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PETITIONER: M/s.  ANWARKHAN MAHBOOB CO.

       Vs.

RESPONDENT: THE STATE OF BOMBAY (NOW MAHARASHTRA) AND OTHERS

DATE OF JUDGMENT: 20/09/1960

BENCH: GUPTA, K.C. DAS BENCH: GUPTA, K.C. DAS DAS, S.K. HIDAYATULLAH, M. SHAH, J.C. AYYANGAR, N. RAJAGOPALA

CITATION:  1961 AIR  213            1961 SCR  (1) 709  CITATOR INFO :  R          1962 SC 562  (8)  RF         1963 SC 906  (20)  RF         1977 SC 879  (27)  R          1979 SC1721  (7)  RF         1980 SC1227  (6)  R          1986 SC1085  (9)  R          1987 SC1885  (8)

ACT: Purchase   Tax--If  leviable  on  goods   not   specifically mentioned as taxable but come under the general  description "all  goods other than those specified "-Conversion  of  one commodity into another commerciallydifferent article-If amounts to consumption-Place of purchasefor the purpose of taxation-Constitution of India, Art. 19 (f) &  (g)286- Bombay  Sales Tax Act, 1953 (Bom. Act III of 1953),  s.  10, Schedule B, Entry 80.

HEADNOTE: The  petitioner  Company carrying on the business  of  manu- facturing  bidis and having its head office at  Jabalpur  in the  State  of  Madhya Pradesh  made  certain  purchases  of tobacco  in  the  State of Bombay.  The  Sales  Tax  Officer assessed  the  petitioner  to  a  purchase  tax  under   the provisions   of  the  Bombay  Sales  Tax  Act,  1953.    The petitioner contested the assessment of 710 purchase tax on the grounds that those transactions and pur- chases  were  "  Outside the State of Bombay  "  within  the meaning of Art. 286(1)(a) of the Constitution read with  the Explanation,  that  the provisions of the Bombay  Sales  Tax Act,  1953,  did  not  authorise  the  imposition,  levy  or collection  of  any  purchase tax  on  the  transactions  in question and that the transactions took place in the  course of inter State trade and commerce.  The petitioner’s  appeal to  the Assistant Collector of Sales Tax was  dismissed  and then  the  present  petition  for  writs  of  mandamus   and certiorari  was filed in the Supreme Court.  The  petitioner contended  that  the  Bombay Sales Tax Act,  1953,  did  not

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authorise  the imposition of a tax on the purchase of  bidi- tobacco which was not one of the goods specified in column 4 of  Schedule  B  of the said Act.   The  petitioner  further contended  that  the purchased tobacco was delivered  to  it within  the  State  of  Bombay as a  direct  result  of  the purchase  but  it was intended to be sent to  the  State  of Madhya Pradesh to be manufactured into bidis at that  place. The  only  thing which was done in the Bombay State  was  to remove the stem and dust from the tobacco which process  did neither amount to " consumption " of tobacco as contemplated under  the Explanation to Art. 286 of the  Constitution  nor did it convert the tobacco which was sent to the Head Office into an article " commercially different " from the  tobacco purchased from the cultivators.  In their counter  affidavit the  respondents averred that the raw tobacco was  converted into  bidi  pattis before it was sent outside  Bombay  State both  of which were commercially different articles and  the market  value of which was also different.  These  averments were not controverted by the petitioner. Held, that the words " all goods other than those  specified from time to time in Schedule A and in the preceding entries "  in  entry 8o of Schedule B of the Bombay Sales  Tax  Act, 1953, amounted to a specification of goods for the  purposes of  s.  lo of the Act and as bidi tobacco purchased  by  the petitioner  was not within Schedule A or any of the  earlier entries  in  Schedule B purchase tax at the  rate  mentioned against entry 8o was leviable under s. 1o of the Act. Whenever a commodity was so dealt with as to change it  into another  commercial commodity there was consumption  of  the first  commodity  within the meaning of the  Explanation  to Art. 286 of the Constitution. State  of  Travancore-Cochin v. Shanmugha Vilas  Cashew  Nut Factory, [1954] S.C.R. 53, followed. The delivery of tobacco in Bombay State for changing it into bidi patti which is a commercially different article amount- ed  to  delivery  for the purpose  of  consumption  and  the purchase  fell within the meaning of Art. 286(i)(a)  of  the Constitution and took place inside tile Bombay State.                             711

JUDGMENT: ORIGINAL JURISDICTION: Petition No. 125 of 1959. Petition  under Article 32 of the Constitution of India  for enforcement of Fundamental Rights. G.S.  Pathak,  A. P. Sen and J. B.  Dadachanji,  for  the Petitioners. H. J. Umrigar and T. M. Sen, for the Respondents. 1960.   September  20.   The  Judgment  of  the  Court   was delivered by DAs  GUPTA  J.-In  this  petition  under  Art.  32  of   the Constitution the petitioner, a partnership firm carrying  on the  business  of manufacture of bidis and having  its  head office  at  Jabalpur  within the  State  of  Madhya  Pradesh complain that its fundamental rights under Art. 19(1)(f) and (g)  of the Constitution have been violated by  the  illegal imposition of a purchase tax on certain purchases of tobacco made  by  it in the State of Bombay.  It  appears  that  the Sales  Tax  Officer,  Baroda, made an  order  assessing  the petitioner to a purchase tax under s. 14, sub-s. (6), of the Bombay  Sales Tax Act, 1953 (Bom.  Act III of 1953) for  the period April 1, 1954 to September 29, 1955.  The  petitioner contends that this assessment was illegal inasmuch as  these transactions  are purchases " outside the State of Bombay  "

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within  the  meaning of Art. 286(1)(a) of  the  Constitution read   with   the  Explanation  and   also   because   these transactions  took place in the course of inter-State  trade and commerce within the meaning of Art. 286(2) of the  Cons- titution.   It  was also urged that the  provisions  of  the Bombay Sales Tax Act, 1953, do not authorise the imposition, levy  or collection of any purchase tax on the  transactions in question. In  appears that against this assessment order made  by  the Sales  Tax  Officer  on October  18,  1955,  the  petitioner preferred an appeal to the Assistant Collector of Sales Tax. This  officer set aside the order of the Sales  Tax  Officer imposing  a penalty under s. 16(4) but dismissed the  appeal against the order of assessment to tax.  The order in appeal was made on 91 712 November  26,  1957.   The present petition  was.  filed  on August 4, 1958, praying for a writ in the nature of mandamus or  any  other appropriate direction or  order  against  the respondents-The State of Bombay, The Collector of Sales Tax, State  of  Bombay  The Sales Tax  Officer,  Baroda  and  the Assistant  Collector of Sales Tax, Northern Division,  Range III, Baroda- preventing them from enforcing the provisions of the  Bombay Sales Tax Act against the petitioner on the transactions  in question,  for  a  writ  in the  nature  of  certiorari  for quashing  the proceedings taken against the  petitioner  and the  orders of assessment made by the Sales Tax Officer  and the order in appeal by the Assistant Collector of Sales  Tax and  for a declaration that the Act does not  authorise  the imposition, levy or collection of tax on the transactions in question. It  will  be convenient to consider first  the  petitioner’s contention  that  the Bombay Sales Tax Act, 1953,  does  not authorise  the imposition of a tax on the purchase of  bidi- tobacco.  The relevant portion of s.    10(1) which provides for the levy of a purchase tax is in these words :- "there  shall  be levied a purchase tax on the  turnover  of purchase of goods specified in column 1 of Schedule B at the rates,  if any specified against such goods in column  4  of the said schedule......." The  petitioner’s contention is that bidi-tobacco which  was purchased by it is not one of the goods specified in  Column 4 of the said schedule.  Turing to Schedule B we find  there are  80 entries in the first column.  Against each of  these entries the second column of the schedule mentions the rates of  sales  tax  leviable under s. 8 of the  Act:  the  third column mentions the rate of general sales tax leviable under s. 9, while the fourth column which is the last, column men- tions the rate of purchase tax.  While the entries from 1 to 79  mention specific articles, entry 80 as it  stood  before its amendment in 1957 was in these words:-" All goods  other than those specified from time to time in Schedule A and  in the preceding entries." (An amendment by the Bombay Act,  71 of                             713 1958,  added  the words " and sec. 7A " after  the  words  " Schedule  A  ").  The question is whether these  words  "all goods  other  than  those specified from  time  to  time  in Schedule-A  and  in  the preceding entries  "  amount  to  a specification of goods for the purpose of s. 10.  On  behalf of the petitioner Mr. Pathak contends that only the  mention of specific goods can amount to specification and mention of goods  in  such general language as " all goods  other  than

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those  specified from time to time in Schedule A and in  the preceding entries " cannot be said to be a specification  of goods.   We are unable to accept this argument. While it  is true that mention of specific goods is specification for the purpose  of s. 10 as also for the purpose of ss. 8 and 9  of the Act, we see no reason to think that mention of goods  in a general way as " all goods other than those specified from time to time in Schedule A and in the preceding entries " of Schedule B itself is not a specification.  We are of opinion that the entry 80 in Schedule B is a specification of  goods within  the meaning of s. 10 and as bidi-tobacco  which  the petitioner purchased is not within either Schedule A or  any of the earlier entries in Schedule B, purchase tax under  S. 10  is  leviable on these purchases, at the  rate  mentioned against Entry 80. This brings us to the petitioner’s main contention that  the purchases  took  place  outside the State  of  Bombay.   The contention as stated in para. 11 of the petition is that the purchases would be. deemed to have taken place in the  State of  Madhya  Pradesh,  where the tobacco  was  delivered  for consumption.   At the hearing, however, it was not  disputed that  the  tobacco  was delivered to  the  Company’s  Ranoli Branch  within the State of Bombay which made the  purchase. The  despatch  by the Ranoli Branch to  the  company’s  head office  at Jabalpur is not a delivery as a direct result  of the sale. It  has  been  urged  however that  even  though  there  was delivery  in  Bombay State, that delivery was  not  for  the purpose  of  consumption within Bombay State;  and  so,  the Explanation to Art. 286 (1)(a) does not come into operation. 714 The  sales tax authorities have proceeded on the basis  that as  a direct result of the purchase goods were delivered  in the  State of Bombay for the purpose of consumption  in  the State of Bombay.  Unless that view is shown to be wrong, the purchase  must be held to have taken place within the  State of Bombay and it will be unnecessary to consider the  larger question whether even if the Explanation be not  applicable, Bombay State is entitled to tax. The  definite case of the petitioner is that  the  purchased tobacco  is delivered to it within the State of Bombay as  a direct  result of the purchase.  The further  question  that has been raised is whether such delivery was for the purpose of  consumption  in the State of Bombay.  On behalf  of  the petitioner  it  was contended that after its  delivery,  the tobacco  was  intended  to be sent to the  State  of  Madhya Pradesh  to be manufactured into bidis at that  place.   All that  used to be done to the purchased tobacco in the  State of  Bombay was to have the stems and dust removed  from  the tobacco.  Such removal of the waste material, like stems and earth,  it  is  urged, does not  amount  to  consumption  of tobacco.   It  is further stated that the tobacco  which  is despatched  to  the head office after removal of  the  waste material is not an article Cc commercially different "  from the   tobacco  purchased  from  the  cultivators.   In   the respondents’  counter  affidavit  it is stated  that  "  the petitioners   after   purchasing  raw   tobacco   from   the cultivators in the State of Bombay, subject the raw  tobacco so purchased to process leading to its conversion into  bidi pattis   for   immediate   use   in   the   manufacture   of bidis...............  that marketable value of  raw  tobacco and bidi pattis differs and that both these are commercially different  articles...............  There  was  no   further affidavit filed on behalf of the petitioner to traverse  the averments  of the respondents that the raw tobacco  is  con-

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verted  into  bidi  patti before it  is  despatched  outside Bombay  State and that the market value of raw  tobacco  and bidi  patti  differs.   Mr. Pathak also con.  ceded  at  the hearing the correctness of the statement that anybody  could go to the market to purchase the                             715 article known as raw tobacco or Akho Bhuko and that he could also go and purchase from the market the article known as  " bidi  Patti  ". That itself is sufficient-  proof  that  raw tobacco and bidi Patti are distinct and different commercial articles. It  is  in  the background of these facts that  we  have  to consider  the question whether tobacco was delivered in  the State of Bombay for consumption in that State.  In answering that  question it is unnecessary and indeed  inexpedient  to attempt an exhaustive definition of the word " consumption " as used in the explanation to Art. 286 of the  Constitution. The act, of consumption with which people are most  familiar occurs when they eat, or drink or smoke.  Thus, we speak  of people consuming bread, or fish or meat or vegetables,  when they  eat  these  articles  of  food;  we  speak  of  people Consuming  tea or coffee or water or wine, when  they  drink these  articles;  we  speak of people  consuming  cigars  or cigarettes or bidis, when they smoke these.  The  production of wealth, as economists put it, consists in the creation of "  utilities  ". Consumption consists in the act  of  taking such  advantage of the commodities and services produced  as constitutes  the " utilization " thereof.  For  each  commo- dity, there is ordinarily what is generally considered to be the  final act of consumption.  For some commodities,  there may  be even more than one kind of final consumption.   Thus grapes may be " finally consumed " by eating them as fruits; they may also be consumed by drinking the wine prepared from " grapes ". Again, the final act of consumption may in  some cases be spread over a considerable period of time.   Books, articles  of  furniture,  paintings  may  be  mentioned   as examples.  It may even happen in such cases, that after  one consumer has performed part of the final act of consumption, another  portion  of’ the final act of  consumption  may  be performed   by   his  heir   or   successor-in-interest,   a transferee,  or  even  one who has  obtained  possession  by wrongful  means.   But  the  fact that  there  is  for  each commodity what may be Considered ordinarily to be the  final act  of  consumption,  should not make  us  forget  that  in reaching 716 the stage at which this final act of consumption takes place the   commodity  may  pass  through  different   stages   of production and for such different stages, there would  exist one  or  more intermediate acts of consumption.   Thus,  the final  act of consumption of cotton may be considered to  be the  use as wearing apparel of the cloth produced  from  it. But  before cotton has become a wearing apparel, it  passes, through the hands of different producers, each of whom  adds some  utility to the commodity received by him.   There  ’is first  the act of ginning ; ginned cotton is spun into  yarn by  the  spinner; the spun yarn is woven into cloth  by  the weaver; the woven cloth is made into wearing apparel by  the tailor.   At  each of these stages  distinct  utilities  are produced and what is produced is at the next stage consumed. It  is usual, and correct to speak of raw cotton being  con- sumed  in  ginning;  of  ginned  cotton  being  consumed  in spinning;  of spun yarn being consumed in weaving; of  woven cloth being consumed in the making of wearing apparel.   The final product-the wearing apparel-is ultimately consumed  by

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men,  women  and  children in using it  a;  dress.   In  the absence of any words to limit the connotation of the word  " consumption  " to the final act of Consumption, it  will  be proper  to think that the Constitution-makers used the  word to connote any kind of user which is ordinarily spoken of as consumption of the particular commodity. Reverting  to  the instance of cotton, mentioned  above,  it will be proper to hold that when raw cotton is delivered  in State A for being ginned in that State., it is delivered for consumption in State A ; when ginned cotton is delivered  in State  B  for  being spun into yarn,  it  is  delivered  for consumption  in State B ; when yarn is delivered in State  C for  being woven into cloth in that State, it  is  delivered for consumption in State C; when woven cloth is delivered in State D for being made by tailor in that State into  wearing apparel, there is delivery of cloth for consumption in State D; and finally when, wearing apparel is delivered in State E for being sold as dress                             717 in  that State, it is delivery of wearing apparel  for  con- sumption   in  State  E.  Except  at  the  final  stage   of consumption  which consists in using the finished  commodity as  an  article of clothing, there will be noticed  at  each stage  of  production  the  bringing  into  existence  of  a commercial commodity different from what was received by the producers.  This conversion of a commodity into a  different commercial commodity by subjecting it to some processing, is consumption with. in the meaning of the Explanation to  Art. 286  no  less than the final act of user  when  no  distinct commodity  is  being  brought into existence  but  what  was brought  into existence is being used up.  At one  stage  of the  argument  what Mr. Pathak appeared to insist  was  that there  must  be destruction of the substance  of  the  thing before the thing can be said to be consumed.  That takes  us nowhere, because we have still to find out what is meant  by destruction of the substance.  It may well be said that when a  commodity  is  converted into  a  commercially  different commodity  its former identity is destroyed and so there  is destruction of the substance, to satisfy the test  suggested by the learned counsel.  We think it unnecessary however  to enter  into a discussion of what amounts to " destruction  " as  even without deciding, whether there was destruction  or not, we think it proper and reasonable to say that  whenever a  commodity is so dealt with as to change it  into  another commercial  commodity  there  is consumption  of  the  first commodity within the meaning of the Explanation to Art. 286. This aspect of consumption was pointed out by Das, J. (as he then was), in State of Travancore-Cochin v. Shanmugha  Vilas Cashew  Nut  Factory  (1)  at p. 113  of  the  Report.   The purchase  there  was  of raw cashew  nuts.   Discussing  the question  whether the delivery of these nuts  in  Travancore was  for the purpose of consumption in that State, Das,  J., observed:--- " The raw cashew-nuts, after they reach the respondents, are put through a process and new articles of commerce,  namely, cashew-nut oil  and edible cashew-nut kernels, are obtained. It follows, (1)  [1954) S.C.R. 53. 718 therefore,  that  the  raw cashew-nut  is  consumed  by  the respondents in the sense I have mentioned". Das,  J., here proceeded on the view that using a  commodity so as to turn it into a different commercial article amounts to  consumption,  within the meaning of the  Explanation  to Art. 286(1) (a)-a view which he had earlier indicated at  p.

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110 of the Report.  We are not aware of any case where  such use  of  a  commodity  has  been  held  not  to  amount   to consumption. It  must  therefore be held on the facts of this  case  that when  tobacco was delivered in the-State of Bombay  for  the purpose  of  changing  it  into  a  commercially   different article,  viz., bidi patti the delivery was for the  purpose of  consumption.  The purchases in this case therefore  fall within the meaning of Explanation to Art. 286(1)(a) and must be held to have taken place inside the State of Bombay. There  remains  for  consideration the  objection  that  the transactions  took place in the course of inter-State  trade or  commerce  within  the. meaning of  Art.  286(2)  of  the Constitution and the levy of tax was therefore prohibited by the provisions thereof.  Even if these transactions were  in the  course of inter-State trade, the bar of Art. 286(2)  of the  Constitution  stands  removed by  the  Sales  Tax  Laws Validation  Act,  for the entire period  upto  September  6, 1955.  The levy of tax for the period September 7, 1955,  to September  29, 1955, would be illegal if these  transactions are  in the course of inter-State trade.   The  petitioner’s counsel however informed us that he did not want a  decision on  his  question  and would not, in this  case,  press  his objection  under  Art.  286(2).  It is  unnecessary  for  us therefore  to  decide whether the transactions  in  question took  place  in the course of interState  trade-or  commerce within  the meaning of Art. 286(2) of the Constitution.   As the petitioner has failed to establish any, violation of its fundamental right, the petition is dismissed with costs.                     Petition dismissed. 719