M/S. Anwarkhan Mahboob Co. Vs. The
State of Bombay (Now Maharashtra) & Ors [1960] INSC 157 (20 September 1960)
GUPTA, K.C. DAS DAS, S.K.
HIDAYATULLAH, M.
SHAH, J.C.
AYYANGAR, N. RAJAGOPALA
CITATION: 1961 AIR 213 1961 SCR (1) 709
CITATOR INFO :
R 1962 SC 562 (8) RF 1963 SC 906 (20) RF 1977
SC 879 (27) R 1979 SC1721 (7) RF 1980 SC1227 (6) R 1986 SC1085 (9) R 1987
SC1885 (8)
ACT:
Purchase Tax--If leviable on goods not
specifically mentioned as taxable but come under the general description
"all goods other than those specified "-Conversion of one commodity
into another commercially different article-If amounts to consumption-Place of
purchase for the purpose of taxation-Constitution of India, Art. 19 (f) &
(g)286Bombay Sales Tax Act, 1953 (Bom. Act III of 1953), s. 10, Schedule B,
Entry 80.
HEADNOTE:
The petitioner Company carrying on the
business of manufacturing bidis and having its head office at Jabalpur in the
State of Madhya Pradesh made certain purchases of tobacco in the State of
Bombay. The Sales Tax Officer assessed the petitioner to a purchase tax under
the provisions of the Bombay Sales Tax Act, 1953. The petitioner contested the
assessment of 710 purchase tax on the grounds that those transactions and purchases
were " Outside the State of Bombay " within the meaning of Art.
286(1)(a) of the Constitution read with the Explanation, that the provisions of
the Bombay Sales Tax Act, 1953, did not authorise the imposition, levy or
collection of any purchase tax on the transactions in question and that the
transactions took place in the course of inter State trade and commerce. The
petitioner's appeal to the Assistant Collector of Sales Tax was dismissed and
then the present petition for writs of mandamus and certiorari was filed in the
Supreme Court. The petitioner contended that the Bombay Sales Tax Act, 1953,
did not authorise the imposition of a tax on the purchase of biditobacco which
was not one of the goods specified in column 4 of Schedule B of the said Act. The
petitioner further contended that the purchased tobacco was delivered to it
within the State of Bombay as a direct result of the purchase but it was
intended to be sent to the State of Madhya Pradesh to be manufactured into
bidis at that place.
The only thing which was done in the Bombay
State was to remove the stem and dust from the tobacco which process did
neither amount to " consumption " of tobacco as contemplated under
the Explanation to Art. 286 of the Constitution nor did it convert the tobacco which
was sent to the Head Office into an article " commercially different
" from the tobacco purchased from the cultivators. In their counter
affidavit the respondents averred that the raw tobacco was converted into bidi
pattis before it was sent outside Bombay State both of which were commercially
different articles and the market value of which was also different. These
averments were not controverted by the petitioner.
Held, that the words " all goods other
than those specified from time to time in Schedule A and in the preceding
entries " in entry 8o of Schedule B of the Bombay Sales Tax Act, 1953,
amounted to a specification of goods for the purposes of s. lo of the Act and
as bidi tobacco purchased by the petitioner was not within Schedule A or any of
the earlier entries in Schedule B purchase tax at the rate mentioned against
entry 8o was leviable under s. 1o of the Act.
Whenever a commodity was so dealt with as to
change it into another commercial commodity there was consumption of the first
commodity within the meaning of the Explanation to Art. 286 of the
Constitution.
State of Travancore-Cochin v. Shanmugha Vilas
Cashew Nut Factory, [1954] S.C.R. 53, followed.
The delivery of tobacco in Bombay State for
changing it into bidi patti which is a commercially different article amounted
to delivery for the purpose of consumption and the purchase fell within the
meaning of Art. 286(i)(a) of the Constitution and took place inside tile Bombay
State.
711
ORIGINAL JURISDICTION: Petition No. 125 of
1959.
Petition under Article 32 of the Constitution
of India for enforcement of Fundamental Rights.
G.S. Pathak, A. P. Sen and J. B. Dadachanji,
for the Petitioners.
H. J. Umrigar and T. M. Sen, for the
Respondents.
1960. September 20. The Judgment of the Court
was delivered by DAs GUPTA J.-In this petition under Art. 32 of the
Constitution the petitioner, a partnership firm carrying on the business of
manufacture of bidis and having its head office at Jabalpur within the State of
Madhya Pradesh complain that its fundamental rights under Art. 19(1)(f) and (g)
of the Constitution have been violated by the illegal imposition of a purchase
tax on certain purchases of tobacco made by it in the State of Bombay. It
appears that the Sales Tax Officer, Baroda, made an order assessing the
petitioner to a purchase tax under s. 14, sub-s. (6), of the Bombay Sales Tax
Act, 1953 (Bom. Act III of 1953) for the period April 1, 1954 to September 29,
1955. The petitioner contends that this assessment was illegal inasmuch as these
transactions are purchases " outside the State of Bombay " within the
meaning of Art. 286(1)(a) of the Constitution read with the Explanation and
also because these transactions took place in the course of inter-State trade
and commerce within the meaning of Art. 286(2) of the Constitution. It was also
urged that the provisions of the Bombay Sales Tax Act, 1953, do not authorise
the imposition, levy or collection of any purchase tax on the transactions in
question.
In appears that against this assessment order
made by the Sales Tax Officer on October 18, 1955, the petitioner preferred an
appeal to the Assistant Collector of Sales Tax.
This officer set aside the order of the Sales
Tax Officer imposing a penalty under s. 16(4) but dismissed the appeal against
the order of assessment to tax. The order in appeal was made on 91 712 November
26, 1957. The present petition was. filed on August 4, 1958, praying for a writ
in the nature of mandamus or any other appropriate direction or order against
the respondents-The State of Bombay, The Collector of Sales Tax, State of
Bombay The Sales Tax Officer, Baroda and the Assistant Collector of Sales Tax,
Northern Division, Range III, Barodapreventing them from enforcing the
provisions of the Bombay Sales Tax Act against the petitioner on the
transactions in question, for a writ in the nature of certiorari for quashing
the proceedings taken against the petitioner and the orders of assessment made
by the Sales Tax Officer and the order in appeal by the Assistant Collector of
Sales Tax and for a declaration that the Act does not authorise the imposition,
levy or collection of tax on the transactions in question.
It will be convenient to consider first the
petitioner's contention that the Bombay Sales Tax Act, 1953, does not authorise
the imposition of a tax on the purchase of bidi tobacco. The relevant portion
of s. 10(1) which provides for the levy of a purchase tax is in these words :"there
shall be levied a purchase tax on the turnover of purchase of goods specified
in column 1 of Schedule B at the rates, if any specified against such goods in
column 4 of the said schedule......." The petitioner's contention is that
bidi-tobacco which was purchased by it is not one of the goods specified in
Column 4 of the said schedule. Turing to Schedule B we find there are 80
entries in the first column. Against each of these entries the second column of
the schedule mentions the rates of sales tax leviable under s. 8 of the Act:
the third column mentions the rate of general sales tax leviable under s. 9,
while the fourth column which is the last, column mentions the rate of purchase
tax. While the entries from 1 to 79 mention specific articles, entry 80 as it
stood before its amendment in 1957 was in these words:-" All goods other
than those specified from time to time in Schedule A and in the preceding
entries." (An amendment by the Bombay Act, 71 of 713 1958, added the words
" and sec. 7A " after the words " Schedule A "). The
question is whether these words "all goods other than those specified from
time to time in Schedule-A and in the preceding entries " amount to a
specification of goods for the purpose of s. 10. On behalf of the petitioner
Mr. Pathak contends that only the mention of specific goods can amount to specification
and mention of goods in such general language as " all goods other than
those specified from time to time in Schedule A and in the preceding entries
" cannot be said to be a specification of goods. We are unable to accept
this argument. While it is true that mention of specific goods is specification
for the purpose of s. 10 as also for the purpose of ss. 8 and 9 of the Act, we
see no reason to think that mention of goods in a general way as " all
goods other than those specified from time to time in Schedule A and in the
preceding entries " of Schedule B itself is not a specification. We are of
opinion that the entry 80 in Schedule B is a specification of goods within the
meaning of s. 10 and as bidi-tobacco which the petitioner purchased is not
within either Schedule A or any of the earlier entries in Schedule B, purchase
tax under S. 10 is leviable on these purchases, at the rate mentioned against
Entry 80.
This brings us to the petitioner's main
contention that the purchases took place outside the State of Bombay. The
contention as stated in para. 11 of the petition is that the purchases would
be. deemed to have taken place in the State of Madhya Pradesh, where the
tobacco was delivered for consumption. At the hearing, however, it was not
disputed that the tobacco was delivered to the Company's Ranoli Branch within
the State of Bombay which made the purchase.
The despatch by the Ranoli Branch to the
company's head office at Jabalpur is not a delivery as a direct result of the
sale.
It has been urged however that even though
there was delivery in Bombay State, that delivery was not for the purpose of
consumption within Bombay State; and so, the Explanation to Art. 286 (1)(a)
does not come into operation.
714 The sales tax authorities have proceeded
on the basis that as a direct result of the purchase goods were delivered in
the State of Bombay for the purpose of consumption in the State of Bombay.
Unless that view is shown to be wrong, the purchase must be held to have taken
place within the State of Bombay and it will be unnecessary to consider the
larger question whether even if the Explanation be not applicable, Bombay State
is entitled to tax.
The definite case of the petitioner is that
the purchased tobacco is delivered to it within the State of Bombay as a direct
result of the purchase. The further question that has been raised is whether
such delivery was for the purpose of consumption in the State of Bombay. On
behalf of the petitioner it was contended that after its delivery, the tobacco
was intended to be sent to the State of Madhya Pradesh to be manufactured into
bidis at that place. All that used to be done to the purchased tobacco in the
State of Bombay was to have the stems and dust removed from the tobacco. Such
removal of the waste material, like stems and earth, it is urged, does not
amount to consumption of tobacco. It is further stated that the tobacco which
is despatched to the head office after removal of the waste material is not an
article Cc commercially different " from the tobacco purchased from the
cultivators. In the respondents' counter affidavit it is stated that " the
petitioners after purchasing raw tobacco from the cultivators in the State of
Bombay, subject the raw tobacco so purchased to process leading to its conversion
into bidi pattis for immediate use in the manufacture of bidis...............
that marketable value of raw tobacco and bidi pattis differs and that both
these are commercially different articles............... There was no further
affidavit filed on behalf of the petitioner to traverse the averments of the
respondents that the raw tobacco is converted into bidi patti before it is
despatched outside Bombay State and that the market value of raw tobacco and
bidi patti differs. Mr. Pathak also con. ceded at the hearing the correctness
of the statement that anybody could go to the market to purchase the 715
article known as raw tobacco or Akho Bhuko and that he could also go and
purchase from the market the article known as " bidi Patti ". That itself
is sufficientproof that raw tobacco and bidi Patti are distinct and different
commercial articles.
It is in the background of these facts that
we have to consider the question whether tobacco was delivered in the State of
Bombay for consumption in that State. In answering that question it is
unnecessary and indeed inexpedient to attempt an exhaustive definition of the
word " consumption " as used in the explanation to Art. 286 of the
Constitution.
The act, of consumption with which people are
most familiar occurs when they eat, or drink or smoke. Thus, we speak of people
consuming bread, or fish or meat or vegetables, when they eat these articles of
food; we speak of people Consuming tea or coffee or water or wine, when they
drink these articles; we speak of people consuming cigars or cigarettes or
bidis, when they smoke these. The production of wealth, as economists put it,
consists in the creation of " utilities ". Consumption consists in
the act of taking such advantage of the commodities and services produced as
constitutes the " utilization " thereof. For each commodity, there is
ordinarily what is generally considered to be the final act of consumption. For
some commodities, there may be even more than one kind of final consumption.
Thus grapes may be " finally consumed " by eating them as fruits;
they may also be consumed by drinking the
wine prepared from " grapes ". Again, the final act of consumption
may in some cases be spread over a considerable period of time. Books, articles
of furniture, paintings may be mentioned as examples. It may even happen in
such cases, that after one consumer has performed part of the final act of
consumption, another portion of' the final act of consumption may be performed
by his heir or successor-in-interest, a transferee, or even one who has
obtained possession by wrongful means. But the fact that there is for each
commodity what may be Considered ordinarily to be the final act of consumption,
should not make us forget that in reaching 716 the stage at which this final
act of consumption takes place the commodity may pass through different stages
of production and for such different stages, there would exist one or more
intermediate acts of consumption. Thus, the final act of consumption of cotton
may be considered to be the use as wearing apparel of the cloth produced from
it.
But before cotton has become a wearing
apparel, it passes, through the hands of different producers, each of whom adds
some utility to the commodity received by him. There 'is first the act of ginning
; ginned cotton is spun into yarn by the spinner; the spun yarn is woven into
cloth by the weaver; the woven cloth is made into wearing apparel by the
tailor. At each of these stages distinct utilities are produced and what is
produced is at the next stage consumed.
It is usual, and correct to speak of raw
cotton being consumed in ginning; of ginned cotton being consumed in spinning;
of spun yarn being consumed in weaving; of woven cloth being consumed in the
making of wearing apparel. The final product-the wearing apparel-is ultimately
consumed by men, women and children in using it a; dress. In the absence of any
words to limit the connotation of the word " consumption " to the
final act of Consumption, it will be proper to think that the Constitution-makers
used the word to connote any kind of user which is ordinarily spoken of as
consumption of the particular commodity.
Reverting to the instance of cotton,
mentioned above, it will be proper to hold that when raw cotton is delivered in
State A for being ginned in that State., it is delivered for consumption in
State A ; when ginned cotton is delivered in State B for being spun into yarn,
it is delivered for consumption in State B ; when yarn is delivered in State C
for being woven into cloth in that State, it is delivered for consumption in
State C; when woven cloth is delivered in State D for being made by tailor in
that State into wearing apparel, there is delivery of cloth for consumption in
State D; and finally when, wearing apparel is delivered in State E for being
sold as dress 717 in that State, it is delivery of wearing apparel for consumption
in State E. Except at the final stage of consumption which consists in using
the finished commodity as an article of clothing, there will be noticed at each
stage of production the bringing into existence of a commercial commodity
different from what was received by the producers. This conversion of a
commodity into a different commercial commodity by subjecting it to some
processing, is consumption with. in the meaning of the Explanation to Art.
286 no less than the final act of user when
no distinct commodity is being brought into existence but what was brought into
existence is being used up. At one stage of the argument what Mr. Pathak
appeared to insist was that there must be destruction of the substance of the
thing before the thing can be said to be consumed. That takes us nowhere,
because we have still to find out what is meant by destruction of the
substance. It may well be said that when a commodity is converted into a
commercially different commodity its former identity is destroyed and so there
is destruction of the substance, to satisfy the test suggested by the learned
counsel. We think it unnecessary however to enter into a discussion of what
amounts to " destruction " as even without deciding, whether there
was destruction or not, we think it proper and reasonable to say that whenever
a commodity is so dealt with as to change it into another commercial commodity
there is consumption of the first commodity within the meaning of the
Explanation to Art. 286.
This aspect of consumption was pointed out by
Das, J. (as he then was), in State of Travancore-Cochin v. Shanmugha Vilas
Cashew Nut Factory (1) at p. 113 of the Report. The purchase there was of raw
cashew nuts. Discussing the question whether the delivery of these nuts in
Travancore was for the purpose of consumption in that State, Das, J.,
observed:--" The raw cashew-nuts, after they reach the respondents, are
put through a process and new articles of commerce, namely, cashew-nut oil and
edible cashew-nut kernels, are obtained.
It follows, (1) [1954) S.C.R. 53.
718 therefore, that the raw cashew-nut is
consumed by the respondents in the sense I have mentioned".
Das, J., here proceeded on the view that
using a commodity so as to turn it into a different commercial article amounts
to consumption, within the meaning of the Explanation to Art. 286(1) (a)-a view
which he had earlier indicated at p. 110 of the Report. We are not aware of any
case where such use of a commodity has been held not to amount to consumption.
It must therefore be held on the facts of
this case that when tobacco was delivered in the-State of Bombay for the
purpose of changing it into a commercially different article, viz., bidi patti
the delivery was for the purpose of consumption. The purchases in this case
therefore fall within the meaning of Explanation to Art. 286(1)(a) and must be
held to have taken place inside the State of Bombay.
There remains for consideration the objection
that the transactions took place in the course of inter-State trade or commerce
within the. meaning of Art. 286(2) of the Constitution and the levy of tax was
therefore prohibited by the provisions thereof. Even if these transactions were
in the course of inter-State trade, the bar of Art. 286(2) of the Constitution
stands removed by the Sales Tax Laws Validation Act, for the entire period upto
September 6, 1955. The levy of tax for the period September 7, 1955, to
September 29, 1955, would be illegal if these transactions are in the course of
inter-State trade. The petitioner's counsel however informed us that he did not
want a decision on his question and would not, in this case, press his
objection under Art. 286(2). It is unnecessary for us therefore to decide
whether the transactions in question took place in the course of inter State
trade-or commerce within the meaning of Art. 286(2) of the Constitution. As the
petitioner has failed to establish any, violation of its fundamental right, the
petition is dismissed with costs.
Petition dismissed.
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