into or not, whether the transactio11s entered iiltO by th'! State was for the industrial developmen'f-df

. suPl!.BMB"ciouu REPORTS [1985] 3 s.c.tl. . A the State' and whether the transaction ensured employment for the people of the area and so on. (d) Thirdly, the n ture and meaning of a document cannot be deter- mined by its end-result or one of the consequences which flow from it. In look- in merely at the end-result of the agreem:~nt the court overlooked a firmly esta- B blished principle that both the agreement and the sale must relate to the same subject matter and therefore, there cannot be an agreement relating to one kind of property and a sale as r<gards another. [141C-D]

(e) .In coming to the conclusion that the term ''royalty" used in the document before it was merely a '·feudalistic cuphimism" for the ''price of c timber", the court ov rlooked the fact that the amount of royalty payable by the respondent was consideration for all the rights conferred upon it under the contract though it waS to be calculated according to the quantity of bamboos felled. [141H ; 142AJ

13Copy pinpoint13. Where there are two or more conflicting views of this court on the sa1ne point the proper course for the High Court or even for s1naller Benches of this court is to find out and follow the views expressed by larger Beaches of this court in preference to those expressed by smaller benches. This practice has crystallise.d into a rule of law declared by this Court. [142E..F]

U.O.I. v. K.S. Subramanian [1977] I SCR 87, 92, followed.

14Copy pinpoint14. A works contract is a compendious term to describe conveniently a E contract for the performance of work or services in which the supply of mate- rials or some other goods is incidenlal. lo the instant case, the timber Contracts being agreements relating to .movable ;property and the Bamboos Contracts being a grant of an interest in immovable property, cannot be works contracts. The payee of the price, namely, the Government bas not undertaken to do any \VOrk or labour. It was the contractor who had to enter upon the land to fell the trees and remove them. So is the case of Bamboo Contracts. F [144H ; 145A]

Con1n1issio11er of Sa/el Tax, M.P. v. Purshotta1n Preniji [1970] 26 STC 38, ' )

41 S.C., referred to. -~

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 219- ' 220 of 1982. G From the Judgment and Order datedJl9.9.1979 of the High Court of Orissa in D.J C. Nos. 811 & 1048/77. Anil B. Divan and R. K. Mehta for the Appellants.

S.,T. Desai, S.R. Banerjee and Vinoo. Bhagat, B.R. Aggarwal, II Miss Vijaylakshmi Menon Vinod Bob de for the Respondents.

6RiSSA v. TiTAGHUR PAPER MILLS (Madon, J.) :\9 Th·e Judgment of the Court was delivered by A

MADON J. These two Appeals by Special Leave g.ranted by this Court are against the judgment and order of the Orissa High Court allowing 209 writ petitions under Article 226 of the Constitution of India filed before it. B

Genesis of the 'Appeals.

On May 23, 1977, the Government of Orissa in the Finance Department issued two Notifications under the Orissa Sales Tax Act c 1947 (Orissa Act XIV.of 1947). We will hereinafter for the sake of brevity refer to this Act as "the Orissa Act". These Notifications • were Notification S.R.O. 372/77 and Notification S.R, 0 No. 373/

77. Notification S.R.O. No. 372/77 was made in exercise of the powres conferred by section .3-B of the Orissa Act and Notification S.R.O. No. 373/77 was made in exercise of the powers conferred by the first proviso to sub-section (I) of section 5 of the Orissa Act. We will refer to these Notifications in detail in the course of this judg- ment but for the present suffice it to say that notification S.R.O. No. 372/77 amended notification no. 20209-CTA-J 4/76-F dated April 23, 1976, and made bamboos agreed to be severed and standing trees agreed to be severed liable to tax on the turnover of purchase with effect from June I, 1977, while Noification S.R.O. No 373/77 amen- ded with effect from June l, 1977, Notification :itii. 20212-CTA -14/76-F dated April 23, 1979, and directed that the tax pa}- able by a dealer under the Orissa Act on account of the purchase of bamboos agreed to be severed and standing trees agreed to~be severed would be at the rate of teu per cent. After the promulgation on F December 29, 1977, of the Orissa Sales Tax (Amendment) Ordinance 1977 (Orissa Ordinance No, 10 of 1977 ), which amended the Orissa Act, two other notifications were Issued on December 29, 1977, by the Government of Orissa in the'Finance Department, ·namely Notification No. 67178-C.T.A. l 35/77 (Pt.) F(S.R.O. No 900/77) and Notification No. 67181-C.T.A. 135/77-F (S.R.O. No. 901/77). The G first Notification was expressed to be made in exercise of the pqwers conferred by section 3-B of the Orissa Act and in supersession of all previous notifications issued on that subject. By the said notifi- cation the State Governmer,t declared that the goods set out in the Schedule to the saicj Notification were liable to be taxed on the turn- over of purchase with effect from January L 1978. Entries Nos. 2 H

SU~REMll COURT REPORTS [1985] 3s.c.a. A and 17 in the Schedule to the said Notification specified bomboos agreed to be severed and standing trees agreed to be severed respec- tively. The second Notifcation was expressed to be made in exercise of the powers conferred by sub-section (I) of section 5 of the Orissa Act and in supersession of all previous notifications in that regard. By the said notification the State Government directed that with B effect from January 1, 1978, the tax payable by a dealer under the Orissa Act on account of the purchase of goods specified in column (2) of the Schedule to the said Notification would be at the rate specified against it in column (3) thereof. In the said 0 Schedule the rate of purchase tax for bamboos agreed to be severed J and standing trees agreed to be severed was Prescribed as ten per cent. The relevant entries in the Schedule in that behalf are Ent- ries Nos. 2 and 17. The Orissa Tax (Amendment) Ordinance, 1977, was repealed and placed by the Orissa Sale's Tax (Amend- me·nt) Act, 1978 (Orissa Act No. 4 of 1978). D As many as 209 writ petitions under Article 226 of the Consti- tution of India were filed in the High court of Orissa challenging the validity of the aforesaid two Notifications dated May 23, 1977, and the said Entries Nos. 9 and 17 in each of the said two notifica- tions dated December 29, 1977 (hereinafter colleclively referred to as "the impugned provisions"). The petitioners before the High Court fell into two categories. The first category consisted of those ·who has entere! into agreements with the State of Orissa for the pur- pose of felling, cutting obtaining and removing bamboos from forest areas "for the purpose of converting the bamboo into paper pulp or for purposes connected with the manufacture of paper or in any conneetion incidental therewith". This agreement will be hereinafter referred to as "the Bamboo Contract". The other group consisted of those who had entered into agreements for the purchase of stand- ing trees. We will hereinafter refer to this agreement as "The Timber Contract". All the Bamboo Contracts before the High G Court were in the same terms except with respect to the contract area, the period of the agreement and the amount of royalty paya- ble; and the same was the case with the Timber contracts. By a common judgment delivered on September 19, 1979, reported as The Titaghur Paper Mills Company Ltd. and another v. Stale oj Orissa and other (and other cases) 1 , the High Court allowed all the

(!) (1980) 45 S.T.C. 170. -H

ORiSSA v. TITAGHUR PAPER MiLLS (Madon, I.) 4i said writ petitions and qauashed the impugned provisions. The A High Court made no order as to the costs of these petitions.

Each of the present two Appeals has been filed by the State of Orissa, the Commissioner of Sales Tax Orissa, and the Sales Tax Olli· cer concerned in the matter, challenging the correctnesslof the said B judgment of the High Court. The Respondents in Civil Appeal No. 219 of 1982 are the Titaghur Paper Mills Company Limited (herein- after referred to as 'the Respondent Company") and one Kanak Ghose, a shareholder and director of the Respondent Company. The Respondents in Civil Appeal No. 220 of 1982 are Maogalji Mulji c Khara, a partner of the firm of Messrs M.M. Khara, and the said firm. The Chief Conservator of Forests, Orissa, the Divsional Forest Officer, Rairkhol Division. and the Divisional Forest Officer, Deo- garh Division have also been joined as pro Jonna Respondents to the said Appeal. Facts of C. A. No. 219 of 1985 D

The Resspondent Company is a public limited company. Its registered office is situated at Calcutta in the state of West Bengal. The Respondent Company carries on inter alia the business of manufacturing paper. For this purpose it owned at the relevant time three paper mills-one at Titaghur in the State of West Bengal, E the second at Kankinara also· in the State of west Bengal and the third at P. O. Choudwar, Cuttack District, in the State of Orissa. For the purpose of obtaining raw materials for its business of manufacturing paper, the Respondent Company entered into a Bamboo Contract dated January 20, 1974, with the State of Orissa. This agreement was effective for a period of fourteen years from F Octber 1, 1966, in respect of Bonai Main Areas of Bonai Division; for a period of thirteen years of with effect from October 1, 1967, in respect of Kusumdih P. S. of Bonai Division; and for a period of eleven years with effect from October 1, 1969, in respect of Gurun- dia Rusinath P. S. of Bonai Division, with an option to the Respon· dent Company to renew the agreement for a further period of G twelve years from October l, 1980. For the present it is not neces- sary to refer to the other terms and conditions of this Bamboo Contract.

After the said two Notification dated May 23, 1977, were issued, the Sales Tax Officer, Dhenkanal Circle, Angul, Ward A ''ff (the Third Appellant in Civil Appeal No. 219 of 1982) issused to

42 SUPREME COURT REPORTS (1985] ~ s.c.k.

A the manager of the Respondent Company's mill at P. O. Choudwar a notice dated August 18, 1977, under Rules 22 and 28(2) of the Orissa Sales Tax Rules, 1947, stating that though the Respondent Company's gross turnover during the year immediately preceding June 1, 1977, had exceeded Rs.25,000; it had without sufficient cause B failed to apply for registration as a dealer under section 9 of the Orissa Act and calling upon him to submit within one month a return in Form IV of the forms appended to the said Rules, show- ing the particulars of "turnover for the quarter ending 76-77 & 6/77". By the said notice the said manager was required to attend c in person or by agent at the Sales Tax Office at Angul on October 30, 1977, and to produce or cause to be produced the accounts and documents specified in the said notice and to show cause why in addition to the amount of tax that might be assessed a pcn:ilty not exceeding one and half times that amount should not be imposed under section 12(5) of the Orissa Act that is, for carrying on busi- D ness without being registered as a dealer. By its letter dated August 25, 1977, the Respondent Company asked for time to seek legal advice. Thereafter by its letter dated September 27, 1977 addressed to the said Sales Tax Officer, the Respondent Company contended that the said notice was invalid and called upon him to cancel the said notice. A copy of the said letter was also sent to the Co mis- E sion er of Sales Tax, Orissa, who is Second Appellant in Civil Appeal No. 219 of 1982 as also to the Chief Secretary to the Government of the State of Orissa. As no reply was received to the said letter, the Respondent company and the said Kanak Ghosh filed writ petition in the High Court of Orissa, being O.J .C No. 811 of 1977, challenging the validity of the said two Notifications dated May 23, 1977, and the said notice. While the said writ petition was part-heard. F the said two Notifications were replaced by the said two Notifications dated December 29, 1977. Accordingly, the Respondent Company applied for amendment of the said writ petition. It also filed along with Kanak Ghosh another writ petition, being O.J.C. No. 740 of. 1978, challenging the validity not only of the said two Notifications dated May 23, 1977, but also of Entries Nos. 2 and 17 of the said G two Notifications dated December 29, 1977, and the said notice dated August 18 1977, on the same grounds as those in the earlier writ petition.

The principal contentions raised in the said writ petitions were that the subject-matter of the Bamboo Contract was not a sale or H

ORiSSA-v. TiTAGllUR PAPER MiLLS (Madon, j,) 43 purchase of goods but was lease of immovable property or in any event was the creation of an interest in immovable property by way of grant of profit a prendre which according to the Respondent Company amounted in Indian law to an easement under the Indian Easements Act, 1882 (Act V of 1882), and that for the said reason the amounts of royalty payable under the Bamboo Contract could not be made exigible to either sales tax or purchase tax in the exercise of the legislative competence of the State, and, therefore, the impugned provisions were unc0nstitutional and ultra vires the Orissa Act. It was further contended that the Bamboo Contract was a works contract and for the said reason also the transaction covered by it c was not exigible to sales tax or purchase tax. It was also contended that as the said Notifications dated December 29, 1977, were expressed to be made in supersession of all earlier notifications on the subject, the liability, if any, under the said Notifications dated May 23, 1977, was wiped out. The said writ petitions prayed for quashing thejimpugned provisions and for writ of mandamus against D the respondents to ihe said petitions, namely, the State of Orissa, the Commissioner of Sales Tax, Orissa, and the said Sales Tax Offieer, restraining them from giving any effect or taking any further steps or proceedings vgainst the Respondent Company on the asis of the impugned provisions or the said notice. E

In addition to the said t~o writ petitions filed by the Respon- dent Company and the said Kanak Ghosh, three other writ Peti- tions were also filed by other parties who had entered into Bamboo Contracts with the State of Orissa in which similar contentions were raised and reliefs claimed. The record is not clear whether any assessment order was made against the Respondent Company in pursuance of the said notice or whether further proceedings in pursuance of the said notice were stayed by the High Court by an interim order. As mentioned earlier, by the said common judgment delivered by' the High Court, the said writ petitions were allowed. As a natural corollary of the High Court, quashing the impugned provisions it ought to have also quashed)he said notice'.dated August 18, 1977, and the assessment order, if any, made in pursuance thereof. The High Court, however, .did not do so, perhaps because as it heard and decided all the said 209 wrii petitions together it did not ascertain the facts of each individual petition or the exact consequenthl reliefs to be given to the petitioner therein.

44 SUPREME COURT REPORTS (!985) 3 s.C.Il. A Facts of C. A. No. 220 of 1982

Messrs. M.M. Khara, Second Respondent to Civil Appeal No. 220 of 1982 (hereinafter referred to as "the Respond1:nt Firm"), is a partnership firm of which the first Respondent to the said Appeal, B Mangalgi Mulji Khara, is a partner. The Respondent Firm carried on business at P.O. sambalpur in the District of Sambalpur in the State of Orissa and was registered as a dealer both under the Orissa Act and the Central Sales Tax Act, 1956 (Act LXXlV of 1956), with the Sales Tax Officer, Sambalpur I Circle. The business of the C Respondent Firm so far as concerns this Appeal consisted of bidding at auction held by the Government of Orissa in respect of trees standing in forest areas and if it was the highest bidder, enter- ing into an agreement with the Government for felling and removing x such trees and in its turn selling the trees felled by it in the shape of logs to other. The procedure followed by the State of Orissa in giving forest areas was to publish notices of proposed auction sales of timber and other forest products in particular forest areas. After the auctions were held, ratification orders would be issued by the State Government to the forest contractors who were the highest bidders as also an agreement would be entered into between the State of Orissa through its Governor and the forest contractor in respect of the forest produce govered by the agreement.

During the relevant period, the Respondent Firm was success- ful at five auction sales held by the State of Orissa. Its bids were ratified by the State Government. The Respondent Firm also . entered into five separate agreements (hereinafter referred to as F "Timber Contractors") for felling and removing trees standing in such forest areas. Three of the said five Timber Contracts were for the period October 31, 1977, to January 31, 1979, the fourth was for the period October l, 1977 to December 31, 1978, and the fifth was for the period October 28, 1977 to July 31, 1979 .

.G After the said Notifications dated May 23, 1977 were issued, the Respondent Firm along with its said partner Mangalji Mulji Khara filed a writ petition in the Orissa High Court, being O.J.C. No. 1048 of 1977, against the State of Orissa, Commissioner of Commercial Taxes, Orissa, Sales Tax Officer, Sambalpur Circle, Divisional Forest Officer, Roirkhol Division, and Divisional Forest H Officer, Deogarth Division. Two main grounds were taken in the

ORiSSA v. TITAGHUR.PAPER MILLS (Madon, J.) 45

said writ petition, namely, (I) the levy of a purchase tax on stand· A ing timber agreed to be severed was beyond the legislative compe- tence ofthe State Legislature and (2) the said Notifications imposed a tax both at the point of sale and point of purchase and were, therefore, invalid and ultra vires the Orissa Act. It was also conten- ded that the power conferred upon the State Government under B section 3. B of the Orissa Act to declare any goods or class of goods to be liable to tax .on the turnover of purchase as also the power conferred upon the State Governament to specify the rate of tax subject to the conditions that it should not exceed thirteen per cent amounted to excessive delegation of legislative power to the c State Government and that too without prescribing any guidelines in respect thereof. It w is further contended that the Timber Cont· racts were works contracts and the amounts payable under them were, therefore, not exigible either to purchase tax or sales tax. The reliefs sought in the said writ petition were for quashing the said two Notifications dated May 23, 1977. D

While the said writ petition was pending, the Sales Tax Officer, Sambalpur I Circle, by his assessment order dated November 28, 1978, assessed the Re,pondent Firm to tax under the Orissa Act for the period April I, 1977, to March 31, 1978. He held that the Respondent Firm had paid royalty to the Forest Depart· E ment in the agreggate sum of Rs .. 11,52,175 on which purchase tax at the rate of ten per cent was payable by it. It was further stated in the said assessment order that the Resoondent Firm had not shown this amount in its gross turnover. Accordingly, the Sales Tex Officer enhanced the gross turnover to include this amount. The amount of purchase tax assessed on the Respondent Firm amounted tq F Rs. 1,16,217.SOp. Thereupon, the Respondent Firm and its partner amended the said writ petition No. O.J.C. 1048 of 1977 and challenged the validity of the said assessment order.and prayed for quashing the same. On an application made by the Respondent Firm and its said partner, by an interim order the High Court stayed the recovery of the amount of purchase tax pending the G hearing and final disposal of the said writ petition.

Apart from the Re•pondent Firm, 203 other forest contractors who had entered into similar agreements with the State Govern- ment also filed writ petitions in the High Court challenging the validity of the impu!;lned provisions. By. its .judgment under appeal, " .

46 SUPREME COURT REPORTS [1985] 3 S.C.R.

A the High Court allowed the said petition filed by the Respon- dent Firm. As in the case of the writ petition filed by the Respon- dent Company and very probably for th.c same reason, the High Court did not pass any order quashing the sard assessment order consequent upon it holding that the impugned provisions were B ultra vires the Act.

Judgment of the High Court

All the said 209 writ petitions were heard by a Division Bench of the Orissa High Court consisting of S.K.Ray, C.J., and N.K. Das, c J. The main judgment was delivered by Das. J., while Ray, C.J., delivered a short, concurring judgment. Das, J. rejected the contention that the effect of the word 'supersession' used in the Notifications dated December 29, 1977, was to wipe out the liability under the earlier Notifications dated May 23, 1977. He held that the Notifications dated May 23,1977, remained in force D until the Notifications dated December 29, 1977, came into opera- tion. So far as the other points raised before the High Court were concerned, Das, J., summarized the conclusions reached by the court in paragraphs 19 and 20 of J1is judgment as follows:

"19. For the reasons stated above, we hold as follows: E (I) That the bamboos an J trees agreed to be severed are nothing but bamboos and timber after those are felled. When admittedly timber and bamboos are liable for taxation at the sale point, taxation of those goods at the purd,ase point amounts to double taxation and, as F such, the notifications arc ultra J1ires the provisions of the the Act.

(2) The impugned notifications amount to taxation on agreements of sale, but not on sale and purchase of goods; and

G (3) In the case of bamboo exploitation contracts, the impugned notifications amount also to impost of tax on profit-a-prendre and, as such, are against the provisions of the Orissa Sales Tax Act.

"20. In view of the aforesaid findings, we do not consider it necessary to go into the other questions raised

ORISSA v. TITAGHUR PAPER MILLS (Madon, J.) 47 by the petitioners, namely, whether it is a works contract and whether the notifications amount to excessive delega- tion or whether there has been-business of purchase by the petitioners or whether there has been restriction on trade and bussines" B In his concnrring judgment Ray, C. J., agreed with Das, J. and further held that in the series of sales in question the first sale, that is the taxable event, started from the Division\ Forest Officer and that the Divisional Forest Officer was the taxable person who had sold taxable goods, namely, timber, and that as what was sold by c the Divisional Forest Officer was purchased by the petitioners before the High Court the identity of goods sold and purchased was the same, and that where such a sale was taxed, the purchase thereof was excluded from the' levy of tax by virtue of sections 3-B and 8 of the Orissa Act and consequently the levy of purchase tax by the impugned provisions was bad in law; D

In view of its above findings, the High Court allowed all the writ petitions and quashed the impugned provisions. The High- Court made no order as to the costs of the writ petitions.

We will set out the submissions advanced at the Bar at the E hearing of these Appeals when we deal with the various points which fall to be decided by us. In order, however, to test the correctness of the judgment ,pf the High Court as also of the rival contentions of the parties, it is necessary to sec first the relevant provisions of the Constitution of]nclia as also of the Orissa Act and of the various notifications issued thereunder. F Constitutional provisions

The Orissa Act received the assent of the Governor-General of India on April 26, 1947, and was published in the Orissa Gazette ' on May 14, 1947 .. Under section !(13) of the Orissa Act, section 1 was to come into force at once and the rest of the Orissa Act on G such date as the Provincial Government may by notification in the Orissa Gazette appoint. The rest of the Orissa Act was brought into force on August I, 1947. The Orissa Act is thus a pre-Consti- tution Act. At the date when it was enacted as also when it came into force, the constitutional law of India w&s the Government of

48 SUPREME COURT REPORTS [1985] 3 S.C.R.

A. India Act, 1935, prior to its amendment by the Indian Independence Act, 194.7. Under section 100(3) of the Government of India Act 1935, the Legisalature of a Province alone - had the power to make laws for a province or any part thereof in respect any of the matters enumerated in List II in the Seventh Schedule to that Act, namely B the Provincial Legislatvc List. Entry 48 in the provincial Legisla- tive List provided for "Taxes on the sale of goods and on advertise- ments". Thus, under the Government of India Act, 1935, Sales tax ' was an exclusively provincial subject and the legislative competence of the Orissa Provincial Legislature to enact the Orissa Act was derived from section 100(3) of the Government of India Act, I935, c read with Entry 48 in the Provincial Legislative List. Under the Constitution of India as originally enacted, the legislative topic "Taxes on the sale or purchase of newspapers and on advertise- ments published therein" was excluively a Union subject in respect of which under Article 245(1) read with Article 246(1) parliament alone could make laws for the whole or any part of the territory of India, this topic being the subject-matter of Entry 92 in List I in the Seventh Schedule to the Constitution (namely, the Union List), while "Taxes on the sale or purchase of goods other than news- papers" and "Taxes on advertisements other than advertisements published in newspapers" were exclusively State subjects in respect of which under Article 245(1) read with Article 246(3) of the Constitution of India, the Legislature of a State alone could make laws' for such State or any part thereof, these topics being the subject-matter of Enlries.54 and55 in List II in the Seventh sd1edule to the Constitution, namely, the State List' By the constitution (Sixth Amendment ) Act, 1956, a' new Entry, namely Entry 92A, F was inserted in the Unioo List and Entry 54 in the State List was substituted by a new Entry. Entry 92A in the Union List reads as follows:

"92A. Taxes on .the sale or purchase of goods other than newspapers, where such sale or purchase takes place G in the course of inter-State tcade or commerce."

The amended Entry 54 in List II reads as follows:

"54. Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of Entry_.92A of H List!.''

OIUSSA v. T!TAGl!UR PAPER MiLLS (Madon, J.) 49

We are not concerned in these Appeals with the amendment A. made in Entry 55 in the State List by the Constitution (Forty-_ second Amendment) Act, 1976. We are not concerned with Entry.· 92-B inserted in the Union List or with the extended meaning giveri to the expression "tax on the sale or purdhase of goods" by the new clause (29A) inserted in Article 366 of the Constitution wheteby B that expression inter a/ia includes a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract, by the Constitution (Forty-sixth Amendment) Act, 1982. We are equally not concerned in these Appeals with the restrictions imposed by Article 286 of the c. Constitution on a State's power to levy a tax on certain classes of sales and purchases of goods.

The Orlssa Act

In keeping with the legislative history of fiscal measures in D general, the Orissa Act has been amended .several times. Thus, by the middle of July 1981 it had been amended twenty-eight times. It is needless to refer to all the provisions of the Orissa Act or of the various amendments made therein except such of them as are relevant for the purpose of these Appeals. -d. E The Orissa Act when enacted levied a tax only on the sales of goods taking place in the province of Orissa. By the Orissa Sales tax (Amendment) Act, 1958 (Orissa Act No.28 of 1958), a purchase tax was for the first time introduced in the State of Orissa · with effect from December I, 1958. F The tax under the Orissa Act Is levied not on goods but on sales and purchases of goods or rather on the turnover of sales and turnover of purchases of goods of a dealer. Under section 4(2) of the Orissa Act, a dealer becomes liable to pay tax on sales and purchases. with effect from the month immediately following a period not exceeding twelve months during which his gross turnover G exceed the limit specified in that sub-section which during the rel~­ vant period was Rs. 25,000. Under section 4(3) a dealer who has become liable to pay tax under the Orlssa Act continues to be so liable until the expiry of three consecutive years during each of which his gross turnover has failed to exceed the prescribed liniit and· such further period after the date of the said. expiry as may be

so SUPREME COURT REPORTS [1985] 3 S.C.R.

A prescribed by the Orissa Sales Tax Rules and his liability to pay tax .ceases only on the expiry ·Of the further period so prescribed. A special liability is created by section 4-A on a casual dealer as defined in clause (bb) of section 2. We are not concerned in these Appeals with any question relating to a casual dealer. B ·Section 2 is the definition section. ·Clause (c) of that section "t-- defines the term "dealer". The definition as it stood during the relevant period and at the date when the judgment of the High Court was deliverd (omitting what is not relevant) read as follows: c "(c)'Dealer' means any person who carries on the business of purchasing or selling or supplying goods in Orissa, whether for commission, remuneration or otherwise and includes a Department of the Government D which carries on such business and any firm ......

Explanation-The manager or agent of a dealer who resides outside Orissa and who carries on the business of purchasing or selling or supplying goods in Orissa shall, in respect of such business, be deemed to be a dealer for the purposes of this Act". E ff was on the basis of the above Explanation to section 2(c) that the notice impugned in Civil Appeal No. 219 of 1982 was issued to the manager of the Respondent Company and he was sought to be made liable to purchase tax under the said Notifica- tions dated May 23, 1977. F Under the aforesaid definition of the term "dealer" before a person can be a dealer, he must be carrying on the business of pur- chasing or selling or supplying goods. There was no definition of the word "business" in the Orissa Act and the Orissa High Court had interpreted it as connoting an activity carried on with the G object of making profit. By the Orissa Sales Tax (Amendment) Act 1974 (Orissa Act No. 18 of 1974), a definition of "business" was for he first time inserted as clause (b) in section 2, the original clause (b) which dafined the term "contract" having been omitted by the Orissa Sales Tax (Amendment) Act, 1959. after the decision of this Court in The State:oJ Madras v. Gannon Dunker!ty & Co. (Madras) ff

ORISSA v. TITAGHUR PAPER MiLLS (Madon, J.) 51

Ltd.' The effect of this definition of the term "business" was to do A away with the requirement of profit motive. As a consequence of the decision of the Orlssa High Court in Straw Products Ltmlttd v. State of Ortssa and others', the above definition of the term "dealer" in clause (c) was substituted with retrospective effect by the Orissa Sales Tax (Amendment) Ordinance, 1979 (Orissa Ordinance No. 11 --4- of 1979), which was replaced by the Orissa Sales Tax (Amendment) B Act, 1979 (Orissa Act No. 24 of 1979). In the. Straw Product's Case the petitioner company had entered into two agreements with the State of Orissa. From the facts set out in the judgment of the High Court in that case it would appear that these two agreements were similar to the Bamboo Agreement before us. The Divisional Forest Officer, Balliguda Division, called upon the petitioner com- c pany to reimburse to him the amount of sales tax to which he had been assessed, stating that he was a registered dealer and had been assessed to tax on the sale of all standing trees ·including bamboos. The petitioner company thereupon filed two writ petitions in the Orissa High Court challenging this demand. The contention that the transactions covered by the said two agreements were not sales of goods and, therefore, not exigible to sales tax does not appear to have been raised In those writ petitions. The High Court held that the State of Orissa and not the Divisional Forest Officer could be the dealer qua the transactions covered by the said agreements 1.n case they were exigible to sales tax and that the liability under the Orissa Act being a statutory one, it was not open to the State in the dis- charge of its administrative business or at its volition to name an employee under it as the person to pay sales tax under the Orissa Act, and. therefore, the Divisional Forest Officer could not have been assessed to sales tax on the transactions in question. The High Court further held that though the requirement of profit motive did not exist any more as an ingredient of the term "busi- F ness" as defined by the said claus.e (b) of section 2, whether a person carried on business in a particular commodity depended upon the volume, frequency, continuity and regularity of. transac- tions of purchase and sales in a class of goods, and as these ingre- dients were not satisfied in the cases before it, the transactions were G not exigible to sales tax. The judgment in that case was delivered on May 3, 1977. The State as also the Commissioner of Sales Tax,

(!) [1949] S.C.R. 379. (2) (1978) 42 S.T.C. 302·(1977) I C.W.R. 455, H

52 SUPREME COURT REPORTS (1985) 3 S.C.R.

A Orissa, h_ave come in appeal by Special Leave in this Court against the.said j!!dgment and these appeals are still pending, being Civil Appeals Nos. 1237-1238 of 1979 State of Orissa and others v. Straw Products Limited arid others and Civil Appeals Nos. 1420-1421 of 979 Gommissioner of Sales Tax, Orissa and anothu v. Straw Pro- dt!CI Limited and others. However, to get over the judgment of the B High Court, the State Government issued the two impugned Noti· fications dated May 23, 1977, which were replaced along with others by the said two Notifications dated December 29, 1977. Further, the Governor of Orissa promulgated the Orissa Sales Tax (Amendment and Validation) Ordinance, 1979 (Orissa Ordinance 'No. 11 of 1979), substit1.1ting with retrospective effect from th.e date c of the Orissa Act the definition of "dealer" given in clause (c) of section 2. The said Ordinance was repealed and replaced by the Orissa Sales Tax (Amendment and Validation) Act, 1979 (Orissa Act No. 24 of 1979). This amending and validating Act came into force with effect from July 19, 1979, being the date of the promul- gation of the said Ordinance. Section 3 of the said amending Act D validated assessments or re-assessments, levy or collection of any " tax or imp<;>sition of any penalty made or purporting tq have been made under the Orissa Act before July 19, 1979, as if all such acts had been done under the Orissa Act as so amended, notwith· standing anything contained in any judgment, decree or order of any court or other authority to the contrary. The substituted· definition of "dealer", omitting the portion thereof not relevant for our purpose, reads as follows :

. . "(c) 'Dealer' means any person who carries on the business of purchasing, selling, supplying or distributing goods, directly or otherwise, whether for cash or for defer- red payment. or for commission, remuneration or other valuable consideration and includes-

: (i} ... a company, ... firm or association which carries on such business; G x x x x Explanation I - ... and every local branch of a firm registered outside the State or of a company the principal office or headquarters whereof is outside the State, shall be deemed to be a dealer for the purposes of this Act.

011.iSSA v. TiTAGHU11. PAPEl1. MILLS (Madon, J.) 53·

Explanation II-The Central Government or .a. State. A Government or any of their employees acting· in official . capacity on behalf of such Government, who, whether or not in the course of business, purchases, sells, supplies or distributes goods, directly or otherwise for cash or for deferred payinent or for commission, remuneration or for :• other valuable consideration, shall, except in relation to B any sale, supply or distribution of surplus, unserviceable or old stores or materials or waste products, or ob_solete or discarded machinery or parts or accessories thereof, be deemed to be a dealer for the purposes of this Act. ·

What is pertinent to note about the new definition of "dealer" c is that in the case, of the Central Government, a State Government or any of their employees acting in official capacity on behalf of such Government, it is not necessary that the purchase, sale, supply or distribution of goods should be in the course of business, while in all other cases for a person to be a dealer he must be carryin'g on the business of purchasing, selling, supplying or distributing goods. D Writ petitions challenging the validity of this amending and vali- dating Ordinance and Act have been filed in this Court under Article 32 of the Constitution of India and are still pending. These writ petitions are Writ Petition Nos. 958 .of 1979 Orient Paper Mills and another v. Siate of Orissa and others and Writ Petition No. 966 of 1979 Straw Products Limited and another v. State ·of Orissa and others. E

We are concerned in these Appeals only wiih purchases and · sales of goods and not with their supply or distribution. The terms "sale" and "purchase" are defined in clause (g) of section 2. Clause (g), omitting the Explanation which is not relevant for our purpose, · reads as follows : F

"(g) 'Sale' means, with all its grammatical variations . and cognate expressions, any transfer of property in goods for cash or deferred payment or other valuable considera- G tion, but does not include a mortgage, hypothecation, charge or pledge and the words ','buy" and "purchase" shall be construed accordingly; x

54 SUPREME COURT RBPOll.TS [1985] ~ s.c.ll. A The expressions "goods''. "purchase price" and "sale price" are defined in clause (d), (ee) and (h) of secrion 2 as follows :

·" (d) 'Goods' means all kinds of movable property other than .actionable claims, stocks, shares or securities and in- cludes all growing crops, grass and things attached to or B forming part of the land which are agreed before sale or under the contract of sale to be severed;

" (ee) 'Purchase Price' means the amount payable by a person as valuble consideration for the purchase or supply c of any goods less any sum allowed by the seller as cash discount according to ordinary trade practice, but it shall include any sum charged towards anything done by the seller in respect of the goods at the time of or before deli- very of such goods other than the cost of freight or delivery or the ·cost of installation when such cost is separately charged; D "(h) 'Sale Price' means the amount payable to a dealer as consideration for the sale or supply of any goods, less any sum allowed as cash discount according to ordinary trade practice, but including any sum charged for anything done by the dealer in respect of the goods at the time of, or be- E fore delivery thereof''.

As the liability of a dealer to pay tax under the Orissa Act depends upon his gross turnover exceeding the limit prescribed by section 4(2), it is necessary to see the definition of the expression "gross turnover", "Gross turnover" is defined by clause (dd) of F section 2 as follows :

"(dd) 'Gross Turnover' means the total of 'turnover of sales' and 'turnover of purchases". G The expression ''turnover of sales" and "turnover of purcha- ses" are defined in clauses (i) and (j) of section 2 as follows :

"(i) 'Turnover of sales' means the aggregate of the amounts of sale prices and tax, if any, received and receiv- H able by a dealer in respect of sale or supply of goods other

OR!SSA v. TITAGHtlR PAPER MILLS (Madon, J.) SS than those declared under section 3-B effected or made A during a given period;

x x "(j) 'Turnover of purchases' means the aggregate of the amounts of purchase prices paid and payable by a dealer B -l in respect of tbe purchase or supply of goods or classes of goods. declared under section 3-B; ·

_/ So far as is material for our purpose, section 5(1) provides for the rates at wbicb the tax under the Orissa Act is payable. Sub-section (I) of section 5 and the first proviso thereto as !bey c. stood prior to tbe Orissa Sales Tax (Amendment) Ordinance, !977, read as follows :

"5. Rate of Tax:-

(I) The tax payable by a dealer tind.er ibis Act shall be levied at tbe rate of six per cent on bis taxable turnover; D

Provided that the State Government may, from time to time, by notification and subject to such conditions as they may impose, fix a higher rate of tax not exceeding thirteen per cent or any lower. tax payable under this Act on account of the sale or purchase of any goods or class of E goods specified in such notification;

The words "at the rate of six per cent" in the main sub- section (I) were substituted for the words "at the rate of five per cent" and the words "not exceeding thirteen per cent" were. substi- tuted for the words "not exceeding ten per cent" in the first proviso 11 thereto by the Orissa Sales T~x (Amendment) Act, 1967 (Orissa Act No. 7 of 1976), with effect from May 1,.1976.

G. Amongst the amendments made ·by the Orissa Sales Tax· (Amendment) Ordinance, 1977, which were re-enacted by the Orissa Sales Tax (Amendment) Act, 1978, was the substitution of sub-section (!) of section 5 and the first proviso thereto by a new sub-section(!). Thus, with effect from January 1,1978 sub-section (!) reads as follows : H.

56 SUPREMB COURT REPOl\ts [1985] 3 S.C.R.

A "5. Rate of Tax

(I) The tax payable by a dealer under this Act shall be levied on his taxable turnover at such rate, not exceeding thirteen percent, and subject to such conditions' as the State Government may, from time to time, by notification, B specify;

K x x x The other proviso to the said sub-section (I} are not relevant for our purpose. Sub-section (2) (A) of section 5 defines the c expression "taxable turnover" as meaning that part of a dealer's gross rurnover during any period which ·remains after deducting . therefrom the turnover of sales and purchases specified in that snb- section.

Section 3-B confers upon the State Government the power to declare what' goods or classes of goods would be liable to tax on the turnover of purchases. Section 3-B reads as follows :

"3-B. Goods liable to purchase tax-

The State Government may, from time to time, by notification, declare any goods or class of goods to be liable to tax on turnover of purchases: E Provided that no tax shall be payable on the sales of such goods or class of goods de.dared under this section."

This section was inserted in the Orissa Act with effect from December 1, 1!158, by the Orissa Sales Tax (Amendment) Act, 1958. F As the tax under the Orissa • Act is intended to be a single· point levy, section 8 confers upon the State Government the power to prescribe points at which goods may be taxed or exempted, G Section 8 provides as follows :

·•s. Power of the State Government to prescribe points at which goods may be taxed or exempted

Notwithstanding anything to the contrary, in this Act, the State Government may prescribe the points in the series H

ORISSA. v. TITA.G!IUR PA.PER MILLS (Madon, J;) 51

of sales ·or purchases by successive dealers at which any goods or classes or descriptions of goods may be taxed or exempted from taxation and in doing so may direct that sales to or purchases by a person other than a registered dealer shall be exempted from taxation: ~· ·Provided that the same goods shall not be taxed at more than one point in the same series of sales or pur- chases by successive dealers.

Explanation-Where in a series of sales, tax is prescribed to be fovied at the first point, such point, in respect of goods despatched from outside the State of Orissa c shall mean and shall always be deemed to have meant the first of such sales effected by a dealer liable under the Act after the goods are actually taken delivery of by him inside the State of Orissa."

Rules 93-A to 93-G of the Orissa Sales Tax Rules, 1947 D .

prescribe the goods on which tax is payable at the first point in a . series of sales. The goods so prescribed have no relevance to these Appeals.

Notifications under the Act E In exercise of the powers conferred by section 3-B of the Orissa Act the State Government from time to time issued notifica- tions declaring what goods or classes of goods were liable to tax on the turnover of purchases: As a result of the amendments made in the rates specified in sub-section (1) of section 5 and the first proviso to that sub-section by the Orissa Sales Tax, (Amendment) F Act 1976, with effect from May 1,1976, all these notifications were superseded and a fresh list of goods declared under section 3-B b)' Notification No. 20209C.T.A.L.-14/76- F, dated April 23,1976. All the notifications issued from time to time under the first proviso G to sub-section (l) of section 5 specifying the rates of purchase tax on goods declared under section 3-B were al so superseded and new rates of purchase tax in respect of the goods declared in the said new list were specified with effect from May 1.1976, by Notification No. 20212-C.T.A.-14/76-F, dated April 23,1976. But is these two Notifications which were amended by the impugned .Notifica- H

58 SuPREMB COURT REPORTS [i98SJ 3 s.c.Jl.. A tions dated May 23, 1977. The said two impugned Notifications are as follows:

"Notification S.R .. O.No. 372/77 dated the !23rd May 1977-

In exercise of the powers conferred by section 3-B B of the Orissa Sales Tax Act, 1947 (Orissa Act 14 of 1947), . ;,,-. the State Government do hereby declare that standing trees and bamboos agreed to be severed shall be liable to tax on turnover of purchase with effect from the first day of June, 1977 and direct that the following amendment shall be made in the notification of Government of Orissa, Finance c Department No. 20209-CTA-14/76-F., dated 23rd April 1976.

AMENDMENT

In the schedule to the said notification after serial numbers 2 and 16, the following aew serial and entry shall D be inserted .under appropriate heading, namely:-

Serial No. Description of goods

2-A Bamboos agreed to be severed. E 16-A Standing trees agreed to be Severed.

"Notification S.R.O. No; 373/77 dated the 23rd May 1977-

In exercise of the powers conferred by the first proviso to sub-section (I) of section 5 of the Orissa Sales Tax Act, 1947 (Orissa Act 14 of 1947), the State Government do hereby direct that the following amendment shall be made in the notification of the Government of Orissa, Finance Department No. 20212-CTA-14/76-F., dated the 23rd April 1976 and that the said amendment shall take effect from the first day of June, 1977•

AMENDMENT H In the schedule to the said notification after serial ,

. 6RiSSA v. TlTAGHUR PAPER MILLS (Madon, i.) numbers 2 and 16, the following new serial and entry shall 59 A be .inserted under appropriate heading, namely:

Serial No. Description of goods Rate of Tax

(1) (2) (3) . B 16-A Bamboos agreed. to be Ten per cent severed

2-A Standing trees agreed Ten per cent." to be severed c ~· The above two Notifications were struck down by the High Court by its judgment under appeal.

The State Government had also issued from time to time Notifications in exercise of the powers conferred· by the first proviso to sub-section (I) of section 5 prescribing a rate of tax different from the rate specified in section 5(1) so far as sales of certain goods were concerned. As a result of the amendments made by the Orissa Sales Tax (Amendment) Act, 1976, all these notifications were superseded and new rates specified with effect from May l, 1976, by Notification No. 20215-C-T.A.-14176 F. dated April 23, 1976. By Notification No. S.R.A. 374/77 dated May 23, 1977, made in exercise of the· powers conferred by the first proviso to sub-section (I) of section 5, the Stat~ Government directed that with effect from June 1, 1977, the said Notification No. 20215-C.T.A. -14/76-F. dated April 23, 1976, should inter a/ia be amended by inserting a new entry therein as Entry No. 86-A, By this entry the rate of sales tax on timber was enhanced to ten per .cent, In view of the amendment made in sub-section (I) of section 5 by the Orissa Sales Tax (Amendment) Ordinance, 1977 (replaced by the Orissa Sales Tax (Amendment) Act, i 978), the State Government issued three Notifications, (I) declaring the goods liable to purchase tax, (2) specifying the rates of purchase • tax on such goods; and (3) specifying the rates of sales tax. The relevant portions of the notification declaring the goods liable to purchase tax read as follows :

"Notification No. 67178-C.T.A. 135/77 (Pt. )-F dated the 29th December 1977.

60 SUPREME COURT REPORTS tl985] 3 s.c.k.

A S.R.O.No.900/77 -In exercise of powers conferred by section 3-B of the Orissa Sales Tax Act, 1947 (Orissa Act 14 of l 947), and in supersession of all previous notifications issued on the subject, the State Government do hereby declare that the goods mentioned in column (2) of the schedule given below shall be liable to tax on turnover of B purchase, with effect from the first day of January, 1978.

SCHEDULE

Serial No. Description of goods 0 (!) (2)

x x x x

2. Bamboos agreed to be severed x x x x D

17. Standing trees agreod to be severed

x x x x . The rel event portions of the Notification specifying the, rates of purchase tax read as follows: E

Notification No.67181-C.T.A. 135/77-F. dated the 29th December 1977

S.R.O. NO. 901/77- In exercise of the powers F conferred by sub-section (!) of section 5 of the Orissa Sales Tax Act, 1947(0rissa Act 14 of 1947), as amended by the Orissa Sales Tax (Amendment) Ordinance, 1977 (Orissa G Ordinance No. 10 of 1977) and in supersession of all

- previous notifications in this regard, State Government do hereby direct that with effect from th~ first day of January, 1978 the tax payable by a dealer under the said Act on account of the purchase of the goods specified in column (2) of the sc~edule given below, shall be at the rate specified against each in column (3) thereof; H

ORiSSA v. TITAGHUR PAPER MILLS (Madon, J.) 61 SCHEDUJ,E A Serial No. Description of goods Rate of Tax

x x x x B

2. Bamboos agreed to be Ten per cent severed x x x x

17. Standing trees agreed to Ten per cent be served c K x x x: The relevant portions of the Notification specifying the rates of sales tax read as follows_ :

"Notification No. 67184-C.T.A.-135/77-F., dated the D 29th December 1977.

S.R.0. No. 902/77 - Jn exercise of the powers conferred / by sub,,section (I) of section 5 of the Orissa Sales Tax Act, 1947 (Orissa Act 14 of 1947), as amended by the Orissa Sales Tax (Amendment) Ordinance, 1977 (Orissa Ordinance, No. JO of 1977) and in supersession of all previous Notifications on the subject, the State Govern- ment do hereby direct that with effect from the first day of January. 1978, the rate of tax payable by a dealer under the said.Act on account of the sale of goods specified in column (2) of the Schedule given below shall be at the rate specified against each in column (3) thereof. SCHEDULE

SI.No. Description of goods Rate of Tax G

~it·· x x x x .I 101 All other articles Seven percent" .

Enteries Nos. 2 and 17 in the schedule to each of the said ·H •

62 SUPREME COURT REPORTS (1985] 3 S.C.R.

A Notifications Nos. 67178-C.T.A.-135/77 (Pt.)-F and 67181-C.T.A 135/77-F were also struck down by the High Court by its judgment nnder appeal.

The ambit of the.Orissa State's taxing power-

B The validity of the impugned provisions is challenged on two grounds : (1). they levy a tax on what is not a sale or purchase of goods and are, therefore, nnconstitutional, and (2) assuming the subject-matter of the impugned provisions is a sak or purchase of goods, tbey levy a tax on the same goods both at the sale· point and purchase-point and are therefore, ultra vires the Orissa Act. C In order to test the correctness of these challenges, it is necessary to bear in mind the ambit of the Orissa State's power to levy a tax on the 'sale or purchase of goods. This power is subject to a two· fold restriction-one Contitutional ; and the other, statutory. The Con- stitutional restriction on the legislative comptence of the Orissa State in this behalf is shared by it in common with all other States, while the statutory restriction is self-imposed and flows from the D provisions of the Orissa Act.

We have already set out earlier the relevant provisions of the Government of India Act., 1935, the Constitution of India and the Orissa Act. To recapitulate, the Orissa Act is a pre-Constitution Act and the legislative competence of the Orissa Provincial E Legislature to enact ihe Orissa Act was derived from section 100(3) of the Government of India Act, 1935, read with Entry 48 in List II in the Seventh Schedule to that Act. After the coming into force of the Constitution of India the power of the Orissa State Legis- lature to enact law imposing a tax on the sale or purchase of goods (other than newspapers) is to be found in Articles 245(1) and F 246(3) of the Constitiution of India read with Entry 54 of the Constitution of India. Thus, Entry 54 in the State List in the Constitution of India is, with certain modifications, the successor G entry to Entry 48 in the Provincial Legislative List in the Govern- ment of India Act, 1935.

While Entry 48 spoke of "taxes on the sale of goods", Entry 54 speakes of "taxes on the sale or purchase of goods". The addition of. the word "purchase" permits the State Legislature to levy a ff purchase tax and does not confine its taxing power merely to levying

OR!SS,\ v. TIT,\GHUR PAPER MILLS (Madon, J.) 63 a sales tax. Sale and purchase are merely two ways of looking at A· the same transaction. Looked at from the point of view of the seller a transaction is a sale, while looked at from the point of view of the buyer the same transacation is a purchase.

Entry 48 in List II of the Seventh Schedule of the Govern- ment of India Act, 1935, came up for interpretation by this Court in .B The Sales Tax officer, Pilibhit v. Messrs Budh Prakash Jai Prakash'.· This Court held in that case that there having existed at that time of the enactment of the Government of India Act, 1935, a well- defined and well-establised distinction between a sale and an agree- ment 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 c both in England and India and to hold that it authorized the impo- sition of a tax only when there was a completed sale involving transfer of title. In that case the Uttar Pradesh Sales Tax Act, 1948, had been amended so as to include forward con tracts in the definition of 'sale' and to provide that forward contracts should be deemed to have been completed on the date originally agreed upon' D for delivery. These. aroend.ments were held by this Court to be ultra vires.

In State of Madras v. Gannon Dunkerly .& Co., (Madras) Ltd., 'another Constitution Bench of this Court held that at the time when. the Government of India Act, 1935, was enacted. the expression. "sale of goods" was a term of well-recognized import in the general E law relating to sale of goods and the legislative practice relating to that topic and, thetefore, that expression roust be interpreted when used in the said Entry 48 as having the same meaning as in the sale of goods Act, 1930. The Court further held that any attempt, there- fore, to give to the expressions-i"sale", ''goods" or usale of goods" F an artificial meaning or an enlarged meaning or to bring within their scope what would not be comprehended within it would be ultra >ires and uncostitutional. The court further observed (at page 413-4): G " both under the common law and the statute law relating to sale of goods in England and i~ India; to constitute a transaction of sale there should· be an agree- . ment, express or implied, relating to goods to be completed

(I) [1955) I S.C,R. 243, 246.

64 SUPREME COU.RT REPORTS [1985] 3 s.c.11. A by passing of title in those goods. It is of the essence of this coneept 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 B of warranty. Under the law,· therefore, there cannot be an agreement relating to one kind of property and 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 thi: parties for the sale of the very goods in which eventually property c passes." In that case the definition of term "sale" in the Madras Gene- ral Sales Tax Act, 1939, was enlarged by an amendment so as to include "a transfer of property in goods involved in the exection of a works contract" and the definition of "turnover" was expanped to include within it the amount payable for carrying out a works contract less such portion as may be prescribed. A new definition of "works contract" inserted in the said amendments ircluded within its meaning inter alia the construction, fitting but, improve- ment or repair of any building, road, bridge or other immovable property. The Court held these amendments to be void and beyond the legislative competence of the Madras Provincial Legislature on the ground that in the case of a building contract, which was one and indivisible, the agreement between the parties was that the contractor should construct the building according to the specifica- tion contained in the agreement and in consideration therefore ·receive payment as provided therein, and that in such an agreement there was neither a contract to sell the materials used in the construction nor any property passed in such materials as movables. The same interp relation as was placed on Entry 48 in the Provincial Legislative List in State of Madras v. Gannon Dunkerley G & Co. (Madras) Ltd. was adopted by this Court while construing Entry 54 in the State List and attempts by the State Legislatures to enlarge the .meaning of· the expressions 'sale', 'sale of goods' or 'goods' have been held to be beyond their legislative competence : 11 cc, for instance, Bhopal Sugar Industries Ltd. M.P. and another v. D.P. Dube, Sales Tax Officer, Bhopal Region, Bnopal and another' H (!) A.LR. 1964 SC 1037.

OR!SSA v. TiTAGHUR PAPBR·MlLLS (Madon, J.) 6S K.L. Johar and Company v. Deputy Commucia/ Tax Officer' Joint A Commercial Tax Officer. Harbour Div ll. Madras v. Young Men'J Indian A.ssaciation (Reg.) Madras and others;' and State of Maha• rashtra and another v. Champa/a/ Kishanla/ Mohta.•

In Addition to the above Constitutional limitations on the Orissa State's power to tax sales or purchases of goods, there are B other restrictions imposed. by sections 3-B and 8 of ths Orissa Act. A State is free when there is_ a series of sales in respect of the same goods to _ tax each one of such sales or purchases in that series or to levy the tax at one or more points in such series of sales or purchases. Legislation of all States in this sespect is not uniform. Some States have adopted a single-point ·levy, c others, a two-point levy ; and yet others, a multi-point levy. The State of Orissa has adopted a single-p<Jint levy. It has don'e this by enacting the proviso to section 3-B and the proviso to section

8. Under the proviso to section 3-B no tax is payable on the sales of goods or class of goods declared under that section to be liable to tax on the turnover of purchases. The proviso to section 8 D states that "the &ame goods shall not be taxed at more than one point in the same series of &ales or purchases by successive dealers". Where, therefore, In a series of sales by successive dealers sales tax or purchase tax is levied at a particular point, neither sales tax nor purchase tax can be levied at another point in the same series ;and similarly where goods have been made liable to purchas tax, no sales tax can be levied in respect of the same E transaction or any other transaction of sale of the same goods.

As any attempt on the part of the State to impose by legis- lation sales tax or purchase tax in respect of what would not be a sale or a sale of goods or goods under the Sale of Goods Act, F 1930, is unconstitutional, any attempt by it to do so in the exer- cise of its power of making subordinate legislation, either by way of a rule or notification, would be equally unconstitutional'; and so would such an act on the part of the authorities under a ·sales G Tax Act purporting to be done in the exercise of powers conferred

(3) [1971] l S.C.R. 46. ff·

66 SUPREME COURT REPons [1985] 3 S.C.R.