M/S. Anwarkhan Mahboob Co. versus the State of Bombay (Now Maharashtra) and Others

1 S.C.R. SUPREME COURT REPORTS

709

" The Crown cannot deprive a legislature of its r960 legislative authority by the mere fact that in the n k exercise of its prerogative it makes a grant of land Manmo~a:' Deo within tho territory over which such legislative authov: rity exists and no court can annul the enactment of a State of Bihar legislative 'Body acting within the legitimate scope of its sovereign competence. If, therefore, it be found s. g, Das f. that the subject of a Crown grant is within the competence of a provincial legislature, nothing can prevent that legislature from legislating about it, unless the Constitution Act itself expressly prohibits legislation on the subject either absolutely or conditionally."

¶4

For the reasons given above, we hold that none of the three points urged on behalf of the appellants has any substance. The appeals fail and are dismissed with costs ; there will be only one hearing fee.

¶5

Appeals dismissed.

¶6

M/s. ANW ARKHAN MAHBOOB CO.

v.

September ao.

THE STATE OF BOMBAY

(NOW MAHARASHTRA) AND OTHERS

¶11

(S. K. DAS, M: HIDAYATULLAH, K. c. DAS GUPTA, J. c .. SHAH and N. RAJAGOPALA AYYANGAR JJ.)

¶12

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. z9 ({) & (g), 286-Bombay Sales Tax Act, z953 (Bom. Act III of z953), s. IO, Schedule B, Entry 80.

¶13

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

¶14

710 SUPREME COURT REPORTS

¶15

[1961]

¶16

ftlfs. Anwarkha11 Mahboob Co

¶17

v. The State of Bombay (1Vow Alahara.~htra) 0-- Othe1·s

¶18

purchase tax on the grounds that those tran>actions 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 TaJ< 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 couimerce. The petitioner's appeal to the Assistant Collector of Sales Tax was dismissed and then the present petition for writs of mandamus and artiorari was filed in the Supreme Court. The petitioner1 contended that the Bombay Sales Tax Act, 1953, did not authorise the imposition of a tax on the purchase of bidi-tobacco which was not one of the goods specified in column 4 of Schedule B of the said Act. The petitioner further wntended 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 ~fadhya 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. Jn their counteraffidavit 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.

¶19

Held, that the words" all goods other than those; specified from time to time in Schedule A and in the preceding entries" in entry Bo of Schedule B of the Bombay Sales Tax Act, 1953, amounted to a specification of goods for the purposes of s. 10 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 So was leviable under s. "lo of the Act.

¶20

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 ol the r:xplanation to Art. 286 of the Constitution.

¶21

State of Travancore-Cochin v, Sha11nmgha Vilas Casl1e11" Nut Factory, [1954) S.C.R. 53, followed.

¶22

The delivery of tobacco in Bombay State for changing it into bidi patti which is a commercially different article amounted to deli very for the purpose of consumption and the purchase fell within the meaning of Art. 286(1)(a) of the Constitution and took place inside the Bombay State.

¶23

•

¶24

1 S.C.R. SUPREME COURT REPORTS

¶25

711

¶26

ORIGINAL JURISDICTION: Petition No. 125 of 1958. i96o Petition under Article 32 of the Constitution of M/s. Anwarkhan India for enforcement of Fundamental Rights. Mahboob co.

¶27

Mahboob co. v. The State of Bombay (Now Maharashtra) & Others Das Gupta ].

¶28

G. s . . Pathak, A. P. Sen and J. B. Dadachanji, for the Petitioners.

¶29

H. J. Umrigar and T. ·M. Sen, for the Respondents. 1960. September 20. The Judgment of the Court was delivered by

¶30

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(l)(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 (Born . .Act III of 1953) for the period April 1, 1954 to September 29, 1955. The peti~ioner contends that this assessment was illegal inasmuch as these transactions are purchases " outside the State of Bombay " within the meaning of Art. 286(l)(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.

¶31

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 !tppeal against the order of assessment to tax. The order in appeal was made on 91

¶32

712 SUPREME COURT REPORTS

¶33

[1961]

¶34

196° November 26, 1957. The present petition was filed on August 4, 1958, praying for a writ in the nature of M /s. A^-. nwar.!1an^• d h · t d' t' d Mahboob co man am us or any ot er appropr1a e 1rec 10n or or er v. · against the respondents-The State of Bombay, The n, State of Collector of Sales Tax, State of Bombay, The Sales Bombay (Now Tax Officer, Baroda and the Assistant Collector of Mohorash1'a) Sales Tax, Northern Divisio'n, Range III, Baroda- c:S- Olhers preventing • t h em from enforcing the provisions of the D•s Gupta 1. 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.

¶35

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 i·elevant portion of s. 10(1) which provides for the levy of a purchase tax is in these words :-

¶36

"there shall be levied a. purclia.se ta.x on the turnover of purchase of goods specified in column 1 9f Schedule B at the rates, if any, specified against such goods in column 4 of the sa.id 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 a.re 80 entries in the first column. .Against each of these entries the second column of the schedule mentions the rates of sales tax levia.ble 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 l 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

¶37

1 S.C.R. SUPREME COURT REPOR'l'S

¶38

713

¶39

1958, added the words "and sec. 7 Au after the words "Schedule A"). The question is whether these words "all goods ot er t h h an t h ose spe01 'fi e d f rom t' 1me t o 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 speciiication 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.

¶40

1960

¶41

M/ A k' s. nwa' nan Mahboob co. v.

¶42

The State of Bombay (Now M:'.'';;;;htra) "'

¶43

Das Gupta J.

¶44

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 deli"'.ered 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 R.anoli Branch to the company's head office at Jabalpur is not a delivery as a direct result of the sale.

¶45

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 (l)(a) ·does not come into operation.

¶46

714

¶47

ll961]

¶48

SUP!tE:\IE COt.:RT REPORTS

¶49

The sales tax authoriticH have proceeded on the basis that as a direct result (If the purchase goods ,\f is. A JJWafkhau ft-JahfioofJ Co. were delivered in thr State of Bombay for the purpoe v. of consumption in the State of Bombay. Unless that Tire Stale <>f view is shown to be wrong, the purchase must- be held Hnmliay (iVou: to have ta.ken place within the State of Bombay an Malia'a-•h/f<l) it will be umwceHsary to consider the larger question &- Olhcrs whether even if the Explanation be not applicable, Bombav Statl' is entitled to tax.

¶50

The definite case of the petitioner i' that the purchased tobac:co is delivered to it within the State of Bombay as a direct result of the purchase. Tho further question that has been raised is whether such delivery wa~ for the purpose of consumption iu 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 :IJadbya Pradesh lo be manufactured into bidis at that place. All that used to be <lone to the purchased tobacco in the State of Bombay was to have the stems :ind <lu~t rnmoved from the tobacco. Such removal of the waste material, like stems and earth, it is urged, docs not amount to consumption of tob<J.cco. It is further staled that the tobacco which is despatched to the head office after n•mo\•al of the waste material is not an article "com mrrcially different " from the tobacco purchased from the cultivators. In the respondents' counter a.flida.vit it is Htated that "the petit.ioners after purchasing raw tobacco from the cultivators in the 1:itate of Bombay, 8ubject the raw tobaccu so purchased to process lea.ding to its coJ)VerHion into hidi pattis for immediate use in the manufacture of uidis .............. . that market:.hlu value of raw tobaceo and bidi pattis diffen; and that both these are cornmcrciallv different articles ............ ". Tho re was no further. a.ftida.vit tiled ou behalf of the pe.titioner to traverse the a.vermcnts of the respondents that the raw tobacco is converted into bidi pa.tti before it is <lt·spatehe<l outside Bombay State and that the market value of raw tobacco and bi di pa.tti differs. Mr. Pathak also conceded at the hearing the correl,tncss of the statement that anybody could go to the m11.rkct to purcha.so the

¶51

715

¶52

1 S.C.R. SUPREME COURT REPORTS

¶53

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 sufficient proof that raw tobacco and bidi patti are distinct and different commercial articles.·

¶54

.M:/s. Anwarkhan !VI ahboob Co. 0 v. The State of Bonibay (Now 111aharashtra) 6- Others Das Gupta.].

¶55

It is in the background of these facts that we have to consider the questi'on 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 t.he Constitution. The act of consumption with which people are most familiar occurs when they eat, or drink or smoke. Thus, we speak of veople consuming bread, or fish or meat or vegetables, when they cat 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 eco. nomists 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''. Agaiu, the final act of consumption may Ill some cases be spread. over a considerable period of time.. Books, articles of furniture, paintings may be ment10ncd as examples. It may even happen in snch cases, that after one consumer has performed part of the fina.! act of consumption, another portion of the final act of con~m!lption may be performed by his . heir or successor-rn.mterest,·a transferee, or even one who has obtained possession by wrongful means. But •he fact that there is for each commodity what may be considered ordinarily to be the final act of consumption, should uot make us forget that in reaching

¶56

[1961]

¶57

716 SUPREME COURT REPORTS

¶58

the stage at which this final act of consumption takes place the commodity may pass through different Mis A,1warkhatt Mahboob Co. stages of production and for such different stages, there would exist one or more intermediate acts of '" Thi Stal~ of consumption. Thus, the final act of consumption of Bombay (~Vou.. cotton may be considered to be the use as wee.ring Maharashtra) apparel of the cloth produced from it. But before 6- Others cotton ba.s become a wearing apparel, it passes, Das Gupta ]. through the hands of different producers, ea.ch of whom a.dds some utility to the commodity received by him. There is first the a.ct of ginning ; ginned cotton is spun into yarn by the spinner; the spun yarn is woven into cloth by the weaver; tho woven cloth is ma.de into wearing apparel by the tailor. At each of these stages distinct 'utilities a.re produced and wha.t is produced is at the next stage consumed. It is usual, and correct to speak of raw cotton beirig con. sumed in ginning; of ginned cotton being consumed in spinning; of spun ya.rn being consumed in weaving; of woven cloth being consumed in the ma.king of wearing apparel. The final product-the wearing a.ppa.rel-is ultimately consumed by men, women and children in using it as dress. In the absence of any words to limit the connotation of the word "consumption" to the final a0t of consumption, it will be proper to think that the Constitution-makers used the word to connote any kind of user which i8 ordinarily spoken of as consumption of the particular commodity.

¶59

Heverting to the instance of cotton, mentioned above, it will be proper to hold that when ra.w 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 yam is delivered in State C for being woven into cloth in that State, it is delivered for consumption in State C; when \·oven cloth iH delivered in State D for being made by tailor in that State into wearing apparel, there is delivery of cloth for e?nsumption in State D; and finally when, wearwg apparel is delivered in State E for being sold as dress

¶60

1 S.C.R. SUPREME COURT REPORTS

¶61

717

¶62

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 com. modity 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 producer.a: This conversion of a com. modity 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 brougl;i.t 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 con. sumption of the .first commodity within the meaning of the Explanation to· Art. 286. This aspect of con. sumption was pointed out by Das, J. (as he then was), in Sta!e of Travancore-Cochin v. Shanmugha Vilaa Caahew Nut Factory(') 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 :-

¶63

1960

¶64

Ml A- k rJ~hb~~:'c han

¶65

v. o.

¶66

The State of Bombay (Now Maharashtra) cS- Others

¶67

Das Gupta J.

¶68

"The raw cashew-nuts, after they reach the res. pondents, are put through a process and new articles of commerce, namely, cashew:nut oil and edible cashew-nut kernels, are obtained. It follows,

¶69

(1) [1954) S.C.R. 53·

¶70

SUPRE:.\lE COURT REPORTS

¶71

718

¶72

[1961]

¶73

therefore, that the raw cashew-nut is consumed by the .11!.c Ana,arklian_ respondents in tho sense I have mentioned" • 1lfaldJoob Co. Da8, ,J., here proceeded on the view that using a comv. modity so as to turn it into a different commercial Tht State of article amounts to consumption, wit.bin the meaning 801nlJay (.'ow of tha Explanation to Art.. 286(l)(a)-a view which .'i1aliarashfra) & Others he had earlier indicated at p. 110 of the Report. We are not aware of. any case where such use of a com- Das Gupta ]. modity has been held not to amount to consumption.

¶74

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(l)(a) and must be held to have taken place inside the State of Bombay.

¶75

There remains for consideration the objection that

¶76

the transactions t-0ok place in tho course of inter.State trade or commerce within the meaning of Art. 286(2) of tho 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 thll.t 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 tho petitioner has foiled w establish any violation of its fundamental right, the petition is dismissed with costs.

¶77

Petition dismissed.

M/S. Anwarkhan Mahboob Co. v. the State of Bombay (Now Maharashtra) and Others

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M/S. Anwarkhan Mahboob Co. v. the State of Bombay (Now Maharashtra) and Others

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