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

A by that Act or a~y rule. m1de or notification issued thereunder. Similarly, where any ruk 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 an act or under any rule made or notification issued thereunder cannot travel beyond the scope of such Act, rule or notification. Thus, the sales tax B authorities under the Orissa Act cannot assess to sales tax or purchase tax a transcation which is not a sale or purchase of.goods or assess to sales tax any goods or class of goods which are liable to purchase tax or assess to tax, whether sales tax or purchase tax, goods at another point in the same series ~f sales or pur- chase of those goods by successive dealers when those goods are c liable to be taxed at a different point in that series.

Subject-matter of the impugned provisions

What now falls to be determined is the subject-matter of the impugned provisions. Relying upon the definition of the term "goods"·. in the Sale of Goods Act, 1930, and in the Orissa D Act, it was submitted on behalf of the Appellant State that the subject-matter of the impugned provisions is goods and that what fs made exigible to tax under the impugned provisions is a completed purchase of goods. 011 behalf of the contesting Respondents it was submitted that by impugned provisions a new class of goods not known to law sought to be created and made E. exigible to purchase tax and that this attempt on the part of the State Government was unconstitutional as being beyond its legis- lative·· competence. The High Court held that the impugned provisions amounted to a tax on an agreement of sale and not on a sale or purchase of goods. It further held that in the case of

F Bamboo Contracts, the impugned provisions also amounted to lcvy.ing a tax on a profit a prendre. \ - The term "goods" is defined in clause (7) of section 2 of the Sale of Goods Act as follows:

G "(7) 'goods' mean every kind of movable property other than actionable claims and money ; and includes stock and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be served before sale or under the contract of sale ;" H 'l

ORISSA v. TITAGHUR PAPER MILLS (Madon, I.) 67

We have already reproduced earlier the definition of "goods" A given in clause (d) of section 2 of thelOrissa Act. However for the purposes of ready reference and comparison, we are repro· ducing the same here again. That definition is as 'follows I

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

What is pertinent to note, however, is that under both the definitions the term "goods" mean all kinds of movable property c (except the classes of movable property specifically excluded) and includes growing crops, grass and things attached to ·or forming part af the land which are agreed to be sei•ered before sale or under the contract of sale. The Transfer of Property Act, 1882 (Act IV of 1882), does not give any definition of the term "movable property", but ·clauses (36) of section 3 of the General Clauses D Act, 1897 (Act X of 1897), clause (27) of the Orissa General Clauses Act, 1937 (Orissa Act I of 1937), and clause (9) of sectjon 2 of the Registration Act, 1908 (Act XVI) of (1908) do. Clause (36) of section 3 of the Genernl Clauses Act provides as follows :

"(36) 'movable property, shall mean property of every description, except immovable property." E

The definition in the Orissa General Clauses Act is in iden- tical terms. The definition in the Registration Act is as follows : ' "(9) 'moveable property' includes· standing timber, growing crops and grass, fruit upon and juice in trees, and property of every other description, except immovable property." The Transfer of Property Act does not give any exhaustive definition of "immovable property." The only definition given therein is in section 3 which states :

"immoveable property' does not include standing timber, growing crops, or grass." a This is 'strictly speaking not definition of the term "immo- vable property" for it does not tell us what immovable property is b11t merely tells us what it does not include. We must, therefore, ff

68 SUPREME COUl\T REPOl\TS (1985] 3 S.C.R. A turn to other Acts where that term is defined. Clause (26) of sec- tion. 3 of the General Clauses Act defines "immovable property" as follows :

"(26) 'immovable property' shall include land, benefit - . to · arise out of land, and things attached to the earth, B or permanently fastened to any thing attached to the earth."

The definition of "immovable property" in clause (21) of section 2 of the Orissa General Clauses Act is in the same terms . .C A more elaborate definition is given in clause (6) of section 2 of the' ·) Registration Acfwhich states :

.. "( 6) 'immovable property' includes land, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything D which is attached to the earth, but not standing timber, growing crops nor grass."

What is pertinent to note about these definitions is that things attached to the earth are immovable property. The expression "attached to the earth" is defined in section 3 of the Transfer of Property Act as follows : E " 'attached to the earth, means·-

(a) rooted in the earth, as in the case of trees and shrubs ;

(b) imbedded in the earth, as in the case of walls or build· F . ings .; or

(c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached."

G Thus, while trees rooted in the earth are immovable property as being things attached to the earth by reason of the definition of the term "immovable property" given in the General Clauses Act, the Orissa General Clauses Act and the Registration Act, read with the definition of the expression "attached to the earth" given in the Transfer of Property Act, standing timber is movable ll property by reason of its bein$ exclucdecl fro!D the definition of

i>iuSSA v. TirAGHUR PAPER MiLLS (Madon, i.) 69 l "immovable property" in tbe Transfer of Property Act.and tbe A. Registration Act and by being expressly included within the mean- ing of the term "movable property" given in the Registration Act. The distinction between a tree and standing timber has been poin- ted out by Vivian Bose, J., in his separate but con curing judgment in the case of Shrimati Shantabai v. State of Bombay and others1 as follows : B "Now, what is the difference between standing timber and a tree ? It is clear that ihere must be a distinc' tion because the Transfer of Property Act draws one in the definitions of 'immovable property and 'attached to the earth' ; and it seems to me that'the distinction must lie in c the difference between a tree and timber. It is to be noted that the exclusion is only of 'standing timber' and not of 'timber trees.' "Timber is well enough known to be-wood suitable for building houses, bridges, ships, etc., whether on the tree or cut and seasoned.' (Webster's Collegiate Dictionary). D Therefore, 'standing timber' must be a tree that is in a state fit for these purposes and, further, a tree that is meant to be converted into timber so shortly that it can already be looked upon as timber for all practical purposes even though it is still standing. If not, it is still a tree because, unlike timber, it will continue to draw sustenance from the soil. E

"Now, of course, a tree will continue to draw sus- tenance from the soil so long as it continues to stand and live ; and that physical fact of life cannot be altered by giving it another name and calling it 'standing timber' But the amount of nourishment it takes, if it is felled at a F reasonably early date, is so negligible that it can be ignored for all practical purposes and though, theoretically, there is no distinction between one class of tree a)ld another, if the, drawing of nourishment from the soil is the basis of the rule, as I hold it to be, the law is groun- ded, not "so much on logical abstractions as on sound and practical commonsense. It grew empirically from instance to instance and decision to decision until a recognisable

(I) [1959] S.C.R. 265, 27S-6. H

70 SUPllEMll COURT llEPOllTS [1985] 3 s.c.a. A and workable pattern emerged ; and here, this is the shape it has taken."

Thus, trees which are ready to be felled would be standing timber and, therefore, movable property. What is, however, B material for our purpose is that while trees (including bamboos) rooted in the earth being things attached to the earth are immov· able property and if they are standing timber are movable 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 0 movable property but also goods. ' In this connection it may be mentioned that in English law there exists (or rather existed) a difference between fructus natwriles and fructus industriales. Fructus natura/es are natural growth of the soil, such as; grass. timber and fruit on trees, which were regarded at common law as part of the soil. Fructus industriales are fruits or crops produc.ed "in the year, by the labour of the year" in sowing and reaping, planting, and gathering e.g. corn and potatoes. Fruc- tus industriales are traditionally chattels being considered the "representative" of the labour and expense of the occupier and thing independent of the land in which they are growing and were not treated as an interest in land. Fructus naturales are regarded until severance as part of the soil and an agreement conferring any right or interest in them upon a buyer before severance was a contract or sale of an interest in land and were, therefore, governed by section 4 of the Statute of Frauds of 1677 (29 Car. n c. 3). If they were severed before sale, section 17 of that Statute applied (I (see Benjamin's Sale of Goods, Second Edition, para 90, p. 62)

----. This distinction was, therefore, important in England for the '-"""== purposes of the formalities required under the Statute of Frauds. . I · Under the definition of 'goods' given in section 62 (1) of the old English Sale of Goods Act of 1893, "goods" included inter alia all industrial growing crops and things attached to or forming part of the land which were agreed to be severed before sale or under the contract of s.ale. The formalities required for a con tract for the sale· of goods of the value of £10 and upwards by section 17 of the Statute of Frauds were re-enacted in section 4 of the Sale of Goods Act, 1893. This section was repealed by the Law Reform (Enforcement of Contracts) Act, 1954. The definition of 'goods' in section 61 (1) of the new Sale of Goods Act, 1979, is the same as in

ORISSA v. TITAGHUR PAPER MILLS (Madon, j.) 11 the earlier Sale of Goods Act. Thus, the position now in English law is that crops and other produce whether fructus naturales or fructus industria/es (except in the case of a sale without severance on a landlord, incoming tenant or purchaser of ·the land)· will· always be "goods" for the purposes of a contract of sale since the agree: ment between the parties must be that they shall be severed either "before sale" or "under the contract of sale" (see Benjamin's Sale B of Goods, Second Edition, para 91, p.63).

As pointed out in Mahadeo v. The State of Bombay' the distinc- tion which prevailed in English law between fructus natura/es and fruc111, industria/es does not exist in Indian law, and the only ques- tion which would fall to be considered in India is whether a trail- C saction concerns .. "goods" or "'movable property" or "immovable property'" The importance of this question is twofold : (I) in the case of immovable property, a document of the kind specified in· section 17 of the Registration Act requires to be compulsorily '. registered and if it is not so registered, the consequences mentioned in sections in sections 49 and 50 of that Act follow, while a docu-. D ment relating to goods or movable property is not required to be registered; and (2) by reason of the interpretation placed on Entry 54 in List II in the Seventh Schedule to ·the Constitution of India · by this Court a State cannot levy a tax op. the sale or purchase· of any property other than "goods" . J.

The subm.ission of the Respondent that, the impugned provisfons E levied a purchase tax on immovable property and not on goods '.and hence travelled beyond the taxing power of the State Government under the said Entry 54 was based upon the omission in the impu- gned provisions of the words "before sale or under the contract of sale." It was urged that ·unless these words qualified the phrase ''agreed to be severed", standing trees and bamboos would not be F "goods" within the meaning of the definition of that term in tlie Sale of goods Act and the Orissa Act. The High Court held that the impugned provisions amounted to levying a tax on an agree; G ment of sale and not on actual sale or purchase. According to the High Court, on tax can be imposed unless the taxable event (name- ly, the transfer of property in the goods from the seller to the buyer) takes place ; and .standing trees (including bamboos) b~ing

(1) (1959) Supp. 2 S.C,R. 339, 349.

72 stiPROO cduar REPORTS [19~5] 3s.c.a. A unascertained goods, under the forest contracts entered into by the State Government, they continue to be the property of the State Government untill felled and, therefore, the title to such trees or bamboos is transferred in favour of the forest contractor only when the B trees or bamoos are felled and severed after complying with the con- ditions of the forest contract. We find that there is a fallacy under- lying the above submissions of the Respondents and in the reasoning of the High Court, the fallacy being to read merely the description of the goods given in the impugned provisions by itself and not in conjuctions with the governing words of the said provision. These c impugned provisions declare that standing trees agreed to be severed and bamboos agreed to be severed shall be liable to tax on the turnover or purchases. The tax that is levied under section 3-B is not on goods declared under that sectioµ but on the turnover of purchases or such goods. It one reads the Notifications issued under section 3-B and S (1) as a whole. it is clear that the taxable event is not an agreement to sever st•nding trees or bamboos but the purchase of bamboos or standing trees agreed to be severed.

Does the absence of the words "before sale or under the con- tract of sale" make any difference to this position ? The answer in our opinion must be in the negative. The very use of the word "agreed" in the description of goods shows that there is to be an agreement between the buyer and the seller and under this agree .. ment standing trees must be agreed to be severed and so) also bam- boos. According to the definition of "goods" such severance may be either before sale or under the. contract of sale. At the first blush, therefore, it would appear that the goods which form the subject· matter of the impugned provisions are either bamboos and standing trees agreed to be severed before sale or bamboos and standing trees agreed tobe severed under the contract of sale. The question is "Which one is it ?". The answer to this question depends upon the distinction in law between an agreement to sell and sale. Section 4 G of the Sale of Goods Act, 1930, deals with a sale and an agreement to sell and it provides as follows :

"4. Sale and agreement to sell.

(1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract ff' of sale between one part-owner and another.

ORiSIA v. TITAGHUR PAPER MILLS (Madon, i.)

(2) A contract of sale may be absolute or conditional. A

(3) Where unJ,r a contract of sale the property in the goods is transferre.d from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition . thereafter to be fulfilled, the B contract is called an agreement to sell.

(4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which ~--/ the property in the goods is to be transferred." c Thus, where th~re is a transfer from the buyer to the seller of property in the goods which are the subject-matter of the agreem_ent 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 condi- D tions are fulfilled. In the first case the contract is executed, w hilc in the second case it is executory.

The distinction between an agreement to sell and sale and the legal consequenc.es flowing from each have been succinctly stated in Benjamin's Sale of Goods, paras 25-26 at page 23, as follows : E

"Agreement to sel/ ...... An Agreement to sell is simply a contract, and as such cannot give rise to any rights in the buyer which are based on ownership or possession, but only to claims for breach of contract. In the normal case _at least, so long as the property in the goods remains in the seller, they are his to deal •with as he chooses (except that he may be in breach of hi; contract with the buyer); they are liable to seizure in distress or ~xecution as his property; and they pass to the trustee in the event of his bankruptcy.

Sale. The Sale of Goods Act 1979 defines a sale in the following passages: first 'where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale'; and secondly, 'an agreement to sell becomes a sale when the time elapses or H.

74 SUPREME couar REPORTS [1985] 3 s.c.R.

A the conditions are fulfilled subject to which the property in the goods is to be transferred'. It is therefore possible for a sale within the statutory meaning to come about in one of two ways: either by a contract whi.ch itself operates to transfer the goods from the ownership of the seller to that of the buyer, the property passing when the contract is B made; or by a contract which is initially only an agreement to sell, but is later performed or executed by the transfer of the property. In either case it is clear that the sale involves not only a contract, but also a conveyance of the property in the goods, and so it may confer on the buyer the right to bring a claim in tort for wrongful interference c with the goods as well as rights in contract."

, The test, therefore, is the transfer of the property in the goods from the seller to the buyer. In order to dctermil)c whether for the impugned provision> to apply standing trees or bamboos are to be severed before sale or under the contract of sale, what is required to be ascertained, therefore, is the point of time when the property in the goods is transferred from the seller to the buyer. Under section 18 of the Sale of Goods Act, where there is a contract for the sale of unascertained goods, no property in the goods transferred to the buyer unless and until the goods are ascertained. Under section 19, where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred and for the purpose of ascertaining the intention of the parties regard is to be had to the terms of the contract, the conduct of the parties and circumstances of the case. Further; unless a different intention appears, the rules contained in sections 20 to 24 are rules for F' ascertaining the intention of the parties as to the time at which the property in the goods is to pass to' the buyer. Sections 20 to 23 provide as follows : G' "20. Specific goods in a deliverable state.

Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price H' or the time of delivery of the goods; or both, is postponed."

ORISSA v. :riTAGHUR PAPER MILLS (Madon, J.)

"21. Specific goods to be put into a deliverable state. A Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods. for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof." B "22. Specific goods zn a deliverable state, when the seller has to do anything thereto in order to ascertain price.

Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to c weigh, measure, test or do s·ome other act . or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer has notice thereof."

"23. Sale of unasccrtained goods and appropriation.

(I) Where there is a contract for the sale of unascertained or future goods by description and goods of that description .and in a deliverable state are uncondition· ally appropriated to the contract, either by the seller with .the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to E the buyer. Such assent may be expressed or implied, and may be given either before or after the appropriation is made.

(2) Delirery to the Carrier. F Where, in pursuance of the contract, the seller deli- vers the goods to the buyer or to a carrier or other bailee· (whether named by the buyer or not) for the purpose of G transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropria- ted the goods to the contract."

We are not concerned with section 24 which provides when property in the goods passes to the buyer where goods are delivered

SUPREME COuRT REPORtS [1985] ? s.c.Il, A to the buyer on approval or "on sale or return" or other similar terms. The terms "deliverable state" and "specific goods" are defined in clauses (3) and (14) of section 2 of the Sale of Goods Act as follows :

"( 3) goods are said to be in a 'deliverable state' when B they are in such state that the buyer would under the con- tract be bound to take delivery of them;"

"(14) 'specific goods' means goods identified and agreed upon at the time a contract of sale is made."

Under the Orissa Act also "sale" is defined as meaning c "transfer of property in goods" and the word "purchase" is to be construed accordingly. The language of the impugned provisions, especially the governing words thereof, makes it clear that what is made exigible to tax is not an executory contract of sale but an executed contract of sale or in other words, not an executory con- tract of purchase but a completed contract of purchase. Bearing in mind the statutory provisions referred to above, it is further clear that such purchase would be complete when the standing trees or bamboos are specific goods, ·that is, when they are identified and agreed upon at the time the contract of sale is made, and the con- tract is unconditional and further such standing trees or bamboos are in a deliverable state, that is, nothing remains to be done except for the buyer to enter upon the land of the seller and to fell and remove the trees or bamboos, as the case may be, without any let or hindrance. If these factors exist, then unless a different inten- tion appears either from the terms of the contract or can be infer- red.from the conduct of the parties and other circumstances of the case, the property in such standing trees and bamboos would pass from seller to the buyer when the contract is made and it is im- material whether the time of payment of the price or the time of 1' taking delivery of standing trees agreed to be severed or bamboos agreed to be severed or both is postponed. If, however, there is an .G unconditional contract for the sale of standing trees or bamboos which are unascertained, then unless a different intention appears, the property in them would be transferred to the buyer when the standing trees and bamboos are ascertained and it would be equally 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 ,H sale and purchase would be completed before severance as under

ORISSA v. TITAGHUR PAPER MILLS (Madon, J.) 77 the impugned provisions there has to be a completed purchase of standing trees or bamboos agreed to be severed for the impugned provisions to apply. The severance obviously cannot be before sale because in that case the property would. only pass and the sale completed after severance and the impugned provisions would have no application. 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 "before sale or under the contract. of sale" thus makes 'no differ- ence. The subject-matter of the impugned provisions is goods and the tax that is levied thereunder is on the completed purchase of goods. c The fallacy underlying the reasoning of the High Court is that it has confused the question of the interpretation of the impug- ned provisions with the iqterpretation of Timber Contracts and the Bamboo Contract. On the interpretation it placed upon the Timber Contracts it came to the conclusion that the property in the D standing trees passed only after severance and after complying with the conditions of that contract and, therefore, the impugned I. provisions purported to levy a purchase tax on an agreement to sell. In the case of bamboos agreed to be severed, the High Court on an interpretation of the Bamboo Contract held that it was a grant of a profit a prendre and from that it further held that the · impugned provisions were bad in law because they amounted to a E levy of purchase tax on a profit a prendre. This approach adopted -'·~. by the High Court was erroneous in law. The question of the. vali- dity of the impugned provisions had nothing to do with the legality ofany action taken thereunder to ·make exigible to tax a particular transaction. If a notification is invalid, all actions taken under it would be invalid also. The converse, however, is not true. Where a notification is valid, an action purported to be taken thereunder contrary to the terms of that notification or going beyond the scope of that notification would be bad in law without affecting in any maimer the validity of the notification. Were the interpretation placed by the High Court on the Bamboo Con- tract and the Timber Contracts correct, the transactions covered by them would not be liable to be taxed under ,the impugned provi- sions and any attempt or action by the State to do so would be illegal but the validity of the impugned provisions would not be ff

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

A affected thereby. The challenge to the validity of the impugned provi>ions on the ground of their unconstitutionality must, therefore, fail. Double taxation Another ground on which the High Court invalidated the B impugned provisions was that bamboos agreed to be severed and trees agreed to be severed were the same as bamboos and .timber after they are felled and as bamboos and timber were liable to tax at the sale-point, the taxation of the same goods at the purchase- point amounted to double taxation and was contrary to the provi- sions of the Orissa Act. The general rule of construction is that a c taxing >tatute will not be so construed as to result in taxing the same person twice in respect of the same income or transaction. There is, however, nothing to prohibit the legislature from so enac- ting it. If what the High Court held were correct, it would not be double taxation in the strict sense of the term because the same person is not being taxed twice in respect of the same transaction but the same transaction is being taxed twice though in different hands, tint is, the seller in a tra111action of sale is being subjected to sales tax and the purchaser in the s1mc transaction is being sub- jected to purcluse tax. Not oaly d0es the Orissa Act expressly forbid this but it also forbids the levying of tax at more than one point in the same sedes of sales or purchases by successive dealers. The provisions in this behalf arc to be found in the proviso lo section 3-B and the proviso to section 8. Under the proviso to section 3-B, no tax is to be payable on the sales of goods or class of goods declared under that section to be liable to tax on the turn over 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. According fo the High Court, under the Orissa Act all goods are liable to sales tax unless exempted from tax by the State Government under section 6, and, therefore, if particular goods are liable to sales tax, no purchase tax is leviable in respect of the same goods unless the State Govern, men! issues three notifications, namely, (I) a notification under section 3-B declaring the goods to be taxable at the purchase point: (2) a notification under section 5 prescribing the rate of purchase tax, and (3) a notification deleting the goods from the list of goods taxable at the sale point. The High Court has illustrated this by setting out what was done when fish was made liable to purchas~ tax instead of sales tax,

ORISSA v. TITAGHUR PAPER MI.LLS (Madon, J.) 79

We find that the High Court has misunderstood the scheme A of taxation under the Orissa Act. As the Notifications dated December 29, 1977, were issued as a result of the amendments made by the Orissa Sales Tax (Amendment) Ordinance, 197.7, replaced by .the Orissa Sales Tax (Amendment) Act, 1978, while the Notificatioris dated May 23, 1977, were issued prior to these amendments, it is · necessary to consider the scheme of taxation under the Orissa Act B. both prior to and after January 1, 1978, being the· date on which the relevant provisions of.the said Ordinance came into force.

~f Prior to January 1, 1978, under section 5 (!)·the tax payable by a dealer under the Orissa Act on his taxable turnover was at the rate specified in that sub-section. At the relevant ti me the rate was c six .per cent. The rate specified in section 5 (1) was for both sales tax and. purchase tax. As under the Orissa Act a dealer js liable to pay tax on his turnover of sales as also on his turnover of purc]Jases and as purchase tax is payable only on the turnover of purchases of those declared under section 3-B, in respect of the goods not so. declared a dealer would be liable to pay sales tax. Under the pro- D. viso to section 3-B, when any goods are declared to be liable to tax on the turnover of purchases, no tax is payable on the sales of such goods. Prior to January l, 1978, a notification was to be issued by the State Government under the first proviso to section 5 (1) only when it wanted to fix a r>te of tax higher or lower than that specified in section 5(1). If no such notification was issued, then the tax which was payable, whether it was sales tax .or purchase tax, was to be at the rate mentioned in section 5 (1). The illustration given by the High Court was in respect of goods for which under the first proviso to section 5(1) the State Government had notified a rate of tax different from that mentioned in section 5(1). Where, however, any goods were declared under section 3-B to be liable to tax on the turnover of purchases, the notification prescribing a high, er or lower rate of sales tax issued under the first proviso to section 5(1) would there upon cease to be operative by reason of the opera, tion of the proviso to section 3-B 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 unless it wanted .to fix a rate higher or lower than that specified i~ section 5 (!). Where no such notification was issued, the rate of. purchase tax would be the one which was mentioned in section 5(1), lJ

80 SUPREME COURT REPORTS (1985] 3 •.C.R

After January 1, 1978,"the scheme of taxation is that no.rate A of tax is specified in the Orissa Act but under section 5(1) the State Government is given the power to notify from time to time the rate of tax, whether sales tax or purchase tax, by issuing notifications. The notifications issued under section 5 (I) fixing the rate of sales tax, namely, Notification No. 67184-C.T.A.-135/77-F dated Decem· B ber 29, 1977, does not contain any entry in respect of bamboos 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 be liable to sales ' tax at the rate of seven per cent. If, however, any goods falling under the residuary entry or any other entry in that notification arc c declared under section 3-B to be liable to tax on the turnover of purchases, the residuary entry or that particular entry would auto· matically cease to operate in respect of those goods by reason of the proviso to section 3-B without there being any necessity to delete that particular entry or to amend th~ residuary entry by excluding those goods therefrom. It would, however, be necessary for the State Government to issue a notification specifying the rate of purchase tax on those goods because unlike what the position was prior to January 1, 1978, on and after that date the 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, therefore, in error in holding that the impugned provisions were invalid and ultra 1•ires the Orissa Act as they amounted to "double taxation".

Effect of "Supersession"

Yet another contention raised by the contesting Respondents with respect to the impugned provisions was that the two Notifica- F tions dated December 29, 1977, having been made in "supersession" of all previous Notifications issued on the subject, the effect wits to wipe out all tax liability which had accrued under the Notifications dated May 23, 1977. The High Court held that to hold that the G liability was so wiped out would amount to giving a retrospective effect to the Notifications dated December 29, 1977, and as the Legislature had not conferred upon the State Government the power to issue notifications having retrospective effect, to so hold woulq be to render the said Notification void. The High Court re:forred to a number of decisions on the question of the power to make subordinate le$islation havin$ retrospective effect. H

ORISSA v. TiTAGHUR PAPER MILLS (Madon, J.) 81 L We find it unnecessary for the purpose of deciding this point A to refer to any of the authorities cited by the High Court. Both. the Notifications dated December 29, 1977, are in express terms made with effect from January 1, 1978. They do not at all puport to have any retrospective effect and, therefore, they conld not affect the operation of the earlier Notifications dated May 23, 1977, until they came into force on. January 1, 1978. Further, both section

3. Band section 5(1) in express terms confer power upon the State Government to issue notifications "from time to time". Section 3-B provides that "the State may, from time to time by notifications,

~r declare ... "goods liable to purchase tax. Prior to Jannary l, 1978, the proviso. to sub-section (I) of section 5 provided that "The State c Government may, from ti11w to time by notification ... fix a higher rate not exceeding thirteen per cent or any lower rate of tax ... " Section 5 (1) as amended with effect from January, 1978, provides that "The tax shall be levied ... at such rate, not exceeding thirteen per cent ... as the State Government may, from time to time by notifi- cation, specify." Thus, the power of the State Government to issue no- tifica lion under these two sections is to be exercised by it "from time to time" and, therefore, the State Government can under section 5(1) issue a notification and repeal and replace it by another noti- fication enhancing or lowering the rate of tax and similarly it can issue a notification under section 3-B declaring particular goods or class of goods to be liable to tax on the turnover of purchases and subsequently by another notification repeal that notification with E the result that the particular goods or class of goods will from the date of such repeal be again liable to pay tax on the turnover of sales. In the Notifications dated December 29, 1977, the word "supersession" is used in the same sense ,as the word "repeal" or rather the words "repeal and replacement". The Shorter Oxford English Dictionary, Third Edition, at page 2084, defines the word . F_ 'supersession' as meaning "The action of superseding or condition of being superseded." Some of the meanings given to the word 'supersede' on the sam: p1go in that Dictionary which are relevant for our purpose are "to put a stop to; to render superfluous or un- 'G necessary; to make of no effect; to annul; to take the place of (some- thing set aside or abandoned); to succeed to the place occupied by; · to supply the place of a thing". Webster's Third New International Dictionary at page 2296 defines the word "supersession" .s "the state of being ~superseded; removal and replacement". Thus, by usin(l in •. \he Notjficatio11s <;fated l)ecemb;r 2'J, 1977,

82 SUPREME COURT REP OR TS (l985] 3 S.C.R. J A the expression 'in snersssion of all previous notification' all that was done was to repeal and replace the previous notifications by new notifications. By repealing and replacing the previous notifications by other notifications, the result was not to wipe out any liability accrued under the previous notifications. If this contention of the Respondents were to be accepted, the result B would be startling. It would mean, for example, that when a noti~ fication has been issued under section 5 ( l) prescribing a rate of tax, and that notification is later superseded by another notification further enhancing the rate of tax, all tax liability under the earlier notification is wiped out and no tax can be collected by the State Government in respect of any transactions effected during the period c when the earlier notification wa·s in force.

The two Notifications dated December 29, 1977, impugned by the Respondents were not the only notifications which were issued on that date. There was another notification issued on that date, namely, Notification No. 67184-C.T.A.-135/77-F, directing that with effect from January I, 1978, the rate of tax payable by a dealer under the Orissa Act on account of the sale of goods specified in column (2) of the Schedule to the said Notifications would be at the rate specified against each in column (3) thereof. The issuance of these three Notifications became necessary by reason of the change brought about in the scheme of taxation by the Orissa Sales Tax (Amendment) Ordinance, 1977. Prior to that Ordinance, the rate of tax was as specified in sub-section (I) of section 5 with power conferred up~n the State G~vernment by the first proviso to that sub-section to fix by notification issued from time to time a higher rate of tax not exceeding the limit mentioned in the said proviso or to fix from time to time a lower rate of tax on account of the sale or purchase of any goods or class of goods specified in such notifica- tion. Thus, if no notification was issued by the State Government enhancing or lowering the rate of tax, the tax, whether sales tax or purchase tax, payable by a dealer would be at the rate specified in sub-section (I) of section 5 which at the relevant time was six per cent. In pursuance of the power conferred by the said proviso, the State Government had from time to time issued notifications enhancing and in some cases lowering the rate of tax payable on account of either sale or purchase of goods. The new section 5(1) did not specify any rate of tax but what was done was to confer ll upon the State Government the pow't by notific1tion to specify

) oRiSSA v. 'l'ITAGHUR PAPER MILLS (Madon, J.) 83

from time to time the rate of tax subject to a maximum of thirteen A per cent. Therefore, with effect from January 1, 1978, unless a notification was issued specifying the rate of tax, no dealer would be liable to pay any tax under the Orissa Act. It was for this rea- son that the Notification No. 67184-C.T.A-135/77-F dated Decem- ber 29, 1977, was issued specifying the rates of sales tax with effect from January l, 1978. As under section 3-B the State Government II had to declare the goods or class of goods which were liable to tax on the turnover of purchases, the State Government had issued from time to time notifications declaring such goods or class of goods. The purchase of such goods or class of goods were liable to purchase tax at the rate specified in the old section 5(1). Where, however, the State Government wanted that the turnover of purchase of c particular goods or class of goods should be taxed at a higher or lower rate, it issued notifications specifying such rate. As no rate of tax was specified in the new section 5(1) but it was left to the Government to specify the rate of tax by notification both in respect of sales tax and purchase tax, from the date the amending Ordinance· of 1977 came into force, namely from January I, 1978, it was D necessary to Issue a notification consolidating all previous notifica- tions on the subject in respect of goods liable to purchase tax which the State Government did by the impugned Notification No. _)._ 67178-C.T.A.-135/77-(Pt.)-F. dated December 29, 1977, declaring what goods would be liable to tax on the turnover of purchases with effect from January 1, 1978. Unless, however, the rate of purchase tax in respect of these goods was specified"under the new section 5(1) E the goods though declared to be liable to tax on the turnover of purchase would not be exigible to any tax at all, it, therefore, became necessary for the State Government to issue Notification No. 67181-C.T.A.-135/77-F. dated ~December 29, 1977; specifying the rates of purchase tax with effect from January l, 1978. F Exigibility to tax-Preliminary Contenion-

The question which now remains to be considered is as regards the exigibi!ity to purchase tax of the amounts payable under the G Bamboo Contract and the Timber Contracts. Before we address ourselves to this question, it is necessary to dispo>e of a preliminary contention raised by the Appellant with respect to this part of the case. It was submitted that the question whether a particular contract is a sale or purchase of goods is a question of fact or a question of interpretation of documents and one to be decided by

8.4 SUPREME-COURT REPOR1S (1985] 3 S.C.R,

A the assessing authorities and, therefore, if this Court holds that the impugned provisions are valid (as we· have now done), it should not go into the question of the exigibility to purchase tax of the _transactions in question. This plea was not raised at any stage _before the High Court but has been raised for the first time in the Petitions for Special Leave to Appeal, •-,md that too only with B respect to the Bamboo Contract though during the course of hearing before us, it was raised with respect to the Timber Contracts also. Before the High Court the matter proceeded on the basis that the question of validity of the impugned provisions and of the exigibiiity to purchase tax of the transactions covered by the Bamboo Contract and the Timber Contracts were inextricably linked together as if c the impugned provisions were issued only in order to levy a purchase tax on the transactions covered by these Contracts. The Appellant can, therefore, hardly raise such a plea for the first time before this Court.. It is true that normally it is for assessing authorities to ascertvin the facts and to interpret the documents in question, if there be any, and to decide whether a particular transaction is exigible to tax. Here, however, the facts are not in '· dispute and the determinations of this question involves only an interpretation of the documents. The major part of the hearing before the High Court was .taken up with the nature of the transac- tions covered by these Contracts. Wc Jrnve also heard the parties at length on the merits of this questi'on. Even though the judgment of the High Court with respect to the validity of the impugned provisions has been held by us to be erroneous in law, it may well be said that the High Court's finding on the true nature of the Bamboo Contract and the Timber Contracts remains unaffected. If we refuse to decide this question and leave it to the assessing authol'ities to do so, they may well feel themselves bound by the High Court's findings on this point or on the other hand, they may consider that the whole judgment of the High Court has been reversed, particularly in view of the fact that in their_ writ petitions the Respondent company ha( challenged the notice issued to it to file a return and the Respondent Firm had challenged the assess- G ment order made against it and, therefore, feel free to determine the question afresh. Jn either event the matter would ultimately come back for decision to this Court and that too after the lapse of several years-a. consequence not to be contemplated with equanimity by this Court. We, therefore, reject this preliminary contention raised by the Appellant.

ORISS,\ v. TIT.\GHUR PAPER MILLS (Madon, J.) SS

Timber Contracts

We will first take up the Timber Contracts. The High Court held that standing trees were unascertained goods and continued to be the property of the State Government until felled and, therefore, the title to them was transferred to the forest contractor only when the trees were felled or severed by hini after complying with all the conditions of the forest contract and as the impugned provisions applied only to standing trees, that is, to l trees before their severance, purchase tax was not attracted and any __ j attempt to levy purchase tax on the amounts payable under the Timber Contracts would amount to taxing an agreement of sale c of goods and not a completed sale or purchase of goods. The· High Court further held that. the trees so severed in which the property passed to the forest contractor were liable to sales . tax by. reason of the retrospectively amended definition of the term "dealer" in clause (c) of section 2 of the Orissa Act and they could not;· therefore, be again made liable to purchase tax. The High Court also rejected the contention of the Appellant State that .timber and dressed or sized Jogs were different commercial commodities and that sales tax could, therefore, be levied on both. According · to the High Court they were the same commodity and, therefore, . they could not be made liable to sales tax at two points in the.' same series of sales. The High Court did not decide the question: whether the Timber Contracts were works contracts. This point. E was, however, urged before us "on behalf of the Respondent firm. We will deal with this point separately but for the present suffice it to say that according to us none of the Timber Contracts is a works contract.

On behalf of the Appellant State it was submitted that the F , Timber Contracts read with the sale notice advertising the auction , in respect of the standing trees showed that the standing trees which were the subject mattter of the Timber Contracts were goods G ;·; identified and agreed upon at the time when the contract of sale was made and were thus specific goods and that, therefore, there was an unconditional contract for the sale , of specific goods · in a deliverable state and the property in the said trees passed to the forest contractor, namely, the Respondent Firm, when the contract was made, and the fact that the time of delivery as also payment, ·of price was postponed was irrelevant. It was the Appellant's

SUPREME COURT REPORTS [1985) 3 s.c.li..

A submission that for the reason set out above the amounts payable under the Timber Contract were e~igible to purchase tax. It was further submitted that in any event the property in the standing trees passed when the forest contractor was permitted to get into the area as delineated under Rule 12 of the Orfasa Forest Contract Rule, 1966 (hereinafter referred to as "The Forest Contract B Rules"), to enable the contractor to fell the trees. The same. submissions as found favour with the High Court were advanced before us on behalf of the Respondent Firm.

While setting out the facts of Civil Appeal No. 220 of 1982, c we have outlined the procedure followed by the State of Orissa in entering into forest contracts. The notice of public auction with · which we are concerned was published in the Orissa Gazette and was headed "Sale Notice of Timber and Other Forest Products .... " This Sale Notice related to different forest produce and was in three parts. ·Part I gave "the list of timber and other forest products" for the session 1977-78 which would be "sold by public auction''' D and the places and dates where such auction sales were to be held. Clause 2 of Part I of the Sale Notice stated that· the sale lots were subject to the Special Conditions of Sale as published in Part II of the Sale Notice, the General Conditions of Sale as published in Part III of the Sale Notice so far as they may be applicable and the conditions mentioned in the sanctioned form of agreement. Clause 3 stated that the successful bidders shall be bound by the Orissa E Forest Act. 1972, the Forest Contract Rules, the Orissa Timber and other Forest Produce Transit Rules, and all other relevant rules in force or which might hereinafter come into force and

F promulgated under the Orissa Forest Act, 1972.

Under condition I of the Special Conditions of Sale set out in Part II of the Sale Notico, the contract period of timber coupes was to commence from the date of the ratification of sale by the competent authority and was to include the number of working -- '

G months mentioned in the sale notice a·gainst each lot. Condition 2 stated the time and manner of "payment of purchase price" in full or by instalments. Under condition 8, the intending bidders were asked to inspect the coupes and lots before bidding in the auc- tion and their act of bidding was to be deemed as sufficient proof of their having inspected the coupes the coupes and satisfied them- selves about the correctness of the quality and quantity of the H

Ol!.issA v. TITAGHiiR PAPER MILLS (Madon, J.) si produce and ·the area of the contract. Condition 9 provided that no extension of time for working any coupe beyond the contract period as published in the Sale Notice and declared in the auction hall would be allowed except under very exceptional circumstances. Under condition 14, the prescriptions contained in the working plan, working schedule and their amendments or the executive in· structions of the higher authority and local rules were to be binding on the contractors as regards felling of trees in coupes. Under con- dition 21, the purchaser was to pay the sales tax as per the Orissa Act over and above the bid amount. In the event of his delay in __/ payment of sales tax, the ~ame was to be adjusted from the earnest money deposit or the security deposit, as the case niay be, and the purchaser was bound to replenish the same forthwith. Condition c · 22 provided that the contractor was to pay sales tax on the amount of each instalment as per the Sales Tax Rules along with the instal- ment of consideration money and non-payment of sales tax or non- subniission of appropriate declaration under the Sales Tax Rules was to amount to incomplete payment of instalm,ent and thereupon Rule 9-A of the Forest Contract Rules was to be applicable.

Under condition 1 of the General Conditions of Sale Pub- lished in Part III of the Sale Notice, the bid was to be accepted by _)._ - the Divisional Forest Officer subject to the approval of the com- petent authority and the right to take contract fQ( exploiting forest produce in the lots advertised in Part I of the Sale Notice was to be granted when the competent authority approved' the E bid. Under condition 4, intending bidders were to deposit as earnest money a sum of Rs. 200 . In the case of unsuccessful

-· --../ bidders this amount was to be refunded immediately after the auction was held and in the case of successful bidders the amount ·was to be adjusted towards the security deposit. Under con· F dition 1O, a bidder whose bid was conditionally of finally accepted by the. Divisional Forest Officer was to make the security deposit in cash. On payment of the security deposit, the bidder was to sign the necessary agreement but the signing of such agreement G was not to confer any right on the bidder unless the sale was ratified by the competent authority and the ratification order was communicated to him. No sale of any lot was to be considered valid or complete unless these conditions had been complied with and in the event of failure to do so, the Divisional Forest Officer was to be at liberty to quasb the sale and forfeit the H

88 SUPREME COURT REPORTS [1985] 3 s.c.R. J

A earnest money or the security deposit, as the case may be, and resell the lot and recover from tbe successful bidder who had failed to comply with the conditions the shortfall on such resale. Condition 12 provided for the payment of purchase price in full or by instalments. Under condition 15 orders of ratification of sale by the competent authority were to be communicated to the B successful bidder by the Divisional Forest Officer specifying ther.::in the dates of the payment of instalments in accordance with condition 12 and the period of the contract. Under condition 16, the contractor was not to commence the work in the contract area before the payment of the first instalment or the full considera- tion money if it was payable in one instalment and before furnish- c - ing the coupe declaration certificate or intimatiou about starting work, as the case may be, as required by Rule 12 of the Forest Contract Rules. Under condition 18, an agreement was to be executed by the competent authority o·n behalf of the Government and a copy thereof was to be delivered to the contractor as soon as may be. '

On its bids being accepted the Respondent Firm entered into five Timber Contracts in the forms prescribed in the Sche- dule to the Forest Contract Rules. The main heading of each of these Timber Contracts is 'Forest Contract--Agreement Form' and the long,heading states that it is "An agreement for the sale and purchase of forest produce". Under clause 1, the forest E produce "sold and purchased under" the Timber Contract was to be as specified in Schedule I thereof and the forest area in which it was situated was indicated in Schedule V thereof and was to be referred to as the contract area. Schedule I in eacb of the Timber Contracts mentioned that the forest produce "sold and purchase.d Under" the Timber Contract consisted of a certain number of sound and unsound trees marked and numbered serially on the blazes, one at the base of the trees and the other about 4-1/2',from the ground level, · witb the hammer mark of -"- '--

G: facsimile shown in the Sale Notice. Clause 2 stated that the quantity of the forest produce "sold and purchased under" the Timber Contract was all the said forest produce which then existed or might come into existence in the contract area which the forest contractor might remove from the s:.id area during the period of the contract and it was further provided that the said forest produce was to be extracted by the forest contractor ollly H

ORISSA v. TIT/\GHUR PAPER MILLS (Madon, J.) 89

during the aforesaid period. That part of clause 2 which. spoke of A forest produce which might come into existence in the contract area was obviously inapplicable to the Respondent Firms's case inasmuch ·as the Timber Contracts were in respect of a certain number of existing trees. This provision was there because the Timber Contract was in .the form which is the prescribed form of contract in respect of all forest produce and under Rule 33 of the -B Forest Contract Rules all forest contracts are required to be made in this form. Clause 4 started that the routes by which the said forest produce was to be removed from the contract area and the depots at which it was to be presented for examination were to be those specified in Schedule Ill. Under dause 5, it was agreed that the Timber Contract was to be subject to the Forest Con- c tract Rules and conditions laid down in the Sale Notice except to the extent that the said Rules· and conditions were deemed to be modified to the extent prescribed in Schedule JV. Under Schedule 4 ·to the contract, the Forest Contract Rules were deemed to be modified by the Special. Conditions in the Sale Notice. By clause 6 the forest contractor bound himself to perform all acts. and duties required and to abstain from performing any act forbidden by or under the Orissa Forest Act, 1972, and the Forest Contract Rules and by the Timber Contract. Schedule II set out the. number and amounts of inslalments and the dates of payment of the instalments.

The bids given by the Respondent Firm were ratified in due E course by the Government of Orissa and the fact of such ratification . was communicated to the Respondent Firm by the Divisional .Forest Officer. Each of these ratification letters specified the number and amounts of the instalments payable by the Respondent Firm and the dates when eacb instalment was payable. Each of F- these ratification letters required the Respondent Firm to take delivery of the particular coupe within one and half months from the date of issue of the ratification order and to get the Respondent · Firm' s property hammer mark registered in the office of the G Divisional Forest Officer on payment of the appropriate registration fee. Each of these letters required the Respondent Firm not to commence work in the contract area before the payment of the first instalment and before furnishing the Coupe Declaration Certificate · or intimating in writing that.it inte11ded to commence work from a particular date, as the case may be, as required under Rule 12 of H

90 SUPREME COURT REPORTS tt985] 3 S.C.R. the Forest Contract Rules. By the said letters the Respondent A Firm was also required to submit monthly returns of removal of forest produce from the contract area to the concerned Range Officer. A copy of each of these letters was forwarded to the concerned Range Officer with a direction that he should give delivery of the coupe to the Respondent Firm within one and a half B months from the date of the ratification order and allow the Respondent firm to commence work in the contract area after it had furnished the Coupe Declaration Certificate and made payment of the first instalment

As the Orissa Forest Contract Act, 1972 (Orissa Act 14 of c J972), and the Forest Contract Rules formed part of the agreement between the State of Orissa and the Respondent Firm, it may be convenient at the stage to look at the relevant provisions thereof. Clause (g) of section 2 of the Orissa Forest Contract Act defines "forest produce"' as including inter alia timber, whether found in or brought from a forest or not, and trees wh~n found in or brought from a forest. Clause (n) defines "timber" as including "trees D fallen or felled and all wood cut-up or sawn". Clause (o) of section 2 of the Act defines "trees" as including bamboos. Section 36 of •ihe Orissa Forest Act confers powers upon the State Government to make rules inter u/ia for the cutting, sawing, conver- sion and removal of trees and timber, and the collection, manufacture and removal of forest produce, from protected forests. E Under section 37, any infringement of a rule made under section 36 is an offence punishable with imprisonment for a term which may extend to one year or with fine which may extend to Rs. 2000 or both. Under section 45(1) the control of all rivers and their banks as regards the floating of timber as well as the control of all timber and other forest produce in transit by land or water is vested in the State Government and the State Government is conferred the power to make rules to regulate the transit and possession of all timber and other forest produce, including rules prescribing the routes by which alone timber or other forest produce may be imported, exported or moved into, from or within the State, and to providC for punishment of imprisonment which may extend to one year or fine which may extend to Rs. 1,000 or both for any breach of such rules.

Under rule .2 of the Forest Contract Rules, all contracts whereby H

ORiSSA v. TltAGHUR PAPER MILLS (Madon, J.) 91 the Government sells forest produce to a purchaser are, subject to the Forest Contract Rules in so far as they are applicable, and the Forest Contract Rules are deemed to be binding on every forest contractor. The Forest Officer executing a forest contract is, however, given the power to vary the rules by express provision in such contract. A "forest contract' is defined in clause (1) of Rule 3 as.meaning '·a contract whereby Government agrees to sell and purchaser agrees to buy forest produce" and a 'forest contractor' is defined in clause (2) of Rule 3 as meaning "the person who purchases produce under a forest contract". Under Rule 6, a forest contract is to carry with it an accessory licence entitling the forest contractor and his servants and agents to go upon the land specified in the contract and to do all acts necessary for the proper c extraction of the forest produce purchases under the contract. Uuder Rule 6. where a period is specified iu the forest contract for the extraction of the forest produce purchased under the- contract, time is deemed to be of the essence of such contract and upon the completion of the specified period the contractor's right under the contract is to cease and any forest produce' not removed across the boundaries of the contract area is to become the absolute property of the Government. The Conservator of Forests or the Divisional Forest Officer, as the case may be, is, however, given the right, for special reasons, to grant an extension of time on such terms as may be decided for a total period (inclusive of the original contract period) not exceeding the period for which he is empowered to sanction contracts on payment of a monthly extension fee of one per cent of the amount of the contract. Under Rule 9, the Divisional Forest Officer or the Range Officer, as the case may be, is given the power to stop extraction of the forest produce where

-- the consideration payable to the Government under a forest con· tract is payable by instalments and, at any time before the last instalment is paid, he considers that the value of the forest produce removed by the contractor exceeds the amount of instalments F

already paid. Further removal is to be permitted only after the contractor has paid such further sum as in the opinion of the G Divisional Forest Officer or the Range Officer is sufficient to cover such excess. Under Rule 9-A, it is open to tlie Divisional· Forest Officer or the Range Officer of the concerned . range to stop extraction .if the contractor fails to pay any instalment due from him within the grace period of ten days beyond the date fixed for payments of the instalment. It is equally open to these officers H.

92 SUPREME COURT REPORTS [1985] 3 .s.c.a

A to stop work in the contract area if the · contractor fails to pay two instalments due from him. Under Rule 12, before commencing any work in the contract area the forest contractor is to sign and submit to the Divisional Forest Officer or L

the concerned Range Officer a written declaration to the effect that he or his authorized agent or both have been shown the boundaries B and limits of the lot covered by the contract by the Range Officer or by a subordinate deputed by him for the purpose and that the area shown on the ground agrees with the area delineated on the map annexed to the forest contract and until such a declaration has been given, the Divisional Forest Officer or the Range Officer may \_ refuse to allow any work to commence and the contractor is not c to be entitled to any compensation for any loss that might be sustained by him by reason of any delay in commencing the work owing to such refusal. Rule 12 further provides that if such declaration is not furnished within one and a half months from the date of issue of the ratification order, the Divisional Forest Officer is to cancel the contract, forfeit the security deposit, resell the D contract at the risk of the contractor and recover the shortfall from him. Condonation of delay in furnishing such intimation or declaration is expressly prohibited. Under Rule 13, a forest contractor is not to remove any forest produce from the contract area unless it is accompanied by a permit signed by the contractor or his authorized agent. Such permits are to be obtained on payment from tile Range Officer. Further, the Divisional Forest E Officer or the Range Officer, as the case may be, has the power to withdraw a permit book, if in his opinion, such permit book has been misused for unlawful gain. In the event of such withdrawal

F the forest contractor is not entitled to any compensation for any loss that might be sustained by him for any stoppage of his work in or extraction from the contract area, Under Rule 14, the method employed by the forest contractor for extraction of forest produce along forest roads is to be subject to the approval of the Divisional ·- 1.

Forest Officer and the forest contractor is not to cart any produce over forest roads between such periods as the Divisional Forest Officer might appoint without the previous permission in writinl( of the Divisional Forest Officer. Further, the Divisional Forest Officer is given the discretion to close forest roads for extraction of forest produce on any rainy days and for three days thereafter during the rest of the year. He may also close roads temporarily for nrgent or special repairs should this in his opinion become

ORJSSA v. TJTAGHUR PAPER MILLS (Madon, J.) 93 necessary. Further, the forest contractor is prohibited from extracting forest produce by dragging along forest roads. Under Rule 15, except with the special permission of the Divisional Forest Officer, a forest contractor is not to remove any forest produ.ce from -the contract area after sunset or before sunrise. Under Rule 16, a forest contractor is not to remove any forest produce· except by routes specifieCI by rules made under the Orissa Forest Act or ·by the forest contract and is to take all forest produce removed by him to such depots or places as . may be similarly prescribed for check and examination. Under Rule 19, the forest contractor is to keep and submit accounts of the amount of the various kinds of forest produce removed by him from the contract area in such, form as the Divisional Forest Officer. may prescribe or c approve, and such accounts .are to be open to inspection at any time by the Divisional Forest Officer or by any subordinate duly authorized by him. Rule 20 prescribes the mode of felling standing trees. The Divisional Forest Officer has the power to stop further felling until these provisions are complied with. Under Rule 21, the Divisional Forest Officer is to divide the D contract area into such number of sections as he may think fit and has the power to regulate and confine the operations of the forest contractor within these sections in accordance with the provisions set out in the said Rule. Under the said Rule, the work is to be allowed progressively from section to section. When the forest contractor begins his operations under the contract, he is to be allowed to carry out cutting operations in sections Nos. I and 2 E only. As soon as he begins cutting operation in section No. 3 he is deemed to have surreµdered all his rights to standing trees in section No. I. When he begins cutting operations in section No. 4 he is deemed to have surrendered all his rights to the standing trees in section No. 2 and so on, throughout the F contract area. Under Rule 22, the forest contractor unless otherwise directed to do so in writing by the Divisional Forest Officer, is to register his property mark or trade mark in the Office of Divisional Forest Officer an.d get it registered by paying the registration fee in respect thereof. No timber is to be con- G veyed from the contract area without the impress. of the forest contractor's registered property or trade mark, and the Divisional Forest Officer and his subordinates have the right to mark any piece of timber with the Government ha1nmer mark pef9re it is rem9ved fro!ll the stump-side beyond the limits of such JL

94 SuPREME COURT REPORTS [1985] 3 S.C.R.

A checking station as the Divisional Forest Officer may appoint in writing. Under Rule 34, if the forest contractor makes default in the payment of the consideration for his contract or any instalment thereof or does not pay the compensation assessed under any of the Forest Contract Rules, the contract is liable to be terminated by the a11thority competent to do so. The B termination is to be notified to the forest contractor and the contract is deemed to have been terminated unless the contractor pays within one month from the date of receipt of the notice of termination all arrears due to the Government together with interest assessable under Rule 42 and renewal fee not exceeding one per cent of the arrears due and if he fails to do so, all his rights under c the contract including all necessary licences are to cease and all the forest produce remaining within the contract area or at the depots and bearing the contractor's registered property or trade mark and the Government hammer mark are to become the absolute property of 1he Government. Further, the Government becomes entitled to keep ~11 sums already paid by the contractor and to recover as arrears of land revenue any compensation which may be assessed and to resell the contract together with produce at the depots and other produce which has become the property of the Government and to recover the shortfall as arrears of land revenue and to forfoit the security deposit of the contractor. Under Rule 35, if the forest contractor commits any breach of conditions of the contract other than those mentioned in Rule 34(1), the contract is liable to be terminated and thereupon all the contractor's rights under the contract includ- ing all accessory licences are to cease and all the forest produce remaining within the contract area or at the depots is to become the absolute property of the Government. Under Rule 36, 'if in ) the opinion of the State Government it is considered necessary to ·\ F supply any kind of forest produce from any contract area to the people in case of flood, famine, cyclone and other calamities and if the contractor does not supply the materials at the rate fixed by the Government, such contract can be terminated by the Government G in writing by a written notice to the contractor and from the date of such termination, the contractor is to forfeit all his rights in the coupes. Under Rule 40, a forest contractor is not to be entitled to any compensation for any loss that may be sustained by reason of fire, tempest, disease, pest, flood, drought or other noturrtl calamity or by reason of any wronsful act committcJ by any third party or

ORISSA v. TITAGHUR PAPER MILLS (Madon, J.) 95 by reason of the unsoundness or breakage of any forest produce purchased by him or for any loss sustained by him through any operation undertaken in the interest of fire conservancy. He is equally not entitled to claim any reduction or refund of the sums payable or paid by him under his contract on the ground that the roads provided by the Forest Department or any other department are insufficient 'or in bad order or remain closed under any special order or that the quantity of produce falls short of any quantity specified in the schedule annexed to the contract or in the sale notice or that the area of the contract area differs in any way from that indicated in the schedule attached to the contract. Under Rule 44, all forest produce removed from a contract area in accordance with the Forest Contract Rules is to be at the absolute disposal of c the forest contractor.

B~aring in mind the terim and conditions of the Timber Con- tracts-not only those expressly ·set out therein but also those incor- porated therein by reference, namely, the terms of the Sale Notice, D the Special Conditions of Contract, the General Conditions of Contract and the various statutory provisions-we have now to determine wheth.er the property in the trees which were the subject. matter of the Timbor Contracts passed to the Respondent Firm while the trees wore still standing or after they were severed. In the first case the impugned provisions would apply and the amounts 'E payable under the Timber Contracts would become exigible to pur- chase tax, while in the second case the impugned provisions would not apply and no purchase tax would be payable. The above cons- pectus of these terms and conditions shows that the heading of the Sale Notice, namely, "Sale Notice of Timber" as also the use of the words "timber and other forest products··· Will be sold by public F ~uction" are not determinative of the matter. Though clause 1 of the Timber Contracts speaks of "the forest produce sold and pur- chased", the other terms and conditions of the contract make it clear that the Timoer Contracts were not unconditional contracts for the sale of goods in a deliverable state and the property in the G trees specified in Schedule 1 of the Contract, therefore, did not pass to the Respondent Firm when each of the Contracts was made. As mentioned earlier the Timber Contracts are in the prescribed form for all forest produce annexed to the Forest Contract Rules and the provisions of the Orissa Forest Act and the Forest Contract Rules are expressly made applicable thereto. Clause (I) of Rule 3 of the ff·

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

A Forest Contract Rules deflnes a "forest contract" as meaning "a contract whereby Government agrees to sell and purchaser agrees to buy forest produce." That this is also such an agreement is borne out by the long heading of the Timber Contracts which. des· cribes these contracts as "an agreement for the sale and purchase of forest produce." In fact, the signing of the Timber Contracts B did not result in a concluded contract because each contract was conditional upon the State Government ratifying the acceptance of the bid given by the Respondent Firm. Even after the ratification order was issued by the Government, it did not become an uncon-. ditional contract for the sale of specific goods in a deliverable state for the Respondent Firm had no right to severe the trees and take c them away before it had complied with the other conditions of the contract set out above. To recapitulate the most important amongst them, under Rule 12 of the Forest Contract Rules the Respondent Firm had to furnish a Coupe Declaration Certificate within one and half months of the issue of the ratification order. If D it did not do so, the contract would stand cancelled. It had also under Rule 22 of the Forest Contract Rules. to register within the same period its property mark or trade mark with the Divisional Forest Officer. Further, the Respondent Firm could.not commence any work unless it had given the required security deposit and before paying the first instalment as under the Timber Contracts in the present Appeals the amounts were payable by instalments. That the property in the trees did not pass to the Respondent Firm while the trees were standing is also shown by the fact that the Divisional Fo. est Officer or the conc1:rncd Range Officer had the power to stop further removal of the felled trees until the Respondent Firm had paid the amount required to make up the excess of the value of the felled trees removed over the amount of the instalments already paid by it and under Rule 9·A it was further open to the Divisional Forest Officer or the concerned Range Officer to stop - ' further work if there was a default in payment of any instalment or in payment of any two instalments and the contract could also be terminated under Rule 33 for such default. Further work or removal could not be stopped or the contract terminated if the property in the trees had passed to the Respondent Firm because in such event the only remedy open to the seller would be to sue for the balance of the price. It is also pertinent that under Rule 33 the contract could also be terminated and the Respondent Firm ff would forfeit its ri~ht to all ftirther trees to be severed by it if it

ORiSSA v. TITAGHUR PAPER MILLS (Madon J.). 97

committed a breach of any of the other conditions of the contract. A The mode of felling the trees was also not of the choice of the Res- pondent Firm but was one prescribed by Rule 20. Even after felling the trees the Respondent Firm was not entitled to remove the felled trees by any route which it liked but only by routes which were prescribed and that too only if covered by a permit signed by the Respondent Firm or its duly authorized agent from a permit book obtained from the Range Officer. Further, under Rule 16, after felling the trees the Respondent Firm had to remove them to the prescribed depots or places for check and examination and it was only after the trees felled by it were checked and examined to ascertain that they were felled in the manner prescribed in Rule 20 and were the trees which were the subject matter of the con- tract that it could take them out of the contract area. Unless the Respondent Firm felled and removed all the trees which were the subject-matter of the c ~ntract within the period of the contract, on the expiry of such period it would lose all rights to the trees not so removed.

It is true that under Rule 40 if the trees were destroyed by reason of fire, tempest, disease, pest, flood, drought or other natural calamity or by reason of any wrongful act committed by any third party or by reason of the unsoundness or breakage of any trees which were the subject-matter of the contract, the Respondent Firm was not entitled to any compensation for any loss sustained by it. This would show that after a Timber Contract was concluded, the risk passed to the Respondent Firm. Under section 26 of the Sale of Goods Act, the goods remain at the seller's risk until the pro- perty in the goods is transferred to the buyer and when the property is transferred to the buyer, the goods are at the buyer's risk whe- ther delivery has ·been made or not. Section 26 is, however, qualified by the phrase "Unless otherwise agreed." Thus, this section is subject to a contract to the contrary and what we have stated above is sufficient to show that the Timber Contracts were subject to a contract to the contrary and under them the dsk passed to the Respondent Firm before the property passed to it. This is made ahundantly clear by Rule 44 which states that "All forest produce removed from a contract area in accordance with these rules shall be at the absolute disposal of the forest contractor."

It is, therefore, clear that the Timber (on tracts were not ff

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

A_ transactions of sale or purchase of standing trees agreed to be severed. They were merely agreements to sell such trees. As po in. ted out above, each stage of the felling and removal operations was governed by the Forest Contract Rules and was under the control and supervision of the Forest Officers. The property passed to the Respondent Firm only in the trees which were felled, that is, in B timber, after all the conditions of the contract bad been complied with and after such timber was examined and checked and removed from the Rcontract area. The impugned provisions, therefore, did not apply to th'e transactions covered by the Timber Contracts.

It will be useful in the context of the conclusion which we \

c have reached to refer to the decision of this Court in Badri Prasad \_. v. Slate of Madhya Pradesh & Anr. fhe 'question in that case was whether there was a contract of sale of standing timber and whe- ther under the contract the property had passed to the appellant or whether the property had passed after the trees had been felled and hence the right of the appellant's transferor had vested in the D State Government before the trees were felled by reason of the provisions of the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mabals, Alienated Lands) Act, 1950 (M.P. Act No. I of 1951). The Court held that under the terms of the contract the trees had to be felled before they be co me the property of the appellant. The Court observed (at pages 390· l) : E "It will be noticed that under cl. 1 of the contract the plaintiff was entitled to cut teak trees of more than 12 inches girth. It had to be ascertained which trees fell within that description. Till this was ascertained, they were not 'ascertained goods' within s. 19 of the Sale of Goods Act. Clause 5 of the contract contemplated that stumps of trees, after cutting, had to be 3 inches high. In other words, the contract was not to sell the whole of the trees. In these circumstances property in the cut timber would only pass tq the plaintiff under the contract at the earliest when the trees are felled. But before that happe- ned the trees had vested in the State."

It is pertinent to note that conditions 16 to 18 of the Special Conditions of Sale which form part of the Timber Contracts also

H (I) (196912 S,C.R. 380.

OlUSSA v. TiTAGHUR PAPER MILLS (Madon, J.) 99

prescribe the girth of the trees which are to be felled and the height above the ground level at which they are to be felled, Timber a11d Logs.

On our above finding that the transactions under the Timber Contracts are sales of timber and not sales of standing trees agreed to be severed the tax which would be attracted would be sales tax and not purchase tax under the impugned provisions. This would, ' however, be so if the Divisional Forest Officer were a dealer. Under the terms of the Timber Contracts the Respondent Firm is liable to reimburse the Divisional Forest Officer the amount of sales _) tax he would which be liable to pay. The question.whether'the Division a c Forest Officer is a dealer within the meaning of that term as defined in clause (c) of section 2 prior to its being substituted with retros- pective effect by the Orissa Sales Tax (Amendment and Validation) Act, 1979, which repealed and replaced the Ordinance with the same title, is pending before this Court in Civil Appeals Nos. 1237-1238 of 1979 and 1420-142l of 1979. Whatever be the position under the old definition, after the substitution of that definition with retros- pective effect by the said Amendment and Vali:lation Act, the Divi3ional Forest Oflbor would be a dealer. The validity of this amendment is, however, also under challenge in this Court in Writ Petitions Nos. 958 of 1979 and 966of1979. W' therefore, express no opinion on eithJr of tho>e questions. It w1s, however, submitted on beh~lf of the Respondent Firm that assuming these challenges fail, it would be called upon to reimburse the Divisional Forest Officer According to the Respondent Firm, the Divisional Forest Officer. would not be entitled to do so because it bad made sized and dressed logs from the timber which it had purchased under the Timber Contracts and had sold such logs and paid sales tax on· these sales and, therefore, to tax the sales of timber to them would be to levy the tax at an earlier point in the same series of sales which is not permissible by reason of the prohibition contained in the proviso to section 8. According to them, timber and sized or dressed logs are • one and the same commercial commoaity. This contention was upheld by the High Court. Though the High Court had so decided in order to consider whether the same transaction could be taxed both at the sale-point as also at the purchase-point, it none the less becomes necessary for us to determine this question in or to prevent needless litigation in the future.

Though under section 8 the State Goveniment ])as the power to H

100 SUPREME COURT REPORfS [l 985] 3 S.C.\\. .J A prescribe the points in the series of sales or purchases by successive dealers at which any goods or class or description of goods may be taxed, it has not done so either in the case of timber or logs, though in the case of some of other goods, as pointed out earlier, the State Government has made rules prescribing that the tax would be levied . at the first point of sale. Thus, if the contention of the the Respon- B dent Firm were correct, as tax has already been levied at one point in the same series of sales, it would not be now open to the State Governmept to say that by reason of the substituted definition of the term "dealer", sales tax could also be levied at another point.

We will first see how different High Courts have dealt with c this question. Tn Saw Bros. aiid Co. v. The Stale of West Benga/1 al learned Single Judge of the Calcutta High Court held that planks sawed out oflogs are different things from logs and timber in its nascent state. No reasons are given in that Judgment for reaching this conclusion,

D In Bachha Tewari and another v. Divisional Forest Officer, West Midnapore Division, and others' the same learned Judge held that the the chopping of timber into firewood was a manufacturing process. and, therefore, the imposition of a tax on timber and on firewood manufactured from that timber did not amount to double taxation The question in both those cases was whether sawing of planks and chopping of timber into firewood amounted to manufacture so as to make the assessee liable to pay sales ta' on the manufactured goods. This is a different question from that to which we have to address ourselves. We may, however, point out that even where the question is whether a certain process has resulted in a manufacture, the resultant product must be a different commercial commodity and merely because certain articles are known by different names it does not mean that they are different commercial commodities if in fact they are n,erely different forms of the same commodity. Thus, in Tungabhadra Industries Ltd. Kumool v. Commercial Tax Officer, G Kurnoo/3, hydrogenated groundnut oil, commonly called 'Vanaspati' was held by this Court to be groundnut oil within the meaning of Rules 5 (I) (k) and 18 (2) of the Madras General Sales Tax (Turn-

(I) [1963] 14 S.T.C. 878. (2) [1963] 14 S.T.C. 1067. H (3) \19601 11 S.T.C. 827; (1961) 2 S.C R. 14.

ORISSA, v. TITAGHUR PAPERS MILLS (Madon, J.) JOi over and Assessement) Rules, 1939. The Court further held that A• the processing of groundnut oil to render it more acceptable to the customer by improving its quality would not render the oil a com- modity other than groundnut oil. Similarly, in the State of Gujarat v. Sakanvala Bros.(1) this Court held that 'patassa', 'harda' and 'alchidana' were ~ugar in different forms and fell within the defini- tion of sugar in Entry 47 of Schedule A to tha Bombay Sales Tax B , Act, 1959.

-' A decision · more relevant to our purpose than the two - .) Calcutta decisions is a decision of a Division Bench of the Madhya Pradesh High Court in Mohan/al Vishram v.- Commissioner of Sales Tax Madhya Pradesh, Indore('). In that case the Madhya c Pradesh High Court held that by felling standing timber trees, cutting them and converting some of them into 'ballis', a dealer did not alter their character as timber or used them for manufuc· ture of other goods within the meaning of section 8(1) of the Madhya Pradesh Sales Tax Act, 1958. Another decision equally relevant for our purpose is that of a Division Bench of the Andhra D Pradesh High Court in G. Ramaswamy and others v. The State of A11dhra Pradesh and others(') in which the question was very much the same as the one which we have to decide. The assessees in that case purchased nascent timbor, that is, logs of wood, and had swan or cut them into planks, rafters, cut sizes, etc., and sold them for the purpose of construction of buildings and the like. E Under section 5(2)(a) of the Andhra Pradesh General Sales Tax Act, 1957, read with Item 63 in the First Schedule to that Act, a dealer in timber was liable to pay sales tax at the rate of three pies in a rupee at the point of first sale. The assessees were, however, sought to be taxed under section 5(1) of that Act on their sales of, planks, rafters, out sizes, etc. treating them as general goods. The contention of assessees was that these goods were timber which was taxable at the first point of sa.le and the first • point of sale was when the Forest Department sold the standing timber trees to them and, therefore, the planks, rafters, cut sizes, etc., sold by them could not again be made liable to sales tax

--.;-· (I) [1967] 19 S. T.C.24 (S.C.) (2) [1969] 24 S,T.C. IOI. (3) [1973] 32 S.T.C. 309.

\02 SUPREME COURT REPORTS t1985] 3 5.C.il

A treating those goods as different commercial commodities. The Division Bench held that in dealing with matters relating to the general public, statutes are presumed to use words in their popu- lar rather than their narrowly legal or technical sense, and that as the provision levying a tax on timber was directed to deal with a matter affecting people generally, as timber is in common use B the word "timber" would have the same meaning attached to it as in the common and ordinary use of language. The Division ' Bench further held that although dictionaries are not to be taken as authoritative exponents of the meanings of words used in a statute, it was a well-known rule of courts of law that words should be taken to be used in the ordinary sense and courts are, there- c fore, sent for instruction to the dictionaries in the absence of any legislative or judicial guidance. The Division Bench then refer- red to the meaning given to the word "timber" in different dic- tionaries. The Division Bench also considered the meaning in commercial parlance of the term "timber". In that case the the assessees in their affidavits had asserted that timber in the commercial field also meant planks, cut sizes, etc. There was no convincing denial by the Government of that asser- tion. The Division Bench then, turned to the "Rules for grad- ation of cut sizes of timber" prepared and issued in October, 1960, by the Indian Standards Institution which showed the word "timber" was freely used for kinds of standanl cut sizes for building purposes. The Division Bench also looked at Indian Airlines Quotation No. 406 of April 26, 1972, in which the words used were "timber teak-wood" setting out the particular sizes thereaft.er. The Division Bench also referred to the other documentry evidence produced in that case and held that the documents and affidavits before it clearly made out that even the cut sizes of timber were commonly known as timber in commer- cial field and that, therefore, both in the popular sense and in the c.om1nercial sense, the word "timber" had the san1e meaning. The Division Beach also laid emphasis on the interpretation given to • the term "timber" by the sales tax Administration. For all these reasons tbe Division Bench beld that merely because plan ks, rafters, cut sizes, etc., were sawn or cut from logs of wood, they did not alter their character and still continued to be raw mater- ials which by themselves and in the same form could not be di- rectly put to use for construction purposes and the Jogs of wood purchased by the assessees were merely cut or sawn to sizes

ORiSSA v. TiTAGHUR PAPER MILLS (Madon, i.) 103

for the sake of convenience and to make them acceptable to the customers and that by reason of this process they did not lose their character as timber.

We will n iw turn to the decisions of the Orissa High Court on '( this point. In State of Orissa v. Rajani Timber traders(') a Division Bench of that High Court held that timber logs and sized timber were different commodities in the commercial sense though sized timbers were brought out only from timber logs by a parti- cular process. The Division Bench further observed that the _) person who had a need of timber logs would not be satisfied had sized timber been offered to him and similarly a person requiring c sized timber woulJ not be satisfied if timber logs were supplied. In Krupasindhu Sahu & Sons v. State of Orissa( 2) another Division Bench of the same High Court hdd that the dictum in the Rajani Timber Traders' case was too widely stated and it did not indi- cate the meaning of the word "timber" as used in common parlance in commercial circles and it also did not purport to specify the meaning of the expression "sized timber" as used in that judg- ment. The Division Bench further held that timber in common parlance in Orissa took within its ambit only long and big sized logs of wood ordinarily used in house construction as beams and pillars and that when timber was converted into planks, raf- ters. and other wood products like tables and chairs or cut into various small sizes so as to be unfit for use as beams and pillars and similar such uses they could not be termed as timber in common parlance though they may retain their essential character as wood because the essential characteristic of timber as a commercial commodity was lost after such conversion. The judgment in that case does not indicate any basis for holding that the word "timber" had in common parlance in Orissa the mean- ing which according to the Division Bench it bore. It is 'also curious to note that one learned Judge was common to both the • Division Benches though in each case the judgment was deli- vered by the other learned judge. G Having seen how the different High Courts have dealt with this question, we will now ascertain the true position for our-

(1) (1974] 34 S.T.C. 374. (2) [1975] 35 S.T.C. 270. H

104 SUPREME COURT REPORTS [ 1985] 3 s.C.R.

A selves. In Ganesh Trading Co., Karna/ v. State of Haryana and ano- ther(') Hedge, J., speaking for this Count, said : ''This Court has firmly ruled that in finding out the true meaning of the entries in a Sales Tax Act, what is relevant is not the dictionary mean- ing, but how those entries are understood in common parlance, specially in commercial circles'.'. Applying this principle, the 'y B Court held that although rice was produced out of paddy, paddy did not continue to be paddy after dehusking and that when paddy was dehusked and rice produced, there was a change in the identity of the goods and, therefore, rice and paddy were two different things in ordinary parlance. A careful reading of the judgment in that case shows that there was no evidence c before the court to show how "paddy" and "rice" were under- stood in commercial circles or what these words meant in com- mercial or trade parla.nce and th at what the Court did was to refer to various authorities dealing not with rice or paddy but with other goods and the meaning in ordinary parlance of the words "paddy" and ''rice" in order to ascertain the meaning of these words in the sense stated by it above.

So far as the case before us is concerned, there is material on the record to show what the words "timber" and "logs" mean in commercial or trade parlance nor do the pleadings of the parties filed in the Orissa High Court throw any light oa the matter. The averment of the Respondent Firm in this behalf is to be found in paragraph 13 of its writ petition in the High Court and all that is stated therein is that under the impugned provisions it would be required to pay purchase tax on "timber agreed to be servered" and after savering the timber while effecting sales of timber would be liable to pay sales tax on such sales. In the counter affidavit of the Law Officer in the office of the Commissioner of Commercial Taxes, Orissa, filed on behalf of the Commissioner of Commercial Taxes and the Sales Tax Officer, Sambalpur Circle, while replying to the said paragraph 13 all that • is stated is that timber commercially does not remain the same after being cut, sized and shaped, and, therefore, there was no legal obstruction to tax an altogether different commercial commodity at sale-point.

(I) [19731 32 S.T .C. 623, 625 (S.C.) H

Oil.ISSA v. TITAGHUR PAPER MILLS (Madon, J.) 105

In view of this state of the record we must seek to ascertain A the meaning of these two terms in common parlance with such aid as is available to the Court. It is now well settled that the dictionary meaning of a word cannot be looked.at where that word has been. statutorily defined or judicially interpreted but where there is no such definition or interpretation, the court may take the aid of dictionaries to ascertain the meaning of a word in common ll parlance. In doing so the cpurt 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, thetefore have to seloct the particular meaning which would be relevant to the con- ~· text in which it has to interpret that word. The Orissa Act does not define the term ''timber" or "logs". Orissa is, however, a c State which is rich in natural wealth and mostly all, if not all, forests in the State of Orissa are protected or reserved forests. and come within the purview of the Orissa Forest Act, 1972, which 'was an Act passed to consolidate and amend _the laws relating to the protection and management of forests in the State of Orissa. The real object behind the issue of impugned provi- D sions was to levy purchase tax on standing trees agreed to be severed and bamboos agreed to be servered in view of the judg- ment of the Orissa High Court in Straw Products Ltd, v. State of Orissa in which it was held that a Divisional Forest Officer was not a dealer and, therefore, not liable to pay sales tax and hence could not call upon forest contractors to reimburse him in respect thereof. In view of this background, it would be relevant for our E purpose to look at the statutory definition of the term "timber". given in the Orissa Forest Act, 1972 .. That term is defined in

---.,(. \ clause (n) of section 2 of that Act, which reads as follows.