PETITIONER:
STATE OF MAHARASHTRA ETC.
Vs.
RESPONDENT:
THE CENTRAL PROVINCES MANGANESE ORE CO. LTD.
DATE OF JUDGMENT29/10/1976
BENCH:
BEG, M. HAMEEDULLAH
RAY, A.N. (CJ)
SHINGAL, P.N.
CITATION:
1977 AIR 879 1977 SCR (1)1002
1977 SCC (1) 643
ACT
Sales Tax--Central Provinces and Berar Sales Tax Act,
1947, s. 2(g), Expln. II--Goods within State at the time of
contract of sale, mixed up outside State and the mixture
sold---"Sale’ if taxable.
Interpretation of Statutes--Provision in Act substituted
by another--Amending provision void--Effect.
Words and Phrases--‘Substituted; meaning of.
HEADNOTE
Section 2(g) of the Central Provinces and Berar Sales
Tax Act, 1947 defines ’sale’ and Explanation II to the
sub-section provides that notwithstanding anything to the
contrary in the Indian Sale of Goods Act, 1930, the sale of
any goods which are actually in the State at the time when
the contract of sale, as defined in that Act in respect
thereof is made, shall, wherever the contract of sale is
made, be deemed for the purpose of this Act to have taken
place in the State. The Amending Act of 1949 substituted
for this Explanation another Explanation but as the amend-
ment did not receive the assent of the Governor General
under S. 107 of the Government of India Act, 1935, it was
void.
The assessee owned manganese ore mines in the State and
was entering into contracts at places outside the State for
the despatch abroad of manganese ore through different
ports. The contracts contained specifications of strengths
of manganese ore to be supplied with permissible percentages
of other ingredients an admixtures. The assessee arranged
for the transport of various grades of menganese ore in
railway wagons from one or more of the mines, and the order
in which trucks were loaded and unloaded was so arranged
that the required average consistency or strength of
manganese ore specified in the contracts was obtained in the
course of such unloading. The assessee described the par-
ticular type of conglomerate as ’Oriental mixture.’
The assessee contended (1) that the original Explanation II
was validly repealed by the Amending Act and since no sub-
stitution of the new provision had taken place, only the
repeal survived, and that, therefore neither the old una-
mended provision nor its replacement were in operation, with
the result that the Sales after the date of amendment were.
not subject to sales tax, and (2) even assuming that the
unamended provision was in force, ’Oriental Mixture’, as a
taxable commodity came into existence only after the ores
got mixed up in the process of unloading and not before so
that, its sale could not be taxed as ’goods which are actu-
ally in the State’, at the time when contracts: were
entered into.
The High Court on a reference held the first contention
against the assessee and the second in favour of the asses-
see. Both sides appealed to this Court.
Dismissing the appeals of the assessee and allowing the
appeals of the State.
HELD: (1) As the period involved is preconstitution period,
Art. 286 of Constitution, which is not retrospective in
operation would not help the assessee even though the as-
sessment was after the Constitution came into force. [1007
F]
(2) There was no repeal of the existing Explanation when
’substitution’ by means of the amending Act failed to be
effective and so the sale could be taxed under it. [1012 A-
B]
(a) The question is one of gathering the intent from the
use of words in the enacting provisions seen in the light of
the procedure gone through, and from the nature of the
action of the authority which functions, [1010 B]
1003
(b) The word ’substitution’ does not necessarily or
’always connote two severable steps, one of repeal and
another of a fresh enactment, even if it implies two
steps. The natural meaning of the word ’substitution’ is to
indicate that the process cannot be so split up. If the
process described as substitution fails, it is totally
ineffective so as to leave in tact what was sought to be
displaced. It could not be inferred that; what was intended
was that in case the substitution failed or proved ineffec-
tive, some repeal, not mentioned at all, was brought about
and remained effective so as to create what may be described
as a vacuum in the statutory law on the subject-matter. The
term ’substitution’ when it occurs without anything else in
the language used or in the context of it or in the sur-
rounding facts and circumstances, means, ordinarily, that
unless the substituted provision is there to take its place,
in law and in effect, the preexisting provision continues.
[1009 H, 1010 A-G]
(c) In the present case, the whole legislative process
termed substitution was abortive. because, it did not take
effect for want of the assent of the GovernorGeneral.
Considering the actual procedure, even if the Governor had
assented the substitution, yet the amendment would have
been effective as a piece of valid legislation only when the
assent of the Governor-General had also been accorded to it.
It could not be said that what the Legislature intended or
what the Government had assented to consisted of a separate
repeal and a fresh enactment. The two results were to
follow from one and the same effective legislative process.
[1010 CD]
(d) It is easier to impute an intention to an executive
rule-making authority to repeal altogether, in any event,
what is sought to be displaced by another rule, because the
repeal as we11 as replacement are capable of being achieved
and inferred from a bare issue of fresh instructions on the
same subject. In the case of a legislative provision sought
to be amended by a fresh enactment, the procedure for enact-
ment is far more elaborate and formal. A repeal and a
replacement of a legislative provision by a fresh enactment
can only take place after such elaborate procedure has been
followed in toto. Even the analogy of a merger of an order
into another which was meant to be its substitute could only
where there is a valid substitute. [1011 C-F, 1012 A-B]
Koteswar Vittal Kamath v.K. Rangappa Balica & Co. AIR
1969 SC & 509 [1969] (3) SCR 40. @ 47 Firm .A.T.B. Mehtab
Majid & Co. v. State Madras [1963] Suppl. 2, SCR 435 and
B.N. Tewari v. Union of India & Ors. [1965] 2 SCR. 421
explained.
Shriram Gulabdas v. Board of Revenue, Madhya Pradesh &
Anr. (1952) 3 STC 343 @ 367 approved.
3. The present case is not one of mixing various ingre-
dients at a ’mixing works’, and the product which comes into
existence being sold as a separate commercial commodity in
the market. The goods got mixed up in the process of un-
loading without employing any mechanical or chemical process
of manufacture. The mere fact that the specifications in
the conrtacts were satisfied when they got so mixed up is
not a good enough ground for holding that a new product has
been manufactured. The mere giving of the new name ’Orien-
tal mixture by the assessee to. what is really the same
product is not the manufacture of a new product. [1013 A-D,
G-H, 1014 A-B]
The Stale of Madras v. Bell Mark Tobacco Co. (1967) 19
STC 129, The State of Madras v. Swasthik Tobacco Factory
(1966) 17 STC 316 and Anwarkhan Mchboob Co. v. The State of
Bombay (Now Maharashtra) & Ors. (1960) 11 STC 698 and Shaw
Bros & Co. v. The State of West Bengal (1963) 14 STC 878
referred to.
Shaw Wallace & Co. Ltd. v. The State of Tamil Nadu
(1976) 37 STC 522 explained.
Nilciri Ceylon Tea Supplying Co. v. The State of Bombay
(1959) 10 STC 500 approved.
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 446--449
of 1976.
Appeals by Special Leave from the judgment and Orders dated.
14-1338SCI/76
1004
7-4-1969 and 25-1-1972 of the Bombay High Court (Nagpur
Bench) In S.T.R. Nos. 17 to 20 of 1964 and
CIVIL APPEAL NOS. 450453 OF 1976.
Appeals by Special Leave from the judgment and order
dated 28-1-1972 of the Bombay High Court (Nagpur Bench) in
G.S.T. Reference Nos. 17-20/64.
V. p. Raman, Addl. Sol. General for India, S.B. Wad and
M. N Shroff for Appellants in CAs. 450 to 453/76.
G.L. Sanghi, A. S. Bobde, M.L. Vaidya, V.A. Bobde, A. G.
Meneses, J.B. Dadachanji, K.J. John, O.C. Mathur and Ravind-
er Narain for the Respondents in CAs. 446-449/76 and Appel-
lants in (2. As. 450-453/76
The Judgment of the Court was delivered by
BEG, J.--The eight appeals before us by special leave
arise out of four Sale "Tax References, under Section 23(1)
of the Central Provinces and Berar Sales Tax Act, 1947,
(hereinafter referred to as ’the Act’). Six common ques-
tions arose here relating to assessments for different
periods on identically similar facts stated below. Five
of these were decided by a Division Bench of the Bombay High
Court. As it answered the main question determining liabili-
ty to pay the sales tax under the Act against the State,
there are four appeals against it by the State. The sixth
question, which was one of law only, was referred by the
Division Bench to a Full Bench, and, this was determined in
favour of the State. There are, therefore, four appeals by
the assessee against the Full Bench decision.
M/s. Central Provinces Manganese Ore Co. Ltd., the
assessee, has its Head Office in London. It carries on
business on an extensive scale. It owns 22 manganese ore
mines in Madhya Pradesh from where manganese ore, after
being excavated, is sent mostly abroad through different
ports. The Company is a registered dealer under the Act.
It used to enter into contracts at places outside Madhya
Pradesh for the despatch of what came to be known, in the
special parlance of this company’s business, as "Oriental
Mixture" But the contracts contain specifications only of
strengths of manganese ore to be supplied with permissible
percentages of other ingredients as admixtures. The term
"Oriental Mixture" was evidently employed by the Company
itself to describe a particular type of conglomerate which
the unloading at one place of Various types of manganese ore
produced. The required average consistency or strength of
manganese ore specified in the contracts, which did not
contain a reference to any "Oriental Mixture", was said to
be obtained in the course of this mechanical process of
transportation when various grades of manganese ore were
heaped together. These grades of manganese ore were trans-
ported, in railway wagons, from one or more mines, and,
it appears that the order in which trucks were.loaded in
goods trains and unloaded was also so,arranged that the
mixture came into existence, as described above, in the mere
process of unloading at the port.
1005
But, this procedure did not seem to involve a process of
"Manufacture", as that term is ordinarily understood, to
which the assessee could be said to have subjected its
manganese ore.
The case of the assessee company was that the "Oriental
Mixture" as a taxable commodity came into existence only
after the ores got mixed up in the process of unloading and
not before so that it could not be taxed as "goods in exist-
ence" in Madhya Pradesh at the time when ,contracts relating
to these goods were made. This is the crucial and simple
question, largely one of fact, which resulted in considera-
ble :argument before the High Court and before us also.
Other questions ,appear to be subsidiary. Nevertheless; we
have to consider them ’before coming to the crucial
question which is: Is the process described above one of
"manufacture" so that a new kind of goods, known as
"Oriental Mixture", came into existence at the port where
manganese ore trucks were unloaded?
As the High Court pointed out, the periods involved in
the four references before it were not governed by the
provisions of the Constitution. They related to the follow-
ing period:
1. Reference No. 17 of 1964 for the period 1st January, 1947
30th September, 1947.
2. Reference No. 18 of 1964 for the period 1st October,
1947 to 31st December, 1948.
3. Reference No. 19 of 1964 for the period 1st January,
1949 to 31st December, 1949.
4. Reference No. 20 of 1964 for the period 1st January,
1950 to 25th January, 1950.
We, therefore, agree with the High Court’s view that Article
286 of the Constitution, which is not retrospective in
operation, could not help the assessee merely because it was
there at the time of assessment.
The next question to be considered, which was referred
to the Full Bench, flows from Explanation (II) to Section
2(g) of the Act which was amended by the C.P. & Berar Sale
Tax (Amendment) Act No. XVI of 1949, came into force on 11th
April, 1949. Hence, the law, as found after the amending
Act, could apply, .if valid, only to the last two refer-
ences. But, the question which arose, on the assumption
that the amendment was ineffective, was whether the
unamended law could be applied at all after the purported
amendment.
Section 2(g) of the Act, with its two explanations,
before it was amended, may be reproduced here in toto. It
reads as follows:
"2(g) ’sale’ with all its grammatical
variations and cognate expressions means any
transfer of property in goods for cash or
deferred payment or other valuable considera-
tion, including a transfer of property
in goods made in course of the execution of a
contract, but does not,include a mortgage,
hypothecation, charge or pledge:
Explanation (I): A transfer of goods on hire-
purchase or other installment system of pay-
ment’ shall, notwithstanding
1006
that the seller retains a title to any goods
as security for payment of the price, be
deemed to be a sale;
Explanation (11): Notwithstanding anything to
the contrary in the Indian Sale of Goods Act,
1930, the sale of any goods which are actually
in the Central Provinces and Berar at the time
when the contract of sale as define in that
Act in respect thereof is made, shall wherever
the. said contract of sale is made, be deemed
for the purpose of this Act to have taken
place in the Central Provinces and Berar".
Section 2 of the Amending Act of 1949 provid-
ed:
2. In section 2 of the Central Provinces
and Berar Sales Tax Act 1947 (hereinafter
referred to as the said Act),
(a) in clause (g) for Explanation (I1) the
following shall be substituted :--
Explanation (I1) :--Notwithstanding
anything to the contrary in the Indian Sale
of Goods Act 1930, the sale or purchase of any
goods shall be deemed for the purposes of this
Act, to have taken place in this province,
wherever the contract of sale or purchase
might have been made---
"(a) if the goods were actually in this
province at the time when the contract of sale
or purchase in respect thereof was made, or
(b) in case the contract was for the
sale or purchase of future goods by descrip-
tion, then, if the goods are actually produced
or found in this Province at any time after
the contract of sale or purchase in respect
thereof was made".
The submission made on behalf of the assessee, which was
accepted by the High Court was that, as the amendment did
not receive the assent of the Governor General under Section
107 of the Govt. of India Act, it was void. It was, howev-
er, also urged, on behalf of the assessee, that a repeal of
the previously existing section did not require the assent
of the Governor General at all. The argument was that the
original provision was validly repealed, but, as no substi-
tution of the new provision could take place, because the
assent of the Governor General was not obtained, only the
repeal survived. The result of accepting such a submission
would be that the substitution will have to be split up into
two distinct enactments; firstly, a repeal of the original
section 2(g) of the Act; and, secondly, the substitution of
the new provision for the repealed one. The assessee’s
argument was that two processes, one of repeal and another
of substitution, are necessarily implied in such an amend-
ment as the one before us. It was urged that both had
received the assent of the Governor, but, since the substi-
tuted provision alone required the assent of the Governor
General, which was not obtained, a repeal, which was assent-
ed to by the Governor, stood on its own separate footing.
Thus, the result was said to be a repeal simpliciter without
the enactment of the fresh provision meant to replace it.
1007
It was submitted that the High Court, after finding the
substituted provisions of section 2(g) of the Act to be
invalid, had erred in holding that the repeal was also
ineffective. It was contended that such a view resulted in
attributing to the legislature an intention contrary to that
which it had unmistakably expressed by repealing the una-
mended provision. It was urged that the repeal, which was
clearly intended, must be held to be valid. According to
this submission, neither the old unamended provision nor the
replacement of it were in operation during the last two.
assessment periods. Of course, this argument assumes that
the repeal and the new’ enactment are separate.
In Shriram Gulabdas v. Board of Revenue, Madhya Pradesh
& Ant. C) which was cited before us, it was held, on the
question argued before us (at p. 366-367):
" ...... we have already shown that
the second Explanation in clause (g) of Sec-
tion 2, which makes an agreement of sale
taxable even though the sale may have taken
place outside. the province, is not ultra
vires the Provision Legislature. We must make
it clear that our answer to this question is
in the affirmative, free from considerations
arising under Article 286. We have shown that
the necessary power to make the unamended
Explanation did exist in the State Legisla-
ture; but we have also made it clear that by
virtue’ of Article 286 the Explanation can no
longer be enforced because under the present
Constitution the sales tax can only be col-
lected at the market and where the goods are
delivered for consumption. We may also state
that the amended Explanation II is not validly
enacted because it makes drastic changes in
the rules as found in the Sale of Goods Act
without obtaining the’ assent of the
Governor-General. The effect of the amended
Explanation going out would be to rehabilitate
the old Explanation as it existed because the
amendment being unconstitutional will fail to
work any change in the law (See the opinion
given by one of us, Hidayatullah, J., in
Laxmibai v. The State (I.L.R. 1951) Nag. 563,
608, 610 (F.B.)".
No question relating to the enforcement of the Sales-tax
by any collection to be made after the Constitution came
into force was raised the cases before us. Only questions
relating to taxability arise here As we have already
indicated, Article 286 does not stand in the way of taxabil-
ity. This was held to be the correct position in the case
of Shriram Gulabdas (Supra). It was also clearly held there
that the ’result of the invalidity of the amended explana-
tion was to leave the law unaltered as it stood before the
amendment. We approve of this pronouncement made long ago on
this very question.
It was urged on behalf of the assessee that the case of
Shriram Gulabdas (supra) contained what was merely an obser-
vation with regard the "rehabilitation" of the preexisting
law as that question was no directly under consideration
there. It was also submitted that this observation must be
deemed to have been over-ruled by subsequent pronouncements
of this Court.
(1) (1952) 3 S.T.C. 343. 367.
1008
The passage cited above by us occurs in answering the
fifth question considered there which was framed as follows:
"(v) Whether Explanation II to clause (g)
of Section 2, which makes an agreement of sale
taxable even though the sale may have taken
placed outside the Province, ultra vires of
the Provincial Legislature ?"
Other questions framed indicate that it was not only the
validity of the provision, both before and after its amend-
ment, which was directly considered and pronounced upon, but
the application of the concept of sale under the unamended
law and its effects were also under consideration. There-
fore, we think that the decision was directly on a question
which necessarily arose for determination before the Court
on that occasion. We think that the view that the unamended
law was in operation was not a mere obiter dictum. It was
necessary to decide that question before other questions
could be determined. We give out own reasons below for
accepting the correctness of the view taken then.
The following passage was also cited from Koteswar
Vittal Kamath V.K. Rangappa Baliga & Co. (at p. 509):
"Learned counsel for the respondent,
however, urged that the Prohibition Order of
1119 cannot, in any case, be held to have
continued after 8th March, 1950, if the prin-
ciple laid down by this Court in Firm A.T.B.
Mehtab Majid & Co. v. State of Madras, (1963)
Supp. 2 SCR 435-(AIR 1963 SC 928) is applied.
In that case, rule 16 of the Madras General
Sales Tax (Turnover and Assessment) Rules,
1939, was impugned. A new R. 16 was substi-
tuted for the old Rule 16 by publication on
September 7, 1955, and this new rule was to be
effective from 1st April, 1955. The Court
held that the’ new Rule 16(2) was invalid
because the provisions of that. rule contra-
vened the provisions of Article 304(a) of the
Constitution. Thereupon, it was urged before
the Court that, if the impugned rule be held
to be invalid, the old Rule 16 gets revived,
so that the tax assessed on the basis of that
rule will’ be good. The Court rejected this
submission by holding that :
’Once the old rule has been substituted by
the new rule, it ceases to exist and it does
not automatically get revived when the new
rule is held to be invalid’.
On that analogy, it was argued that, if we
hold that the Prohibition Order of 1950 was
invalid, the previous Prohibition Order of
1119 cannot be held to be revived. This
argument ignores the distinction between
supersession of a rule, and substitution of a
rule. In the case of (1963) Supp. 2 SCR 435-
(AIR 1963 SC 928) (supra), the new Rule 16 was
substituted for the old Rule 16. The process
of substitution consists of two steps. First,
the old rule is made to cease to exist, and,
next, the new rule is brought into existence
in its place. Even if the new rule be in-
valid, the first step of the
(1) A.I.R. 1969 S.C. 504. 509: [1969] 3
S.C.R. 40. 47.
1009
old rule ceasing to exist comes into effect
and it was for this reason that the Court held
that, on declaration of the new rule as in-
valid, the old rule could not be held to be
revived".
In the above mentioned passage, this Court
merely explained the argument which was ac-
cepted in the case of firm A.T.B. Mehtab Majid
& Co. v. State of Madras(1). After doing so,
it distinguished the facts in Koteswar’s case
(supra), relating to an alleged substitution
of one Prohibition Order by a subsequent order
which was found to be invalid. It recorded
its conclusion as follows (at p. 509):
"In the case before us, there was no
substitution of the Prohibition Order of 1950
for the Prohibition Order of 1119. The Prohi-
bition Order of 1950 was promulgated independ-
ently of the Prohibition Order of 1119, and
because of the provisions of law it would have
had the effect of making the Prohibition Order
of 1119 inoperative if it had been a valid
order. If the Prohibition Order of 1950 is
found to be void ab initio, it could never
make the Prohibition Order of 1119 inopera-
tive".
The argument before us is that since the word "substi-
tuted" is used in the amending Act of 1949, it necessarily
follows that the process embraces two steps. One of repeal
and another of the new enactment. But, this argument is
basically different from the argument which prevailed in
Koteswar’s case (supra) where a distinction was drawn be-
tween a "substitution" and "supersession". It is true that,
as the term substitution was not used there, the old rule
was not held to have been repealed. Nevertheless, the real
basis of that decision was that what was called supersession
was void ab initio so that the law remained what it would
have been if no such legislative process had taken place at
all. It was held that the void and inoperative legislative
process did not affect the validity of the pre-existing
rule. And, this is precisely what is contended or by the
State before us.
In the case before us although the word "substitution"
is used in the amending Act, yet the whole legislative
process termed substitution was itself abortive. The whole
of that process did not take effect as the assent of the
Governor-General, required by Section 107 Govt. of India
Act, was lacking. Such ineffectiveness was the very reason
why, in the case of Sriram Gulabdas (supra), it was held
that the previous law stood unaffected by the attempted
legislation called substitution. Moreover, the case of
Shriram Gulabdas (supra) is a direct authority on the very
provisions now before us. Other cases cited are on very
different legislative provisions.
We do not think that the word substitution necessarily
or always connotes two severable steps, that is to say, one
of repeal and another of a fresh enactment even if it im-
plies two steps. Indeed, the natural meaning of the word
"substitution" is to indicate that the process cannot be
split up into two pieces like this. If the process de-
scribed as substitution fails, it is totally ineffective so
as to leave intact what was sought
(1) [1963] Suppl. 2 S.C.R. 435.
1010
to be displaced. That seems to us to be the ordinary and
natural meaning of the words "shall be substituted". This
part could not become effective without the assent of the
Governor-General. The State Governor’s assent was insuffi-
cient. It could not be inferred that, what was intended was
that, in case the substitution failed or proved ineffective,
some repeal, not mentioned at all, was brought about and
remained effective so as to create what may be described as
a vacuum in the statutory law on the subject matter. Pri-
marily, the question is one of gathering the intent from the
use of words in the enacting provision seen in the light of
the procedure gone through. Here, no intention to reveal,
without a substitution, is deducible. In other words,
there’ could be no repeal if substitution failed. The two
were a part and parcel of a single indivisible process and
not bits of a disjointed operation.
Looking at the actual procedure which was gone through,
we find that, even if the Governor had assented to the
substitution, yet the amendments would have been effective,
as a piece of valid legislation, only when the assent of the
Governor-General had also been accorded to it. It could not
be said that what the Legislature intended. or what the
Governor had assented to consisted of a separate repeal and
a fresh enactment. The two results were to follow from one
and the same effective Legislative process. The process
had, therefore, to be so viewed and interpreted.
Some help was sought to be derived by the citation of
B.N. Tewari v. Union of India & Ors.,(1) and the case of
Firm A.T.B. Mehtab Majid & Co v. State of Madras (supra).
Tewari’s case (supra) related to the substitution of what
was described as the "carry forward" rule contained in the
departmental instruction which was sought to be substituted
by a modified instruction declared invalid by the Court. It
was held that when the rule contained in the modified in-
struction of 1955 was struck down the rule contained in a
displaced instruction did not survive. Indeed, one of the
arguments there was that the original "carry forward" rule
of 1952 was itself void for the very reason for which the
"carry forward" rule, contained in the modified instructions
of 1955, had been struck down. Even the analogy of a merger
of an order into another which was meant to be its substi-
tute could apply only where there is a valid substitution.
Such a doctrine applies in a case where a judgment of a
Subordinate Court merges in the judgment of the Appellate
Court or an order reviewed merges in the order by which the
review is granted. Its application to a legislative process
may be possible only in cases of valid substitution. The
legislative intent and its effect is gathered, inter alia,
from the nature of the action of the authority which func-
tions. It is easier to impute an intention to an executive
rule making authority to repeal altogether in any event what
is sought to be displaced by another rule. The cases cited
were of executive instructions. We do not think that they
could serve as useful guides in interpreting a Legislative
provision sought to be amended by a fresh enactment. The
procedure for enactment is far more elaborate and formal. A
repeal and a displacement of a Legislative provision by a
fresh enactment can only take place after that elaborate
procedure has been followed in toto. In the case of any rule
contained in an executive instruction.
(1) [1965] 2 S.C.R. 421.
1011
on the other hand, the repeal as well as displacement are
capable of being achieved and inferred from a bare issue of
fresh instructions on the same subject.
In Mehtab Majid & Co’s case (supra) a statutory role was
held not to have revived after it was sought to be substi-
tuted by another held to be invalid. This was also a case
in which no elaborate legislative procedure was prescribed
for a repeal as it is in the case of statutory enactment of
statutes by legislatures. In every case, it is a question
of intention to be gathered from the language as well as the
acts of the rulemaking or legislating authority in.the
context in which these occur.
A principle of construction contained now in a statutory
provision made in England since 1850 has been:
"Where an Act passed after 1850 repeals
wholly or partially any former enactment and
substitutes provision for the enactment
repealed, the repealed enactment remains in
force until the substituted provisions come
into operation".
(See: Halsbury’s Laws of England, Third
Edn. Vol. 36, P. 474; Craies on "Statute
Law", 6th Edn. p.386).
Although, there is no corresponding provision in our General
Clauses Acts, yet, it shows that the mere use of words
denoting a substitution does not ipso facto or automatically
repeal a provision until the provision which is to take its
place becomes legally effective. We have, as explained
above reached the same conclusion by considering the ordi-
nary and natural meaning of the term "substitution" when it
occurs. without anything else in the language used or in the
context of it or in the surrounding facts and circumstances
to lead to another inference. It means, ordinarily, that
unless the substituted provision is there to take its place,
in law and in effect, the pre-existing provision continues.
There is no question of a "revival".
This question of interpretation was referred separately
to the Full Bench of the Bombay High Court which drew a
distinction between the two meanings of the word "substitut-
ed"; firstly, where it involved a direction as to what
would have to be removed or repealed simultaneously with
another as to what was to be substituted, so as to involve
two directions and secondly where the "substitution"
merely carried one direction to modify . It is difficult to
see how a single direction to -one direction to modify.
It is difficult to see how a single direction to substitute
would be effective without implying in it another to remove
’what was to be displaced. Perhaps more simply and correct-
ly stated, the difference between two meanings of the word
"substituted" is one ’where it stands for two separable
legislative process and another where it stands for one
total or completed legislative procedure, including the
assent of the Governor-General, which would be covered by
the words "shall be substituted". The Full Bench came to
the conclusion that, in the context in which the words
directing substitution occur, they do not imply that in the
event of the failure of the amendment, taken as a whole a
repeal would survive. To be able to "Survive" a repeal
1012
had first to come into existence. In the situation before us
no repeal came into legal existence.
The real question for determination is always one of the
meaning of words used in a purported enactment in a particu-
lar context. We think that the Full Bench of the High Court
correctly held that there was no repeal of the existing
provision when "substitution", by means of an amendment,
failed to be effective. It had also rightly distinguished
some of the cases cited before it on the ground that, in
those cases, the process for substitution was interpreted to
necessarily imply both a repeal and re-enactment out of
which only the repeal which took place had survived when the
re-enactment proved abortive.
On the question whether the particular goods existed in
Madhya Pradesh at all at the time of the contracts, so that
the contract could be said to be referable to them, the High
Court had observed:
" .... the question was whether Oriental
Mixture was present in the former State of
Madhya Pradesh when the contracts of sale in
respect of Oriental Mixture were made by the
applicant company. On this point, which was
purely a question of fact, the decision of the
second appellate authority was final and that
decision was that Oriental Mixture in the form
in which the contracts to sell that commodity
were made was present in the State of Madhya
Pradesh at the time when those contracts
were made. Therefore, that point was not open
for decision before the Tribunal and it is not
necessary to dilate on the facts relating to
that question".
It also said:
"In Commissioner of Sales Tax, Eastern
Division, Nagpur v. Hesenali Adamji & Co.
(1959) (10 STC 297), there was no evidence
that at the date when the agreement for sale
was made, the particular logs delivered there-
under were in Central Provinces in the shape
of logs at all, and a standing tree which
was in existence at the date of the agreement
of sale and out of which the logs were later
on prepared cannot be said to be the form of
the commodity in respect of which the agree-
ment of sale was made. The Tribunal relied on
the observations in the Judgment of the Su-
preme Court at page 310 which are to the
effect that the goods must, at the date of the
contract, be there in the taxing State in the
form in which they are agreed to be sold. In
that case, the agreement of sale can be said
to be in respect of those goods. Here, as
found by the second appellate authority, ore
in the form of Oriental Mixture was present in
the taxing State when contracts of sale in re-
spect of Oriental Mixture were made by the
Head Office of the applicant company".
After giving the findings set out above, on the question
whether the. goods existed in the State of Madhya Pradesh
when they were sold and, whether the contracts were refera-
ble to these goods, the High Court
1013
proceeded to consider the question whether "Oriental Mix-
ture" itself had come into existence in Madhya Pradesh or at
the port where the goods forming the "Oriental Mixture"
became mixed up in the process of unloading and transporta-
tion. Apparently, what the High Court had meant by its
earlier findings was not that the "Oriental Mixture" was in
existence in Madhya Pradesh, but that the ingredients which
went into its composition existed in Madhya Pradesh at the
time when the contracts were made. It had finally reached
the conclusion that the Mixture itself was formed at the
port where the ingredients were unloaded.
We are unable to accept the High Court’s reasoning that,
while the goods which went into the composition of the
"Oriental Mixture" existed in Madhya Pradesh when the
contracts were made, yet, they were not taxable in Madhya
Pradesh because’ the "Oriental Mixture" came into existence
at the port. In other words, it held that a mere mixture of
goods, even if it occurs in the process of unloading,
converts the goods, which existed in Madhya Pradesh and were
transported to the port, into separately identifiable
commercial commodity Known as "Oriental Mixture". As
already mentioned above, this term is not used in the
contracts but is a term employed by the firm itself to
indicate the specifications contained in the contracts of
goods ordered. It is difficult to see what process of
manufacture is gone through so as to bring a new category
or genus of commercial goods into existence at the port.
The High Court had relied on cases where raw tobacco
subjected to various processes, such as sprinkling of jag-
gery juice or water on it and allowing it to ferment for
some time before cutting it up and packing it, was held to
become a new commodity. These cases were: The State of
Madras v. Bell Mark Tobacco Co. C); The State of Madras v.
Swasthik Tobacco Factory(2); Anwarkhan Mehboob Co. v. The
State of Bombay (Now Maharashtra) & Ors. (3).
Reliance was also placed on behalf of the assessee on
Shaw Wallace & Co. Ltd. v. The State of Tamil Nadu(4), where
it was held that goods were actually subjected to a process
of manufacturing when chemical fertilisers and fillers like
"China clay", "gypsum", and other ingredients, were mixed at
a "mixing works" of a company, by means of shovels, so as to
conform to a particular formula. It was held there by this
Court that the resulting product was a commercially distinct
commodity. Several cases of manure mixtures are referred to
in the case. Now,’ in the case of manure mixtures, made out
of different ingredients, at a "mixing works", it can per-
haps be said that a chemical process is gone through. In
any case, the product which came into existence was known
and sold as a separate commercial commodity in the mar-
ket. It required a process to be gone through at what were
known as mixing works of the company to convert it into that
commodity. On the other hand, in the case before us, it
seems to us that what has been "manufactured" by the asses-
see is the same "Oriental Mixture"
(1) (1967) 19 S.T.C. 129. (2) (1966) 17 S.T.C. 316.
(3) (1960) 11 S.T.C. 698. (4) (1976) 3 S.T.C. 522.
1014
only if the term "manufacture" can be employed at all to
anything done by the assessee. What is to be determined is
whether there has been the manufacture of a new product
which has a separate commercially current name in the mar-
ket. The mere giving of a new name by the seller to what is
really the same product is not the "manufacture" of a new
product. There is, it appears to us, no new process of the
manufacture of goods at all by the assessee before us.
Again, cases in which logs of wood were cut in order to
convert them into planks [e.g. Shaw Bros & Co. v. The State
of West Bengal(1)] could be of no assistance in the case
before us. That too could be a process of "manufacture".
The High Court had also made a passing reference to Nil-
giri Ceylon Tea Supplying Co. v. The State of Bombay(2), a
case decided by the Bombay High Court, where different
brands of tea, purchased in bulk and "without application of
any mechanical or chemical process", were mixed so as to
conform to a particular mixing formula, but this mixture was
held not to constitute a fresh commodity as neither process-
ing nor alteration of the ingredients of the tea in any
manner had taken place. We think that the similarity of the
process to which goods sold were subjected in this case
seems to make the reasoning adopted in this case more prop-
erly applicable to the cases before us than any other found
in other cases mentioned above.
In any event, we are unable to see how, without Subject-
ing to some process the various grades of ores, mixed up in
the process of transporting, so as to conform to the speci-
fications given in the contract, could result in a new
commercial product as it is known in the market. The ingre-
dients were not even shown to have got so mixed up as to
become inseparable. As already mentioned above, this is a
case in which the term "Oriental Mixture" was nothing more
than a name given by the appellant company itself to the
goods which were in the State of Madhya Pradesh at the
relevant time and sent from there specially in order to
satisfy the specifications given in the contracts. The
goods get mixed up in the process of unloading. The mere
fact that the specifications in the contracts are satisfied
when they get mixed up is not a good enough ground for
holding that a new product has been manufactured. They
could no more constitute a new commodity than parts of some
machinery sent by its manufacturer to a purchaser outside a
State, so that the buyer has to just fit in the various
parts together, becomes a new commodity when the parts are
fitted in. The mere fitting up of parts or a mixture of
goods, without employing any mechanical or chemical process
of manufacture, could not, we think, result in a new commod-
ity.
We, therefore, answer the following six questions before
the High Court as follows:
Q. 1. Was the Tribunal right in holding that,
although the assessment order was made after
the Constitution of India came into force,
Article 286 was thereby not contravened,
because such order related to a period prior
to 26.1.1950?
(1) (1963) 14 S.T.C. 878. (2) (1959) 10
S.T.C. 500.
1015
Ans. Yes, The provisions of Article 286 were
not contravened.
Q. 2. Was the Tribunal right in holding that
Explanation (II) to Section 2(g) as was origi-
nally embodied in the Sales Tax Act, 1947, got
restored on the Statute-book because of the
unconstitutionality of the substituted Expla-
nation enacted in the Sales Tax (Amendment)
Act, 1949 ?
Ans. There is no question of restoration of
unamended explanation (II) to Section 2(g) as
the purported amendment itself did not take
effect. Hence, the unamended provision stood
as it was before the attempted amendment. The
question framed rests on a misconception
that there was something to be restored. As
nothing was taken away, nothing was there to
be restored. And, there was nothing added or
substituted.
Q. 3. Does the Tribunal’s decision not contra-
dict the true meaning of the language "sale of
any goods which are actually in the Central
Provinces and Berar at the time when the
contract of sale as defined in that Act in
respect thereof is made", as occuring in
Explanation (II) to section 2(g) of the Sales
Tax Act, with reference to "in respect
thereof" is reference to "specified or ear-
marked" goods which are actually present in
the taxing State when the contracts are made ?
Ans. This is a question of fact as to what
contracts specify and whether those goods were
taxed, on which the finding already recorded
are enough to dispose it off against the
assessee.
Q. 4. In any case, was the Tribunal right in
its interpretation, application and use of the
provisions of original Explanation (II) to
section 2(g) of the Sales Tax Act even as they
were ?
Ans. Yes.
Q. 5. Was the Tribunal right in assuming the
law to be that the existence of ingredients of
ores in the taxing State in question, which
were sufficient if and when mixed in the due
proportion for yielding different varieties of
standard mixtures contracted for by the over-
seas buyers, was in law enough to attract the
tax ?
Ans. There is no question of assuming any-
thing. The process which was revealed and
findings of fact given on it show that it did
not result in the production of a new commodi-
ty at the port. It was only manganese ore of
different grades which was unloaded at the
port and gives the name of "Oriental Mixture"
because the ingredients got mixed up automati-
cally in transportation and satisfied certain
specifications. No new commodity was produced
in this process.
Q. 6. Was the Tribunal right in holding that
the Sales Tax Authorities had found as a fact
that the goods consisting of oriental mixture
1016
were in the Madhya Pradesh State when the
contracts in respect of these goods were made
?
Ans. Yes.
Before we part with the case we may observe that the
questions could have been much more lucidly and simply and
less culmsily stated.
The appeals of the assessee company against the deci-
sions of the Full Bench are dismissed. The appeals of the
State of Maharashtra against the judgment of the Division
Bench are allowed. Parties will hear their own costs,
V.P.S.
Appeals dismissed.
1017