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1985 (3) TMI 226
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....les Tax Act, 1947 (Orissa Act XIV of 1947). We will hereinafter for the sake of brevity refer to this Act as "the Orissa Act". These notifications were Notification S.R.O. No. 372/77 and Notification S.R.O. No. 373/77. Notification S.R.O. No. 372/77 was made in exercise of the powers conferred by section 3-13 of the Orissa Act and Notification S.R.O. No. 373/77 was made in exercise of the powers conferred by the first proviso to sub-section (1) of section 5 of the Orissa Act. We will refer to these notifications in detail in the course of this judgment but for the present suffice it to say that Notification S.R.O. No. 372/77 amended Notification No. 20209-CTA-14/76-F dated April 23, 1976 and made bamboos agreed to be severed and standing trees agreed to be severed liable to tax on the turnover of purchase with effect from June 1, 1977 while Notification S.R.O. No. 373/77 amended with effect from June 1, 1977 Notification No. 20212-CTA-14/76-F dated April 23, 1976 and directed that the tax payable by a dealer under the Orissa Act on account of the purchase of bamboos agreed to be severed and standing trees agreed to be severed would be at the rate of ten per cent. After the promulga....
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.... and removing bamboos from forest areas "for the purpose of converting the bamboo into paper pulp or for purposes connected with the manufacture of paper or in any connection incidental therewith". This agreement will be hereinafter referred to as "the bamboo contract". The other group consisted of those who had entered into agreements for the purchase of standing trees. We will hereinafter refer to this agreement as "the timber contract". All the bamboo contracts before the High Court were in the same terms except with respect to the contract area, the period of the agreement and the amount of royalty payable; and the same was the case with the timber contracts. By a common judgment delivered on September 19, 1979 reported as Titaghur Paper Mills Company Ltd. v. State of Orissa [1980] 45 STC 170, the High Court allowed all the said writ petitions and quashed the impugned provisions. The High Court made no order as to the costs of these petitions. Each of the present two appeals has been filed by the State of Orissa, the Commissioner of Sales Tax, Orissa, and the Sales Tax Officer concerned in the matter, challenging the correctness of the said judgment of the High Court. The re....
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....on 9 of the Orissa Act and calling upon him to submit within one month a return in form IV of the forms appended to the said Rules, showing the particulars of "turnover for the quarter ending 76-77 & 6/77". By the said notice the said manager was required to attend in person or by agent at the Sales Tax Office at Angul on October 30, 1977 and to produce or cause to be produced the accounts and documents specified in the said notice and to show cause why in addition to the amount of tax that might be assessed a penalty not exceeding one and half times that amount should not be imposed under section 12(5) of the Orissa Act, that is, for carrying on business without being registered as a dealer. By its letter dated August 25, 1977 the respondent-company asked for time to seek legal advice. Thereafter by its letter dated September 27, 1977 addressed to the said Sales Tax Officer, the respondent-company contended that the said notice was invalid and called upon him to cancel the said notice. A copy of the said letter was also sent to the Commissioner of Sales Tax, Orissa, who is the second appellant in Civil Appeal No. 219 of 1932 as also to the Chief Secretary to the Government of t....
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....ndent-company on the basis of the impugned provisions or the said notice. In addition to the said two writ petitions filed by the respondent-company and the said Kanak Ghosh, three other writ petitions were also filed by other parties who had entered into bamboo contracts with the State of Orissa in which similar contentions were raised and reliefs claimed. The record is not clear whether any assessment order was made against the respondent-company in pursuance of the said notice or whether further proceedings in pursuance of the said notice were stayed by the High Court by an interim order. As mentioned earlier, by the said common judgment delivered by the High Court, the said writ petitions were allowed. As a natural corollary of the High Court quashing the impugned provisions it ought to have also quashed the said notice dated August 18, 1977 and the assessment order, if any, made in pursuance thereof. The High Court, however, did not do so, perhaps because as it heard and decided all the said 209 writ petitions together it did not ascertain the facts of each individual petition or the exact consequential reliefs to be given to the petitioners therein. Facts of C.A. No. 22....
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....taken in the said writ petition, namely, (1) the levy of a purchase tax on standing timber agreed to be severed was beyond the legislative competence of the State Legislature and (2) the said notifications imposed a tax both at the point of sale and point of purchase and were, therefore, invalid and ultra vires the Orissa Act. It was also contended that the power conferred upon the State Government under section 3-B of the Orissa Act to declare any goods or class of goods to be liable to tax on the turnover of purchase as also the power conferred upon the State Government to specify the rate of tax subject to the conditions that it should not exceed thirteen per cent amounted to excessive delegation of legislative power to the State Government and that too without prescribing any guidelines in respect thereof. It was further contended that the timber contracts were works contracts and the amounts payable under them were, therefore, not exigible either to purchase tax or sales tax. The reliefs sought in the said writ petition were for quashing the said two notifications dated May 23, 1977. While the said writ petition was pending, the Sales Tax Officer, Sambalpur I Circle, by his....
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....0 of his judgment as follows: "19. For the reasons stated above, we hold as follows: (1) That the bamboos and trees agreed to be severed are nothing but bamboos and timber after those are felled. When admittedly timber and bamboos are liable for taxation at the sale point, taxation of those goods at the purchase point amounts to double taxation and, as such, the notifications are ultra vires the provisions of the Act. (2) The impugned notifications amount to taxation on agreements of sale, but not on sale and purchase of goods; and (3) In the case of bamboo exploitation contracts, the impugned notifications amount also to impost of tax on profit a prendre and, as such, are against the provisions of the Orissa Sales Tax Act. 20.. In view of the aforesaid findings, we do not consider it necessary to go into the other questions raised by the petitioners, namely, whether it is a works contract and whether the notifications amount to excessive delegation, or whether there has been business of purchase by the petitioners or whether there has been restriction on trade and business." In his concurring judgment Ray, C.J., agreed with Das, J., and further held that in the s....
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....was an exclusively Provincial subject and the legislative competence of the Orissa Provincial Legislature to enact the Orissa Act was derived from section 100(3) of the Government of India Act, 1935 read with entry 48 in the Provincial Legislative List. Under the Constitution of India as originally enacted, the legislative topic "Taxes on the sale or purchase of newspapers and on advertisements published therein" was exclusively a Union subject in respect of which under article 245(1) read with article 246(1) Parliament alone could make laws for the whole or any part of the territory of India, this topic being the subject-matter of entry 92 in List I in the Seventh Schedule to the Constitution (namely, the Union List), while "Taxes on the sale or purchase of goods other than newspapers" and "Taxes on advertisements other than advertisements published in the news- papers" were exclusively State subjects in respect of which under article 245(1) read with article 246(3) of the Constitution of India, the Legislature of a State alone could make laws for such State or any part thereof, these topics being the subject-matter of entries 54 and 55 in the List II in the Seventh Schedule to th....
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....ing a period not exceeding twelve months during which his gross turnover exceeded the limit specified in that sub-section which during the relevant period was Rs. 25,000. Under section 4(3) a dealer who has become liable to pay tax under the Orissa Act continues to be so liable until the expiry of three consecutive years during each of which his gross turnover has failed to exceed the prescribed limit and such further period after the date of the said expiry as may be prescribed by the Orissa Sales Tax Rules and his liability to pay tax ceases only on the expiry of the further period so prescribed. A special liability is created by section 4-A on a casual dealer as defined in clause (bb) of section 2. We are not concerned in these appeals with any question relating to a casual dealer. Section 2 is the definition section. Clause (c) of that section defines the term "dealer". The definition as it stood during the relevant period and at the date when the judgment of the High Court was delivered (omitting what is not relevant) read as follows: "(c) 'dealer' means any person who carries on the business of purchasing or selling or supplying goods in Orissa, whether for commissio....
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....assessed, stating that he was a registered dealer and had been assessed to tax on the sale of all standing trees including bamboos. The petitioner company thereupon filed two writ petitions in the Orissa High Court challenging this demand. The contention that the transactions covered by the said two agreements were not sales of goods and, therefore, not exigible to sales tax does not appear to have been raised in those writ petitions. The High Court held that the State of Orissa and not the Divisional Forest Officer could be the dealer qua the transactions covered by the said agreements in case they were exigible to sales tax and that the liability under the Orissa Act being a statutory one, it was not open to the State in the discharge of its administrative business or at its volition to name an employee under it as the person to pay sales tax under the Orissa Act, and, therefore, the Divisional Forest Officer could not have been assessed to sales tax on the transactions in question. The High Court further held that though the requirement of profit-motive did not exist any more as an ingredient of the term "business" as defined by the said clause (b) of section 2, whether a person....
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....f a firm registered outside the State or of a company the principal office or headquarters whereof is outside the State, shall be deemed to be a dealer for the purposes of this Act. Explanation II.-The Central Government or a State Government or any of their employees acting in official capacity on behalf of such Government, who, whether or not in the course of business, purchases, sells, supplies or distributes goods, directly or otherwise for cash or for deferred payment or for commission, remuneration or for other valuable consideration, shall, except in relation to any sale, supply or distribution of surplus, unserviceable or old stores or materials or waste products or obsolete or discarded machinery or parts or accessories thereof, be deemed to be a dealer for the purposes of this Act." What is pertinent to note about the new definition of "dealer" is that in the case of the Central Government, a State Government or any of their employees acting in official capacity on behalf of such Government, it is not necessary that the purchase, sale, supply or distribution of goods should be in the course of business, while in all other cases for a person to be a dealer he must be....
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....see the definition of the expression "gross turnover". "Gross turnover" is defined by clause (dd) of section 2 as follows: "(dd) 'gross turnover' means the total of 'turnover of sales' and 'turnover of purchases'." The expression "turnover of sales" and "turnover of purchases" are defined in clauses (i) and (j) of section 2 as follows: "(i) 'turnover of sales' means the aggregate of the amounts of sale prices and tax, if any, received and receivable by a dealer in respect of sale or supply of goods other than those declared under section 3-B effected or made during a given period; (j) 'turnover of purchases' means the aggregate of the amounts of purchase prices paid and payable by a dealer in respect of the purchase or supply of goods or classes of goods declared under section 3-B;....." So far as is material for our purpose, section 5(1) provides for the rates at which the tax under the Orissa Act is payable. Sub-section (1) of section 5 and the first proviso thereto as they stood prior to the Orissa Sales Tax (Amendment) Ordinance, 1977 read as follows: "5. Rate of tax.-(1) The tax payable by a dealer under this Act shall be levied at the rate of six per cent on....
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....er to prescribe points at which goods may be taxed or exempted. Section 8 provides as follows: "8. Power of the State Government to prescribe points at which goods may be taxed or exempted.-Notwithstanding anything to the contrary, in this Act, the State Government may prescribe the points in the series of sales or purchases by successive dealers at which any goods or classes or descriptions of goods may be taxed or exempted from taxation and in doing so may direct that sales to or purchases by a person other than a registered dealer shall be exempted from taxation: Provided that the same goods shall not be taxed at more than one point in the same series of sales or purchases by successive dealers. Explanation.-Where in a series of sales, tax is prescribed to be levied at the first point, such point, in respect of goods despatched from outside the State of Orissa shall mean and shall always be deemed to have meant the first of such sales effected by a dealer liable under the Act after the goods are actually taken delivery of by him inside the State of Orissa." Rules 93-A to 93-G of the Orissa Sales Tax Rules, 1947 prescribe the goods on which tax is payable at the first....
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....do hereby direct that the following amendment shall be made in the notification of the Government of Orissa, Finance Department No. 20212-CTA- 14/76-F., dated the 23rd April, 1976, and that the said amendment shall take effect from the first day of June, 1977. AMENDMENT In the schedule to the said notification, after serial numbers 2 and 16, the following new serial and entry shall be inserted under appropriate heading, namely: Serial No. Description of goods Rate of tax (1) (2) (3) 2-A Bamboos agreed to be severed. Ten per cent 16-A Standing trees agreed to be severed. Ten per cent." The above two notifications were struck down by the High Court by its judgment under appeal. The State Government had also issued from time to time notifications in exercise of the powers conferred by the first proviso to sub-section, (1) of section 5 prescribing a rate of tax different from the rate specified in section 5(1) so far as sales of certain goods were concerned. As a result of the amendments made by the Orissa Sales Tax (Amendment) Act, 1976 all these notifications were superseded and new rates specified with effect from Ma....
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.... each in column (3) thereof: SCHEDULE Serial No. Description of goods Rate of tax (1) (2) (3) 2. Bamboos agreed to be severed Ten per cent 17. Standing trees agreed to be severed Ten per cent The relevant portions of the notification specifying the rates of sales tax read as follows: Notification No. 67184-C. T. A.-135/77-F dated the 29th December, 1977. S.R.O. No. 902/77.-In exercise of the powers conferred by sub-section (1) of section 5 of the Orissa Sales Tax Act, 1947 (Orissa Act 14 of 1947), as amended by the Orissa Sales Tax (Amendment) Ordinance, 1977 (Orissa Ordinance No. 10 of 1977) and in supersession of all previous notifications on the subject, the State Government do hereby direct that with effect from the first day of January, 1978, the rate of tax payable by a dealer under the said Act on account of the sale of goods specified in column (2) of the schedule given below shall be at the rate specified against each in column (3) thereof. SCHEDULE Serial No. Description of goods Rate of tax (1) (2) (3) 101. All other articles Seven per cent." Entries Nos. 2 and ....
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....me transaction. Looked at from the point of view of the seller a transaction is a sale, while looked at from the point of view of the buyer the same transaction is a purchase. Entry 48 in List II of the Seventh Schedule to the Government of India Act, 1935 came up for interpretation by this Court in Sales Tax Officer, Pilibhit v. Budh Prakash Jai Prakash [1954] 5 STC 193, 197 (SC); [1955] 1 SCR 243, 247. This Court held in that case that there having existed at the time of the enactment of the Government of India Act, 1935 a well-defined and well-established distinction between a sale and an agreement to sell, it would be proper to interpret the expression "sale of goods" in entry 48 in the sense in which it was used in legislation both in England and India and to hold that it authorized the imposition of a tax only when there was a completed sale involving transfer of title. In that case the Uttar Pradesh Sales Tax Act, 1948 had been amended so as to include forward contracts in the definition of "sale" and to provide that forward contracts should be deemed to have been completed on the date originally agreed upon for delivery. These amendments were held by this Court to be ult....
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....hese amendments to be void and beyond the legislative competence of the Madras Provincial Legislature on the ground that in the case of a building contract, which was one and indivisible, the agreement between the parties was that the contractor should construct the building according to the specifications contained in the agreement and in consideration therefor receive payment as provided therein, and that in such an agreement there was neither a contract to sell the materials used in the construction nor any property passed in such materials as movables. The same interpretation as was placed on entry 48 in the Provincial Legislative List in State of Madras v. Gannon Dunkerley & Co. (Madars) Ltd. [1958] 9 STC 353 (SC); [1959] SCR 379 was adopted by this Court while construing entry 54 in the State List and attempts by the State Legislatures to enlarge the meaning of the expressions "sale", "sale of goods" or "goods" have been held to be beyond their legislative competence: see, for instance Bhopal Sugar Industries Ltd., M.P. v. D.P. Dube, Sales Tax Officer, Bhopal Region, Bhopal [1963] 14 STC 406 (SC); AIR 1964 SC 1037, K.L. Johar and Co. v. Deputy Commercial Tax Officer [1965]....
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....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 authorities under the Orissa Act cannot assess to sales tax or purchase tax a transaction 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 of sales or purchases of those goods by successive dealers when those goods are 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 Act, it was submitted on behalf of the appellant State that the subject-matter of the impugned provisions is goods and that what is made exigible to tax under the impugned provisions is a completed purchase of goods. On behalf of the contesting respondents it was submitted that by the impugned provisions a n....
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....es 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: "'immovable property' does not include standing timber, growing crops, or grass." This is strictly speaking not a definition of the term "immovable property " for it does not tell us what immovable property is but merely tells us what it does not include. We must, therefore, turn to other Acts where that term is defined. Clause (26) of section 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 or permanently fastened to anything 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. A more elaborate definition is given in clause (6) of section 2 of the Registration Act which states: "(6) 'immovable property' includes land, buildings, hereditary allowanc....
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....imber 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. Now, of course, a tree will continue to draw sustenance 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 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 and another, if the drawing of nourishment from the soil is the basis of the rule, as I hold it to be, the law is grounded, 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 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, material for our purpose is that while trees (including bamboos) rooted in the earth being th....
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....rance to a landlord, incoming tenant or purchaser of the land) will always be "goods" for the purposes of a contract of sale since the agreement between the parties must be that they shall be severed either "before sale" or "under the contract of sale" (see Benjamin's Sale of Goods, Second Edition, para 91, p. 63). As pointed out in Mahadeo v. State of Bombay [1955] Supp 2 SCR 339, 349 the distinction which prevailed in English law between fructus naturales and fructus industriales does not exist in Indian law, and the only question which would fall to be considered in India is whether a transaction concerns "goods" or "movable property" or "immovable property". The importance of this question is twofold: (1) 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 49 and 50 of that Act follow, while a document relating to goods or movable property is not required to be registered; and (2) by reason on of the interpretation placed on entry 54 in List II in the Seventh Schedule to the Constitution of India by this Court a S....
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....ption of goods shows that there is to be an agreement between the buyer and that seller and under this agreement standing trees must be agreed to be severed and so also bamboos. According to the definition of "goods" such severance may be either before sale or under the contract of sale. At 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 to be 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 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 of sale between one part-owner and another. (2) A contract of sale may be absolute or conditional. (3) Where under a contract of sale the property in the goods is transferred from t....
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....e 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 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 determine whether for the impugned provisions 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 is 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 te....
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....re goods are delivered 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 they are in such state that the buyer would under the contract 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 "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 contract 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, a....
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....me to the conclusion that the property in the standing trees passed only after severance and after complying with the conditions of that contract and, therefore, the impugned 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 levy of purchase tax on a profit a prendre. This approach adopted by the High Court was erroneous in law. The question of the validity of the impugned provisions had nothing to do with the legality of any action taken thereunder to make exigible to tax a 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 manner the validity of the notification. Were the interpretation placed by the High Court on the ba....
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....nt issues three notifications, namely, (1) 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 purchase tax instead of sales tax. We find that the High Court has misunderstood the scheme 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, 1977 replaced by the Orissa Sales Tax (Amendment) Act, 1978 while the notifications dated May 23, 1977 were issued prior to these amendments, it is necessary to consider the scheme of taxation under the Orissa Act both prior to and after January 1, 1978 being the date on which the relevant provisions of the said Ordinance came into force. Prior to January 1, 1978 under section 5(1) 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 time the rate wa....
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....ere 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 are declared under section 3-B to be liable to tax on the turnover of purchases, the residuary entry or that particular entry would automatically cease to operate in respect of those goods by reason of the proviso to section 3-B without there being any necessity to delete that particular entry or to amend the 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 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 vires the Orissa Act as they amounted to "double taxation". Effect of "supersession".-Yet another contention raised by the contesting respondents with respec....
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....chases and subsequently by another notification repeal that notification with 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 "supersession" as meaning "the action of superseding or condition of being superseded". Some of the meanings given to the word 'supersede' on the same page in that dictionary which are relevant for our purpose are "to put a stop to; to render superfluous or unnecessary; to make of no effect; to annul; to take the place of (something 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" as "the state of being superseded: removal and replacement". Thus, by using in the notifications dated December 29, 1977 the expression "in supersession of all previous notifications" all that was done was to r....
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....he new section 5(1) did not specify any rate of tax but what was done was to confer upon the State Government the power by notification to specify from time to time the rate of tax subject to a maximum of thirteen 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 reason that Notification No. 67184-C.T.A.- 135/77-F dated December 29, 1977 was issued specifying the rates of sales tax with effect from January 1, 1978. As under section 3-B the State Government 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 purchases of 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 l....
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....y 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 the assessing authorities to ascertain 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 determination 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 transactions covered by these contracts. We have also heard the parties at length on the merits of this question. 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 authorities 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....
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....ntracts read with the sale notice advertising the auction in respect of the standing trees showed that the standing trees which were the subject-matter of the timber contracts were goods 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 the payment of price was postponed was irrelevant. It was the appellant's submission that for the reason set out above the amounts payable under the timber contract were exigible 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 Orissa Forest Contract Rules, 1966 (hereinafter referred to as "the Forest Contract 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....
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.... on the contractors as regards felling of trees in coupes. Under condition 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 or non-payment of sales tax, the same was to be adjusted from the earnest money deposit or the security deposit, as the case may be, and the purchaser was bound to replenish the same forthwith. Condition 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 instalment of consideration money and non-payment of sales tax or non-submission of appropriate declaration under the Sales Tax Rules was to amount to incomplete payment of instalment and thereupon rule 9-A of the Forest Contract Rules was to be applicable. Under condition 1 of the General Conditions of Sale published in Part III of the Sale Notice, the bid was to be accepted by the Divisional Forest Officer subject to the approval of the competent authority and the right to take contract for exploiting forest produce in the lots advertised in Part I of the Sale Notice was to be granted when the competent authority approved the bid. Under condition ....
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....sold and purchased under" the timber contract was to be as specified in Schedule I thereof and the forest area in which it wag situated was indicated in Schedule V thereof and was to be referred to as the contract area. Schedule I in each of the timber contracts mentioned that the forest produce "sold and purchased 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 tress and the other aboubt 4½ from the ground level, with the hammer mark of 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 said 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 only during the aforesaid period. That part of clause 2 which spoke of forest produce which might come into existence in the contract area was obviously inapplicable to the respondent firm's case inasmuch as t....
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....t 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 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 1972) and the Forest Contract Rules formed part of the agreement between the State of Orissa and the respondent firm, it may be convenient at this 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 when found in or brought from a forest. Clause (n) defines "timber" as including "trees 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 the Orissa Fore....
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....ved 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 contract 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 already paid. Further removal is to be permitted only after the contractor has paid such further sum as in the opinion of the Divisional Forest Officer or the Range Officer is sufficient to cover such excess. Under rule 9-A it is open to the Divisional Forest Officer or t....
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.... 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 writing 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 urgent or special repairs should this in his opinion become 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 produce 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 specified 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....
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....ontractor 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 the contract including all accessory 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 the Government. Further, the Government becomes entitled to keep all 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 forfeit 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 con....
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....unts payable under the timber contracts would become exigible to purchase tax, while in the second case the impugned provisions would not apply and no purchase tax would be payable. The above conspectus 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 auction" are not determinative of the matter. Though clause 1 of the timber contracts speaks of "the forest produce sold and purchased", the other terms and conditions of the contract make it clear that the timber contracts were not unconditional contracts for the sale of goods in a deliverable state and the property in the trees specified in Schedule I 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 (1) of rule 3 of the Forest Contract Rules defines a "forest contract" as meaning "a contra....
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....or the balance of the price. It is also pertinent that under rule 33 the contract could also be terminated and the respondent-firm would forfeit its right to all further trees to be severed by it if it committed a breach of any of the other conditions of the contract. The mode of felling the trees was also not of the choice of the respondent-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 authorised 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 contract 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 ....
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.... timber and whether 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 State Government before the trees were felled by reason of the provisions of the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950 (M.P. Act No. 1 of 1951). The Court held that under the terms of the contract the trees had to be felled before they became the property of the appellant. The Court observed (at pages 390-1): "It will be noticed that under clause 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 section 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 to the plaintiff under the contract at the earliest when the trees are felled. ....
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....y 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 commodity. 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 order to prevent needless litigation in the future. Though under section 8 the State Government has the power to 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 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 respondent- 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 Government to say that by reason of the substituted definition of the term "dealer", sales tax could als....
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....the Madhya 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 manufacture 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 Pradesh High Court in G. Ramaswamy v. State of Andhra Pradesh [1973] 32 STC 309 in which the question was very much the same as the one which we have to decide. The assessees in that case purchased nascent timber, that is, logs of wood, and had sawn or cut them into planks, rafters, cut sizes, etc., and sold them for the purpose of construction of buildings and the like. 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, cut sizes, etc., treating them as general goods. The contention of the as....
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....aid emphasis on the interpretation given to the term "timber" by the Sales Tax Administration. For all these reasons the Division Bench held that merely because planks, rafters, cut sizes, etc., were sawn or cut from logs of wood, they did not alter their character and still continued to be raw materials which by themselves and in the same form could not be directly put to use for construction purposes and the logs of wood purchased by the assessees were merely cut or sawn to sizes 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 now turn to the decisions of the Orissa High Court on this point. In State of Orissa v. Rajani Timber Traders [1974] 34 STC 374 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 particular 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 sized timber would not be satisf....
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....words meant in commercial or trade parlance and that 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 no 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 on 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 severed" and after severing 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 tha....
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.... Act, 1927 (Act XVI of 1927). The Madras Forest Act applied to the districts of Koraput and Ganjam and part of Phulbani District, namely, Baliguda and G Udayagiri Taluks. The Indian Forest Act applied to the rest of the State. Both these Acts were repealed in their application to the State of Orissa by the Orissa Forest Act but as prior to the enactment of the Orissa Forest Act, these were the two Acts which provided for the protection and management of forests in the State of Orissa, we may also refer to the definition of the word "timber" given in those Acts. Section 2 of the Madras Forest Act defines "timber" as including "trees when they have fallen or have been felled, and all wood, whether cut up or fashioned or hollowed out for any purpose or not". Clause (6) of section 2 of the Indian Forest Act defines "timber" in identical terms. Though none of these definitions is an exhaustive one since each of them uses the word "includes" and not "means", there is a large and substantial measure of identity in these definitions and it will be apparent from these definitions that the word "timber" is not confined merely to felled trees in forestry in the State of Orissa. In this con....
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....or or suitable for building (as a house or boat) or for carpentry or joinery". A "log" according to the Shorter Oxford English Dictionary means "a bulky mass of wood; now usually an unhewn portion of a felled tree, or a length cut off for firewood" and according to the Concise Oxford Dictionary it means "unhewn piece of felled tree, or similar rough mass of wood especially cut for firewood." Thus, logs will be nothing more than wood cut up or sawn and would be timber. A question which remains is whether beams, rafters and planks would also be logs or timber. The Shorter Oxford English Dictionary defines "beam" inter alia as "a large piece of squared timber, long in proportion to its breadth and thickness" and the Concise Oxford Dictionary defines it as a "long piece of squared timber supported at both ends, used in houses, ships, etc." and according to Webster's Third New International Dictionary, it means "a long piece of heavy often squared timber suitable for use in house construction". A beam is thus timber sawn in a particular way. "Rafter" as shown by the Shorter Oxford English Dictionary is nothing but "one of the beams which give slope and form to a roof, and bear the....
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....f dressed or sized logs by the respondent firm having already been assessed to sales tax, the sales to the first respondent firm of timber by the State Government from which logs were made by the respondent firm cannot be made liable to sales tax as it would amount to levying tax at two points in the same series of sales by successive dealers assuming without decinding that the retrospectively substituted definition of "dealer" in clause (c) of section 2 of the Orissa Sales Tax Act, 1947 is valid. Yet another aspect of this question now arises for our consideration. During the period from June 1, 1977 to December 31, 1977 by reason of Notification No. S.R.O. 374/77 dated May 23, 1977 the rate of sales tax on timber was fixed at ten per cent by the State Government. Since it was the contention of the State Government that logs are commercially a different commodity, the tax could not have been assessed on the sales of logs by the respondent firm during this period at the rate of ten per cent but would have been assessed at the general rate of six per cent specified in section 5(1) of the Orissa Act. If such was the case, on the findings given by us above, the respondent-firm w....
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....cent and there would thus be no under-assessment or escapement of assessment. Bamboo contract.-We will now ascertain the nature of the bomboo contract. Unlike the timber contract, the bamboo contract is not in a prescribed statutory form but it appears from the judgment of the High Court that all the bamboo contracts before it contained identical terms and conditions except with respect to the contract area, the period of the contract and the amount of royalty. The parties to the bamboo contract were the Governor of the State of Orissa referred to in the said contract as "the Grantor" and the respondent company. The bamboo contract is headed "Agreement of Bamboo Areas in Bonai Forest Division to the Titaghur Paper Mills Co. Ltd.". The second and the third recitals of the bamboo contract are as follows: "AND WHEREAS the Company is desirous of obtaining grant from the Grantor of exclusive right and licence to fell, cut, obtain and remove bamboos from all felling series of Bamboos Working Circle in the Bonai Forest Division in the State of Orissa for the purpose of converting the bamboos into paper pulp or for purposes connected with the manufacture of paper or in any connection....
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....he event of the respondent-company committing a breach of the terms of the bamboo contract such as would entitle the Grantor to terminate the bamboo contract. Clause VI provided that "this licence shall be subject to the Orissa Forest Contract Rules as modified from time to time" subject to the amendments thereto set out in the said clause which are not material for our purpose. Clause VIII stated that "the forest produce sold and purchased under this Agreement consists of all Salia and Daba bamboos subject to the cutting rules in the annual coupe of the felling series". Clauses IX to XIII deal with the payment of royalty. What is pertinent to note about these clauses is that under clause XIII, the respondent-company was to pay an annual minimum royalty in the sums mentioned therein and was not to be entitled to the refund of the whole or any part of such minimum royalty should it fail to cut the minimum quantity of bamboos in any year except on the ground that the yield of the area fell below the quantity required to make up the minimum royalty payable for the year owing to gregarious or sporadic flowering of bamboos in the contract area or from any cause whatsoever not being due ....
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.... the royalty on such bamboos was not to be paid by the respondent-company but was to be paid by the local people. Under clause XX, subject to obtaining prior written consent of the Grantor, the respondent-company was to be at liberty to make dams across streams, cut canals, make water courses, irrigation works, roads, bridges, buildings, tramways and any other work useful or necessary "for the purpose of the said business" in or upon the licensed areas and also with the like consent to widen or deepen existing streams, channels or waterways "for the purpose of the said business" and all timber and other forest produce required for this purpose was to be paid for by the respondent-company at current schedule of rates. All such dams, canals, irrigation works, roads, bridges, building and other works which were not removed by the respondent- company within six months from the expiry of or earlier termination of the contract were to become the property of the Grantor. Clause XXI prohibited the respondent-company from interfering with the surface of the land except in so far as it might be necessary for the immediate purpose of "carrying on the necessary operations in connection with th....
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....nected with" the bamboo contract rent free for the term of such contract. Under clause XVI, in the event of the Grantor setting fire to the forest for silvicultural purposes, it was to give to the respondent-company as long a notice as possible of the commencement of such operations and it was the respondent-company which was to be responsible for safeguarding the forest produce which was the subject-matter of the bamboo contract. Under clause XXIX, the contract areas were to be worked on four years cutting cycle for Salia and twelve years cutting cycle for Daba and were to comprise the areas stated in the clause. It was submitted on behalf of the appellant that the bamboo contract was a composite contract of sale, in that it was an agreement to sell existing goods, namely, bamboos standing in the contract areas at the date of the bamboo contract, coupled with an agreement to sell future goods, namely, bamboos to to come into existence in the future. According to the appellant the property in the existing bamboos would pass after they were ripe for cutting and under rule 12 of the Forest Contract Rules the Divisional Forest Officer had delineated the boundaries and limits of the....
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....o application and the amounts payable under the bamboo contract would not be exigible to purchase tax. By reason, however, of the substitution of the definition of the term "dealer" in clause (c) of section 2 of the Orissa Act with retrospective effect, it may be argued that if the bamboo contract was a contract of sale of goods, then on the sale taking place to the respondent-company, sales tax would become payable and the respondent-company would be bound to reimburse to the Forest Department the amount payable by it as sales tax. In order to avoid future legal controversy and particularly in view of the fact that the High Court has held the bamboo contract to be a grant of a profit a prendre it becomes necessary to determine whether the bamboo contract is at all a contract of sale of goods. According to the respondent-company the High Court was right in holding that bamboo contract was not a contract of sale of goods but was a grant of a profit a prendre. The meaning and nature of a profit a prendre have been thus described in Halsbury's Laws of England, Fourth Edition, Volume 14, paragraphs 240 to 242 at pages 115 to 117: "240. Meaning of 'profit a prendre'. A profit a....
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.... and includes both easements and profit a prendre (see Halsbury's Laws of England, Fourth Edition, Volume 14, paragraph 3, page 4). The distinction between a profit a prendre and an easement has been thus stated in Halsbury's Laws of England, Fourth Edition, paragraph 43 at pages 21 to 22: "The chief distinction between an easement and a profit a prendre is that whereas an easement only confers a right to utilise the servient tenement in a particular manner or to prevent the commission of some act on that tenement, a profit a prendre confers a right to take from the servient tenement some part of the soil of that tenement or minerals under it or some part of its natural produce or the animals ferae naturae existing upon it. What is taken must be capable of ownership, for otherwise the right amounts to a mere easement." In Indian law an easement is defined by section 4 of the Indian Easement Act, 1882 (Act No. V of 1882) as being "a right which the owner or occupier of certain land possesses, as such, for the beneficial enjoyment of that land, to do and continue to do something, or to prevent and continue to prevent something being done, in or upon, or in respect of, ce....
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....s as immoveable property benefits to arise out of land, hereditary allowances, rights of way, lights, ferries and fisheries. The definition of immoveable property in the General Clauses Act applies to this Act. The following have been held to be immoveable property: a varashasan or annual allowance charged on land; a right to collect dues at a fair held on a plot of land; a hat or market; a right to possession and management of a saranjam; a malikana; a right to collect rent or jana; a life interest in the income of immoveable property; a right of way; a ferry; and a fishery; a lease of land." Having seen what the distinctive features of a profit a prendre are, we will now turn to the bamboo contract to ascertain whether it can be described as a grant of a profit a prendre and thereafter to examine the authorities cited at the Bar in this connection. Though both the bamboo contract in some of its clauses and the timber contracts speak of "the forest produce sold and purchased under this agreement", there are strong countervailing factors which go to show that the bamboo contract is not a contract of sale of goods. While each of the timber contracts is described in its body as "a....
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.... We may pause here to note what the Judicial Committee of the Privy Council had to say in the case of Raja Bahadur Kamakshya Narain Singh of Ramgarh v. Commissioner of Income-tax, Bihar and Orissa [1943] 11 ITR 513 (PC) about the payment of minimum royalty under a coal mining lease. The question in that case was whether the annual amounts payable by way of minimum royalty to the lessor were in his hands capital receipt or revenue receipt. The Judicial Committee held that it was an income flowing from the covenant in the lease. While discussing this question, the Judicial Committee said (at pages 522-3): "These are periodical payments, to be made by the lessee under his covenants in consideration of the benefits which he is granted by the lessor. What these benefits may be is shown by the extract from the lease quoted above, which illustrates how inadequate and fallacious it is to envisage the royalties as merely the price of the actual tons of coal. The tonnage royalty is indeed only payable when the coal or coke is gotton and despatched: but that is merely the last stage. As preliminary and ancillary to that culminating act, liberties are granted to enter on the land an....
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....to be severed and the other, an agreement relating to bamboos to come into existence in the future. The terms of the bamboo contract make it clear that it is one, intergral and indivisible contract which is not capable of being severed in the manner canvassed on behalf of the appellant. It is not a lease of the contract areas to the respondent-company for its terms clearly show that there is no demise by the State Government of any area to the respondent-company. The respondent-company has also no right to the exclusive possession of the contract areas but has only a right to enter upon the land to take a part of the produce thereof for its own benefit. Further, it is also pertinent that while this right to enter upon the contract areas is described as a "licence", under clause XXV of the bamboo contract the respondent- company has the right to take on lease a suitable site or sites of its choice within the contract areas for the erection of store houses, sheds, depots, bungalows, staff offices, agencies and other buildings of a like nature required for the purposes of its business. The terms and conditions of the bamboo contract leave no doubt that it confers upon the respondent-c....
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....at he was entitled to under the contract. The Court, however, came to the conclusion that the document required registration as it transferred an interest in immovable property, and that it was not a sale of mere standing timber but it was contemplated by the document, as shown by the fact that a comparatively long period of a little more than four years was granted to the defendant for cutting and removing the trees, that "the purchaser should derive a benefit from the further growth of the thing sold, from further vegetation and from the nutriment to be afforded by the land". The above words quoted in the judgment in that case were those of Sir Edward Vaughan Williams in the following passage cited with approval by Lord Coleridge, C.J., in Marshall v. Green [1875] 1 CPD 35, 39: "The principle of these decisions appears to be this, that wherever at the time of the contract it is contemplated that the purchaser should derive a benefit from the further growth of the thing sold, from further vegetation and from the nutriment to be afforded by the land, the contract is to be considered as for an interest in land; but where the process of vegetation is over, or the parties ag....
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....9 PC 311. In that case the assessees carried on business as manufacturers and vendors of bidis composed of tobacco contained or rolled in tendu leaves. The contracts entered into by the assessees were short term contracts under which in consideration of a sum payable by instalments the assessees were granted the exclusive right to collect and remove tendu leaves from specified areas. Some of the contracts also granted to the assessees a small ancillary right of cultivation. The Judicial Committee held that the amounts paid by the assessees under the said contracts constituted expenditure in order to secure raw materials for their business and, therefore, such expenditure was allowable as being on revenue account. In Chhotabhai's case [1953] SCR 476, this Court took the view that the contracts before it were similar to the contracts before the Judicial Committee and quoted with approval the following passage from the judgment in Mohanlal Hargovind's case LR (1949) 76 IA 235 (at page 241): "The contracts grant no interest in land and no interest in the trees or plants themselves. They are simply and solely contracts giving to the grantees the right to pick and carry away leaves, w....
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....olition Act, 1951 (Orissa Act I of 1952). Under the said Act, the estates of the Raja of Parikud vested in the State of Orissa and the State refused to recognise the rights of the petitioners and was seeking to re-auction the rights of fishery in the said lake. The petitioners, contending that the State had infringed or was about to infringe their fundamental rights under articles 19(1)(f) and 31(1) of the Constitution of India, filed petitions in this Court under article 32 of the Constitution. In their petition, the petitioners claimed that the transactions entered into by them were sales of future goods, namely, fish in the sections of the lake covered by the licences and that as fish was movable property, the said Act was not attracted because it was confined to immovable property. The Court observed that if this contention of the petitioners was correct, then their petition under article 32 was misconceived because until any fish was actually caught, the petitioners would not acquire any property in it. The Court held that what was sold to the petitioners was the right to catch and carry away fish in specific sections of the lake for a specified future period and that this amo....
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....ed to her in consideration of a sum of Rs. 20,000 the right to take and appropriate all kinds of wood from certain forests in his Zamindari. On the coming into force of the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950 all proprietary rights in land vested in the State of Madhya Pradesh and the petitioner could no longer cut any wood. She thereupon applied to the Deputy Commissioner and obtained from him an order permitting her to work the forest and started cutting the trees. The Divisional Forest Officer took action against her and passed an order directing that the cut materials be forfeited. She made representations to the Government and they proving fruitless, she filed in this Court a petition under article 32 of the Constitution of India alleging breach of her fundamental rights under article 19(1)(f) and (g) of the Constitution. Four of the five learned Judges who heard the case pointed out that the foundation of the petitioner's claim was an unregistered document and that it was not necessary to determine the true meaning and effect thereof for whatever construction be put on it, the petitioner could not complain of breach o....
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....or cutting twelve years later would not be fit for felling immediately and, therefore, the document was not a mere sale of trees as wood. Vivian Bose, J., held that the transaction was not just a right to cut a tree but also to derive a profit from the soil itself, in the shape of the nourishment in the soil that went into the tree and made it to grow till it was of a size and age fit for felling as timber and if already of that size, in order to enable it to continue to live till the petitioner chose to fell it. The learned Judge, therefore, held that though such trees as can be regarded as standing timber at the date of the document, both because of their size and girth and also because of the intention to fell at an early date would be movable property for the purposes of the Transfer of Property Act and the Registration Act, the remaining trees that were covered by the grant would be immovable property and as the total value was Rs. 26,000, the deed required registration and being unregistered, it did not pass any title or interest and, therefore, as in Ananda Behera's case [1955] 2 SCR 919 the petitioner had no fundamental right which she could enforce. According to learned....
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....3 of the said Act. The petitioners thereupon filed petitions under article 32 of the Constitution of India challenging the legality of the action taken by the Government on the ground that it was an invasion of their fundamental rights. The main contention of the petitioners was that the agreements were in essence and effect licenses granted to them to cut, gather and carry away the produce in the shape of tendu leaves, or lac, or timber or wood, and did not grant to them any "interest in land" or "benefit to arise out of land" and the object of the agreements could, therefore, only be described as sale of goods as defined in the Indian Sale of Goods Act. In support of that contention, the petitioners relied upon the decision in Chhotabhai's case [1953] SCR 476. The Court examined the terms of the agreements in question and concluded that under none of them was there a naked right to take the leaves of tendu trees together with a right of ingress and of regress from the land but there were further benefits including the right to occupy the land, to erect buildings and to take other forest produce not necessarily standing timber, growing crop or grass. The Court further held that wh....
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....right of the petitioners which could support the petitions which were presented under article 32 of the Constitution. It is this aspect of the matter which was not brought to the notice of the Court, and the resulting omission to advert to it has seriously impaired, if not completely nullified, the effect and weight of the decision in Chhotabhai's case [1953] SCR 476 as a precedent." (Emphasis supplied Here italicised.) We may also usefully reproduce the following passages (at page 354) from the concluding portion of the judgment: "From this, it is quite clear that forests and trees belonged to the proprietors, and they were items of proprietary rights..... If then the forest and the trees belonged to the proprietors as items in their 'proprietary rights', it is quite clear that these items of proprietary rights have been transferred to the petitioners.....Being a 'proprietary right', it vests in the State under sections 3 and 4 of the Act. The decision in Chhotabhai's case [1953] SCR 476 treated these rights as bare licences, and it was apparently given per incuriam, and cannot therefore be followed." (Emphasis supplied Here italicised.) Faced with this decision....
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....hwa, etc., held by the Forest Department of the Government of Andhra Pradesh. They were called upon to pay in terms of the conditions of sale stamp duty on the agreements to be executed by them as if these documents were leases of immovable property. The respondents thereupon filed petitions under article 226 of the Constitution in the High Court of Andhra Pradesh. In the said petitions, the State contended that under the agreements, the respondents had acquired an interest in immovable property. The High Court held in favour of the respondents. The State went in appeal to this Court. On a consideration of the terms of the agreements, this Court held that the agreements were licences and not leases. The Court laid emphasis upon three salient features of those agreements for reaching its conclusion, namely, (1) that these were agreements of short duration of nine to ten months, (2) that they did not create any estate or interest in the land, and (3) that they did not grant exclusive possession and control of the land to the respondents but merely granted to them the right to pluck, cut, carry away and appropriate the forest produce that might have been existing at the date of ....
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....and and take away tendu leaves, etc., the right under the bamboo contract is of a wholly different nature. Further, the question whether the agreements were a grant of a profit a prendre or a benefit to arise out of land was not raised and, therefore, not considered in Ansari's case [1976] 38 STC 577 (SC); [1976] 3 SCR 661 and the only point which fell for decision by the Court was whether the agreements were licences or leases. In fact, another question which arose in that case was whether the respondents were liable to pay the amounts demanded from them as reimbursement of sales tax. Affirming the decision of the High Court on this point, the Court held that the Forest Department did not carry on any business by holding auctions of forest produce and was, therefore, not a dealer within the meaning of that term as defined in the Andhra Pradesh General Sales Tax Act, 1957. The question whether the agreements were contracts of sale of goods was, however, not considered in that case. We now come to the case of State of Madhya Pradesh v. Orient Paper Mills Ltd. [1977] 40 STC 603 (SC); [1977] 2 SCR 149 the second of the two cases on which learned counsel for the appellant relied so ....
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....eral Sales Tax Act, 1958 with effect from April 1, 1959 and the new Act did not contain any exclusion of forest contracts from the definitions of "goods". Further, the term "dealer" as defined in the 1958 Act included the Central Government and the State Government or any of its departments. The Forest Department of the State Government was, however, exempted from the payment of sales tax for the period April 1, 1959 to November 2, 1962. After the period of the said exemption expired, the Forest Department got itself registered as a dealer and the Divisional Forest Officer called upon the respondent to reimburse to him the amount which, according to him, he was liable to pay as sales tax in respect of the transaction covered by the said agreement. Challenging his right to do so, the respondent filed in the High Court of Madhya Pradesh a writ petition under article 226 of the Constitution. In the said writ petition the respondent contended that the transaction covered by the said agreement was not a sale of goods and accordingly, no sales tax was payable in respect of bamboos and salai wood extracted by the respondent thereunder, that the said agreement did not provide for the recov....
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....pondent as it would have been had the said agreement been a lease and that as the terms of the said agreement showed, it conferred in substance a right to cut and carry away timber of specified species and till the trees were cut, they remained the property of the owner, namely, the State, and that once the trees were severed, the property in them passed to the respondent. The Court further observed that the term used in the said agreement, namely, "royalty", was "a feudalistic euphemism for the 'price' of the timber". We are unable to agree with the interpretation placed by the Court on the document in the Orient Paper Mills' case [1977] 40 STC 603 (SC); [1977] 2 SCR 149. We find that in that case this Court as also the High Court adopted a wrong approach in construing the said document. It is a well-settled rule of interpretation that a document must be construed as a whole. This rule is stated in Halsbury's Laws of England, Fourth Edition, Volume 12, paragraph 1469 at page 602, as follows: "Instrument construed as whole. It is a rule of construction applicable to all written instruments that the instrument must be construed as a whole in order to ascertain the true mean....
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.... question before us is not so much as to what nomenclature would aptly describe the deed but as to whether the deed results in sale of trees after they are cut. The answer to that question, as would appear from the above, has to be in the affirmative." The above rule enunciated by this Court in that case falls into two parts, namely, (1) a document should be so interpreted as to bring it within the ambit of a particular statute relevant for the purpose of the dispute before the Court, and (2) in order to do so, the Court can look at only such of the clauses of the document as also to just one or more of the consequences flowing from the document which would fit in with the interpretation which the Court wants to put on the document to make that statute applicable. The above principle of interpretation cannot be accepted as correct in law. It is fraught with considerable danger and mischief as it may expose documents to the personal predilections and philosophies of individual Judges depending upon whether according to them it would be desirable that documents of the type they have to construe should be made subject to a particular statute or not. The result would be that a docum....
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....ther and the deed of sale were to provide that the building should be demolished and reconstructed and the price should be paid to the vendor partly in money and partly by giving him accomodation in the new building, according to this rule of interpretation adopted by the Court in the Orient Paper Mills' case [1977] 40 STC 603 (SC); [1977] 2 SCR 149 it would for the purpose of sales tax be a sale of goods because the old building when demolished would result in movable property, namely, debris, doors, windows, water pipes, drainage pipes, water tanks, etc., which would be sold by the purchaser as movables. Similarly, if a man were to give a lease of his orchard or field, the lessee would be entitled to the fruits already in existence as also to the fruits which would come into existence in the future and equally in the case of a field the same would be the case with respect to the crop growing in the field as also the crops to grow thereafter. The fruits and crop, whether existing or future, when plucked or harvested, would be movable property and would be sold as such by the lessee; but on the second part of the rule of interpretation laid down in the Orient Paper Mills' case [197....
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....rovision for payment of a minimum royalty. It is also true that an interpretation placed by the Court on a document is not binding upon it when another documents comes to be interpreted by it but that is so where the two documents are of different tenors and not where they have the same tenor. On the ground that they dealt with the general law of real property, the Court in the Orient Paper Mills' case [1977] 40 STC 603 (SC); [1977] 2 SCR 149 did not advert to the earlier decisions of this Court relating to documents with similar tenor even though those cases were referred to in the judgment of the Madhya Pradesh High Court under appeal before it. In view of this, the Orissa High Court in the judgment under appeal before us held that the Orient Paper Mills' case [1977] 40 STC 603 (SC); [1977] 2 SCR 149 was decided by this Court per incuriam because it did not take into consideration decisions of larger Benches of this Court. In Union of India v. K.S. Subramanian [1977] 1 SCR 87, 92, this Court held as follows: "But, we do not think that the High Court acted correctly in skirting the views expressed by larger Benches of this Court in the manner in which it had done this....
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....oo contract is not a contract of sale of goods but is a grant of a profit a prendre, that is, of a benefit to arise out of land and that it is not possible to bifurcate the bamboo contract into two: one for the sale of bamboos existing at the date of the contract and the other for the sale of future goods, that is, of bamboos to come into existence in the future. In order to ascertain the true nature and meaning of the bamboo contract, we have to examine the said contract as a whole with reference to all its terms and all the rights conferred by it and not with reference to only a few terms or with just one of the rights flowing therefrom. On a proper interpretation, the bamboo contract does not confer upon the respondent company merely a right to enter upon the land and cut bamboos and take them away. In addition to the right to enter upon the land for the above purpose, there are other important rights flowing from the bamboo contract which we have already summarized earlier and which make it clear that what the bamboo contract granted was a benefit to arise out of land which is an interest in immovable property. The attempt on the part of the State Government and the officers....
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....contracts. The payee of the price, namely, the Government has not undertaken to do any work or labour. The work or labour under the timber contracts is to be done by the payer of the price, namely, the forest contractor, that is, the respondent firm. It is the respondent firm which has to enter upon the land and to fell the standing trees and to remove them. Assuming for the sake of argument that the bamboo contract were a contract relating to movables, the same position would apply to it. This contention of the respondents, is therefore, without any substance. Conclusions.-To summarize our conclusions: (1) The impugned provisions, namely, (1) Notification S.R.O. No. 372/77 dated May 23, 1977, (2) Notification S.R.O. No. 373/77 dated May 23, 1977, (3) Entries Nos. 2 and 17 in the Schedule to Notification No. 67178-C.T.A. 135/77 (Pt.)-F (S.R.O. No. 900/77) dated December 29, 1977 and (4) Entries Nos. 2 and 17 in the Schedule to Notification No. 67181-C.T.A. 135/77-F (S.R.O. No. 901/77) dated December 29, 1977 levying purchase tax at the rate of ten per cent on the purchase of bamboos agreed to be severed and standing trees agreed to be severed, are not ultra....
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.... parlance, bearing 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 has, therefore, to select the particular meaning which is relevant to the context in which it has to interpret that word. (10) Timber and sized or dressed logs are one and the same commercial commodity. Beams, rafters and planks would also be timber. (11) As the sales of dressed or sized logs by the respondent firm have already been assessed to sales tax, the sales to the first respondent firm of timber by the State Government from which logs were made by the respondent firm cannot be made liable to sales tax as it would amount to levying tax at two points in the same series of sales by successive dealers, assuming without deciding that the retrospectively substituted definition of "dealer" in clause (c) of section 2 of the Orissa Sales Tax Act, 1947 is valid. (12) During the period June 1, 1977 to December 31, 1977 the sales of logs by the respondent firm would be liable to tax at the rate of ten per cent. Assuming that these sales have been assessed to tax at the rate of six per cent, by reason of the period of limit....
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.... So far the said assessment order is concerned, as we have pointed out earlier, it is severable and does not require to be set aside in toto but only in so far as it imposed purchase tax on the amounts paid by the respondent firm under the timber contracts. Though the High Court did not give these consequential reliefs in view of its findings that the impugned provisions were invalid, it becomes necessary for us to do so in order to do complete justice between the parties as we are entitled to do under article 142 of the Constitution of India. In the result, we reverse the judgment of the High Court in so far as it holds (1) Notification S.R.O. No. 372/77 dated May 23, 1977 issued under section 3-B of the Orissa Sales Tax Act, 1947, (2) Notification S.R.O. No. 373/77 dated May 23, 1977 issued under the first proviso to sub-section (1) of section 5 of the said Act prior to the amendment of the said sub-section by the Orissa Sales Tax (Amendment) Act, 1978 which repealed and replaced the Orissa Sales Tax (Amendment) Ordinance, 1977, (3) Entries 2 and 17 in the Schedule to Notification No. 67178-C.T.A. 135/77 (Pt.)-F (S.R.O. No. 900/77) dated December 29, 1977 issued under....