Retrospective tax assessments, ineffective statutory substitution, and no manufacture from mere blending of ore

Article 286 did not operate retrospectively to invalidate assessments for pre-Constitution tax periods merely because the orders were made later; liability was determined by the law applicable to the relevant period, so the constitutional objection failed. An attempted substitution of Explanation II to section 2(g) that lacked the requisite assent never validly came into force, so it did not repeal the old provision and the unamended Explanation II remained operative. Mere mixing of manganese ore grades during unloading and transport did not amount to manufacture, because no new commercially distinct commodity emerged; the assessee's contention failed on that issue.

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Issues: (i) Whether Article 286 of the Constitution barred the tax assessments made after the Constitution came into force though they related to periods prior to 26 January 1950; (ii) whether the attempted amendment of Explanation II to section 2(g) of the Central Provinces and Berar Sales Tax Act, 1947, which lacked the requisite assent, resulted in repeal of the old provision or left it untouched; and (iii) whether the process by which manganese ore of different grades was mixed during unloading and transportation amounted to manufacture of a new commercial commodity.

Issue (i): Whether Article 286 of the Constitution barred the tax assessments made after the Constitution came into force though they related to periods prior to 26 January 1950.

Analysis: The assessments related to pre-Constitution periods. The constitutional restriction in Article 286 was not retrospective so as to invalidate taxability for those earlier periods merely because assessment orders were made later. The liability had to be tested with reference to the law governing the relevant tax period.

Conclusion: Article 286 did not bar the assessments, and this issue was decided against the assessee.

Issue (ii): Whether the attempted amendment of Explanation II to section 2(g) of the Central Provinces and Berar Sales Tax Act, 1947, which lacked the requisite assent, resulted in repeal of the old provision or left it untouched.

Analysis: The amendment was treated as an indivisible process of substitution. Since the substituted provision never validly came into force for want of the required assent under section 107 of the Government of India Act, 1935, the whole attempted legislative change failed. The old Explanation II was not repealed simpliciter and there was no question of revival, because nothing effective had displaced the pre-existing provision.

Conclusion: The unamended Explanation II continued in force, and this issue was decided in favour of the Revenue.

Issue (iii): Whether the process by which manganese ore of different grades was mixed during unloading and transportation amounted to manufacture of a new commercial commodity.

Analysis: Manufacture requires emergence of a new product with a distinct commercial identity. Mere blending or mixing of grades of ore in the course of transport or unloading, without a mechanical or chemical process producing a new commodity known to the market as such, is not manufacture. The Court treated the so-called mixture as only the same ore satisfying contractual specifications and not a new commodity brought into existence by processing.

Conclusion: No manufacture of a new commodity was shown, and this issue was decided against the assessee.

Final Conclusion: The constitutional objection failed, the pre-amendment sales tax provision remained operative, and the goods were held taxable on the footing that no new commercially distinct commodity came into existence by the alleged mixing process.

Ratio Decidendi: An attempted substitution of a statutory provision is ineffective as a repeal unless the substituted provision validly comes into force, and mere mixing or blending of goods without a manufacturing process does not create a new commercial commodity.

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