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PETITIONER: STATE OF ORISSA & OTHER

       Vs.

RESPONDENT: THE TlTAGHUR PAPER MILLS COMPANY LTD.& ANR.

DATE OF JUDGMENT01/03/1985

BENCH: MADON, D.P. BENCH: MADON, D.P. TULZAPURKAR, V.D. SEN, AMARENDRA NATH (J)

CITATION:  1985 AIR 1293            1985 SCR  (3)  26  1985 SCC  Supl.  280     1985 SCALE  (2)410  CITATOR INFO :  RF         1986 SC1085  (12)  RF         1988 SC1164  (4)  R          1988 SC1531  (46)  RF         1991 SC 672  (2,3,10)

ACT:       Orissa  Sales Tax Act 1947-Sections 3B and 5 (1)-Scope of-Notifications levying  purchase tax  on bamboos agreed to be served  and standing  trees agreed  to be severed-Whether Ultra vires  the Act-Whether  create new  class of goods not known to  law-Whether amount  to tax on immovable property - and not on goods-notifications issued in supersession of all previous notifications  on the  subject-Whether wipe out all tax liability accruing under previous notifications.       "Timber" and "logs"-Whether mean the same thing.       Bamboo contract-Nature of-Whether an easement.      Interpretation-Nature and meaning of a document-Whether can be  determined by  the end-result-Court-if could go into policy matters.       Constitution of India-Article 141-Conflicting views of the Supreme  Court on  same point-View of larger Bench to be followed in preference to view of smaller Bench.

HEADNOTE:      Section 3B  of the  Orissa Sales  Tax Act 1917 empowers the State  Government to declare from time to time any goods or class  of goods  to be  liable  to  tax  on  turnover  of purchases. The proviso provides that no tax shall be payable on the  sales of such goods or class of goods declared under this section.  Section 5(1)  prior to  its amendment  by the Orissa Sales  Tax (Amendment)  Ordinance, 1977 provides that the tax  payable by  a dealer under the Orissa Act should be levied on  his taxable  turnover at  such rate not exceeding thirteen percent and subject to such conditions as the State Government might from time to time by notification specify.       On  May 23,  1977  the  State  Government  issued  two notifications. Notification  No. SRO  372/77 was  made under section 3B amending the earlier notification dated April 23, 1976. This  notification made  standing  trees  and  bamboos agreed to  be severed  liable to  tax  on  the  turnover  of purchase with effect from

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27 June 1,  1977. Notification  SRO No. 373177 issued under the first proviso to section 5(1) of the Orissa Act amended with effect from June 1, 1977 the second of the two notifications of April  23, 1976  and directed  that the  tax payable by a dealer under  the Orissa  Act  on  account  of  purchase  of bamboos agreed to be severed and standing trees agreed to be severed would be at the rate of 10%.       On  December 29, 1977 the Orissa Sales Tax (Amendment) Ordinance, 1977 was promulgated amending the Orissa Act with effect from  January, 1978.  With effect  from the same date two notifications  SRO No  900177 and  SRO No.  901177  were issued; the  first notification  which was  issued under the provisions of section 3B and in supersession of all previous notifications  on  the  subject,  declared  that  the  goods mentioned in  Column (2) of the schedule to the notification were liable  to be  taxed on  the turnover  of purchase with effect from  January 1,  1978.  Entries  2  and  17  in  the schedule of  this notification  specified "bamboos agreed to be severed"  and  "standing  trees  agreed  to  be  severed" respectively. Notification No. 901/77 issued under section 5 (1) was  in supersession  of all  previous notifications  in that regard.  The State  Government, by  this  notification, directed that  with effect  from  January  l  1978  the  tax payable by  a dealer  under the  Orissa Act  on  account  of purchase of goods specified in column (2) of the schedule to the notification  would be  at the rate specified against it in column  (3) thereof. The rate of purchase tax for bamboos agreed to be severed and standing trees agreed to be severed was prescribed  at  10%.  The  Ordinance  was  repealed  and replaced by Orissa Sales Tax (Amendment) Act of 1978.       A large number of writ petitions were filed before the High Court  impugning the  notifications dated  May 23, 1977 and December 29, 1977. One group of petitioners consisted of those who had entered into agreements with the State for the felling, cutting, obtaining and removing bamboos from forest areas for  the manufacture  of paper (bamboo contracts), and the other  group consisted  of those  who had  entered  into agreements  for  the  purchase  of  standing  trees  (Timber Contracts).       The  bamboo contracts  were a grant of exclusive right and license  to fell,  i cut  and remove  bamboos  from  the forest. Under  the terms of auction the respondent was bound to pay  a minimum  royalty irrespective  of the  quantity of bamboos cut  and removed.  The Governor  of  the  State  was called the  "grantor" of  the licence.  The bamboo contracts were in  respect of different areas for periods ranging from 11 to  14 years  with an  option to renew the agreements for further periods.       The  respondent in  CA No. 219182 contended before the High Court  that the  subject matter  of the Bamboo contract was not  a sale  or purchase  of goods  but was  a lease  of immovable property  or in  any went  was a  creation  of  an interest in  immovable property  by way  of grant  profit  a prendre which  amounted to  an  easement  under  the  Indian Easements Act  1882 and  that for  that reason  the  royalty payable  under  the  bamboo  contracts  could  not  be  made exigible to  either sales  tax or  purchase tax and that the impugned provisions  of the  notifications were  ultra vires the Act. It was also contended that the bamboo contract was 28 a works  contract and  for this  reason also the transaction was not exigible to sales tax or purchase tax, and since the two notifications  of December 29, 1977 were expressed to be made in  supersession of  all earlier  notifications on  the

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subject,  the   liability  to   sales  tax  under  the  said notifications of May 23, 1977 was wiped out.       In  Civil Appeal No. 220/82 the bids of the respondent firm at  auctions held by the Government in respect of trees standing in  forest areas  were accepted and on confirmation of the  bids by  the competent  authority  it  entered  into agreements with the Government for felling and removing such trees. The  respondent, in turn, sold the trees felled by it in the  form of  logs to  others- At  the relevant  time the respondent was  successful at  five  auction  sales  and  on ratification  of   the  bids   entered  into  five  separate agreements (timber  contracts) for  felling and removing the trees standing in the forest areas.      After the  issue of  the notifications  of May 23. 1977 the respondent  filed a  writ petition  in  the  High  Court against the  State and  the Sales Tax and Forest Authorities contending (I)  that the  levy of  purchase tax  on standing timber agreed  to be  severed  was  beyond  the  legislative competence  of   the   State   Legislature   and   (2)   the notifications imposed a tax both at the point of sale and at the point  of purchase  and for this reason were invalid and ultra vires  the Act.  It was  also  contended  that  timber contracts were works contracts and the amounts payable under them were not exigible either to purchase tax or sales tax.      The High  Court allowed  all  the  writ  petitions  and quashed the impugned notifications.       In  appeal to  the Supreme  Court the  State contended that the  subject  matter  of  the  impugned  provisions  is "goods" within the meaning of the term in the Sales of Goods Act and  the Orissa  Act, and that what was made exigible to tax under  the  impugned  provisions  notifications,  was  a completed purchase of goods. ^       HELD:  (I) Notification  SRO Nos.  372/77  and  373/77 dated May  23, 1977,  (2) entries  Nos.  2  and  17  in  the schedule to  notification No.  900177 and (3) entries Nos. 2 and 17  in the  schedule to  notification No.  901177  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 vires either Entry  54 List  II of  the Seventh  Schedule  to  the Constitution of  India or  the Orissa Sales Tax Act 1947 but are constitutional and valid [145D-F]       (a)  The Legislative  competence to  enact the  Orissa Act, which  was a  pre-constitution enactment,  was  derived from section  100 (3)  of the  Government of India Act, 1935 read with  Entry 48  in List  II in  the Seventh Schedule to that Act.  While Entry  48 spoke  of "taxes  on the  sale of goods" Entry  54 of  List II  of the Seventh Schedule of the Constitution speaks of "taxes on the sale or 29 purchase of  goods." The  addition of the word "purchase" in Entry 54  permits the  State Legislature  to levy a purchase tax and  does not confine its taxing power merely to levying sales-tax. [62F; H]       (b) A cantena of decisions of this Court had held that the  expression  "sale  of  goods"  had  been  used  in  the Government of  India Act, 1935 in the same sense in which it is used  in  the  Sale  of  Goods  Act,  1930  and  that  it authorised the  imposition of  a tax  only when  there was a completed sale  involving transfer  of title  to the  goods. While construing Entry 54 in List II of the Seventh Schedule to the  constitution  interpretation  was  adopted  and  any attempt by  the State Legislature to give that expression an artificial meaning or an enlarged meaning or to bring within

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its  scope  what  would  not  be  comprehended  within  that expression would  be unconstitutional and ultra vires. [63F; 64G-H; 63G]       State  of Madras  v. Cannon  Dunkerley &  Co. (Madras) Ltd. [1959]  SCR 379;  The Sales  Tax  Officer  Pilibhit  v. Messrs. Budh Prakash Jai Prakash [955] 1 SCR 243, 247.       Bhopal  Sugar Industries  Ltd. M.P.  & Anr. v. P. Dube Sales Tax  Officer Bhopal  Region Bhopal  & Anr. AIR 1964 SC 1037; K.L.  Johar &  Co v.  Deputy  Commercial  Tax  Officer [1965] 2  SCR 112; Joint Commercial Tax Officer Harbour Div. II Madras  v. Young  Men’s India Association (Reg.) Madras & Anr. [1970]  3 SCR  680; State  of  Maharashtra  &  Anr.  v. Champalal Kishanlal Mohta [1971] 1 SCR 46, followed.       (c) Although a State is free to impose a tax at one or more points  in a series of sales or purchases in respect of the same  goods, the  Orissa Act  has adopted a single point levy by enacting the proviso to section 3 under which no tax is payable  on the  sale of goods or class of goods declared under that  section to  be liable  to tax on the turnover of purchases. The  proviso to  section 8  states that "the same goods shall  not be taxed at more than one point in the same series  of   sales  or  purchases  by  successive  dealers." Therefore, where  in a  series of  sales or purchases tax is levied at  a particular point neither sales tax nor purchase tax can be levied at another point in the same series. [65C- E]       (d)  Since any  attempt on  the part  of the  State to impose by-legislation  tax on  sales or purchases in respect of what  would not  be "sale" or a "sale of goods" under The Sale of  Goods Act, 1930 is unconstitutional, any attempt by it to  do  so  in  the  exercise  of  its  power  of  making subordinate legislation,  would be equally unconstitutional. Similarly. where any rule or notification travels beyond the ambit of  the parent  Act, it  would be ultra vires the Act. Equally, sales  tax authorities  purporting to act under the 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 30 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 who are liable to be taxed at a different point in that series.                                               [65G-H: 56A-C]      (2) There  is no  substance  in  the  argument  of  the respondent that  by the  impugned provisions  a new class of goods. not known to law, had been created. The definition of the expression  "goods ’  in both  the Sale of Goods Act and the Orissa  Act which is almost in identical terms, includes "things attached  to or  forming part  of The land which are agreed to  be severed  before sale  or under the contract of sale." [66E; G-H]       (a)  An examination  of  the  definitions  of  movable property and immovable property given in the General Clauses Act, Registration  Act and  Transfer of  Property Act,  show that things  attached to the earth are "immovable property." The term  "attachment" means  "rooted in the earth as in the case of  trees and  shrubs." Thus, while trees rooted in the earth are immovable property as being things attached to the earth by  reason of  the definition  of the  term "immovable property" in various statutes namely the General Clauses Act

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and the  Orissa General Clauses Act and the Registration Act read with  the definition of the expression "attached to the earth" given  in the  Transfer  of  Property  Act,  standing timber is "movable property" by reason of its exclusion from the definition  of "immovable  property" in  the Transfer of Property Act and the Registration Act and by being expressly included within  the meaning  of the term "movable property" given in the Registration Act. [67E; 68F; 68G-H; 69A]       (b)  The term  "standing timber"  has been  judicially recognised as  "a tree  which ii  in a  state  fit  for  the purposes of  being  used  as  wood  for  buildings,  houses, bridges, windows,  whether on the tree or cut and seasoned", that is, a tree meant to be converted into timber so shortly that it  could already  be looked  upon as  timber  for  all practical purposes  even though  it is still standing. Thus, trees which  are ready-to be felled would be standing timber and therefore  "movable property."  While  trees  (including bamboos) rooted in the earth being things attached to  the  earth  are  immovable  property  and  if  they  are "standing timber",  are movable  property, trees  (including bamboos) rooted  in the earth which are agreed to be severed before sale  or under  the contract  of sale  are  not  only movable property but also goods. [o9D-E; 70B-C]      Smt. Shantabai  v. State  of Bombay  & Ors. [1959] SCR, 265, 275-6, followed.       (c)  The distinction  which  existed  in  English  law between fructus  naturales (natural  growth of soil regarded as  part   of  the   soil  until   severance)  and   fructus industriales (which  are chattels considered as representing the labour and expense of the occupier and thing independent of the land) does not exist in Indian law. In a case of this nature the  only question  that falls  for consideration  in Indian law  is whether  a transaction  relates to "goods" or "movable 31 property". If  it is  sale of immovable property, a document of the  kind specified in section 17 of the Registration Act is required  to be  compulsorily registered  but a  document relating to  sale of  goods or  of movable  property is  not required to  be registered.  Secondly under Entry 54 of List 11 of  the Seventh  Schedule the  State cannot levy a tax on the sale or purchase of any property other than goods. [71C- D]       3.  The  respondent’s  contention  that  the  impugned provisions levied  a purchase  tax on immovable property and not on  goods and  that the  State Government  has travelled beyond its taxing power has no merit. [71F]       (a)  The High Court erred in holding that the impugned provisions amounted to levying a tax on an agreement to sell and not  on actual  sale or  purchase, that  standing  trees being unascertained  goods continued  to be  the property of the State Government until felled and therefore the title to such trees or bamboos is transferred in favour of the Forest Contractor only  when the  trees or  bamboos were felled and severed in  accordance with the terms of the contract. There is a  fallacy in the reasoning of the High Court in that the High Court read merely the description of the goods given in the impugned  provisions by  itself and  not in  conjunction with their governing words.                                               [71G-H; 72A-B]       (b)  Tax levied  under section  3B  is  not  on  goods declared under that section but on the turnover of purchases of such  goods. A  reading of the notification, issued under sections 3B  and 5(1)  as a  whole makes  it clear  that the taxable event is not an agreement to sever standing trees or

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bamboos but the purchase of bamboos or standing trees agreed to be severed. [72C-D]       (c)  The use  of the terms "agreed" in the description of goods  showed that there must be an agreement between the buyer and the seller and under this agreement standing trees as also  bamboos must  be agreed to be severed. According to the definition  of "goods"  such  severance  may  be  either before sale or under the contract of sale, The Sale of Goods Act makes  a distinction  between sale and agreement to sell and provides  that where  there is a transfer from the buyer to the seller of property in the goods which are the subject matter of  the agreement  to sell, the contract of sale is a sale but  when the  transfer of  property in the goods is to take place  at a  future time  or subject  to some condition thereafter to  be fulfilled it is an agreement to sell which becomes a  sale when the time elapses or such conditions are fulfilled. In  the first  case  the  contract  is  "executed contract" while in the second it is "executory."                                                 [72E; 73C-D]       (d)  A conspectus of the relevant sections o, the Sale of Goods  Act shows  that a  purchase would be complete when the goods  (in the  case  standing  trees  or  bamboos)  are specific goods.  If  these  factors  exist,  then  unless  a different intention  appears either  from the  terms of  the contract or  can be inferred from the conduct of the parties and other  circumstances of  the case,  the property in such goods would  pass from  the seller  to the  buyer  when  the contract is  made and  it is  immaterial whether the time of payment of the price or the time of 32 taking their  delivery  (of  standing  trees  agreed  to  be severed or  bamboos agreed    to  be  severed  or  both)  is postponed. If,  however, there  is an unconditional contract for the  sale of unascertained goods then unless a different intention appear-, the property in them would be transferred to the  buyer when the goods are ascertained and it would be immaterial whether  the time  of payment of the price or the time of  taking delivery  of standing  trees  agreed  to  be severed  or   bamboos  agreed  to  be  severed  or  both  is postponed. In  either event,  the sale and purchase would be completed  before  severance.  Therefore  for  the  impugned provisions to  apply the  severance of the standing trees or bamboos must  not be  before sale  but under the contract of sale, that  is, after  the sale  thereof is  completed.  The absence in the impugned provisions of the words "before sale or under  the contract of sale" thus made no difference. The subject matter  of the impugned provisions was goods and the tax levied  thereunder was  on  the  completed  purchase  of goods. [76F-H; 77A-C]       4.  The  High  Court  has  confused  the  question  of interpretation  of   the  impugned   provisions   with   the interpretation of Timber Contracts and Bamboo Contracts. 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  action taken  under  it would  be   invalid  also.   Where  on  the  other  hand,  a Notification is  valid, an  action  purported  to  be  taken thereunder contrary  to the terms 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 Bamboo contracts and the Timber Contracts correct, the  transactions covered  by  them  would  not  be liable to  be taxed  under the  impugned provisions  and any attempt or action by the State to do so would be illegal but

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the  validity  of  the  impugned  provisions  would  not  be affected thereby.  There is no merit in the challenge to the validity of  the impugned  provisions on the ground of their unconstitutionality. [77D; F-H; 78A]       5.  (a) The  High Court  also erred  in its  view that bamboos and  trees agreed  to be  severed were  the same  as bamboos and  timber after  they were  felled and  that since bamboos and  trees were  liable to  tax at  the sale  point, taxation of the same goods at the purchase point amounted to double taxation and that this was contrary to the provisions of the Orissa Act. [78C]       (b)  Not only  does the  Orissa Act  expressly forbids double taxation  but it  also forbids  the levying of tax at more than one point in the same series of sales or purchases by successive  dealers This  is evident from the provisos to sections 3B and 8. Under the proviso to section 3B no tax is payable sales of goods or class of goods declared under that section to  be liable  to tax  on the turnover of purchases. Under the  proviso to section 8 the same goods are not to be taxed at  more than one point in the same series of sales or purchases by successive dealers. [78E-F]       (c)  The two  notifications of  December 29, 1977 were issued as  a result      the  Orissa Sales  Tax  (Amendment) ordinance 1977 which later became the 33 Orissa Sales  Tax  (Amendment)  Act,  1978,  while  the  two notifications of  May 23,  1977 were  issued  prior  to  the amendment. [79A]       (d)  Prior to  January 1,  1978 under section 5(1) tax was payable  by a dealer on his taxable turnover of sales as also purchases  at n  certain fixed  percentage.  This  rate applied both to sales tax and purchase tax. But the purchase tax was  payable only  on the turnover of purchases of goods declared B  under section  3B. In  respect of  goods not  so declared a  dealer was  liable to  pay only sales tax. Under the proviso  to this  section, if  goods were declared to be liable to  purchase tax, no tax was payable on sales of such goods. Under  section 5(1) the State Government was required to issue t notification only when it wanted to fix a rate of tax higher  or lower than that specified in this section. If no such  notification was issued then the tax payable, be it sales tax  or purchase  tax, was to be at the rate mentioned in section  5(l). Where,  however, any  goods were  declared under section  3B to  be liable  to tax  on the  turnover of purchases, the  notification prescribing  a higher  or lower rate of  sales tax issued under the first proviso to section 5(1) would  thereupon ceases  to be observative by reason of the operation  of the  proviso to  section 3B and it was not necessary to repeal expressly that notification. It was also not  necessary   for  the   State  Government   to  issue  a notification fixing  the rate  of purchase  tax   unless  it wanted to  fix a rate higher or lower than that specified in section 5(1).  Where no  such notification  was issued,  the rate of purchase tax would be the one which was mentioned in section 5(1). [79C-H]       (e) After January 1, 1978 no rate of tax was specified in the  Orissa Act.  Under section 5(1) the State Government is given  power to notify from time to time the rate of tax- sales tax  or purchase  tax by  issuing  notifications.  The notification dated  December 29,  1977 issued  under section 5(1) does  not contain  any entry  in respect of bamboos, or timber or  in respect  of bamboos  agreed to  be severed  or standing trees  agreed to be severed. If they were liable to sales tax, they would fall under the residuary entry No. 101 and be  liable to sales tax at the rate of seven percent. If

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any goods  feeling under  the residuary  entry or  any other entry in  that notification are declared under section 3B 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  3B without  there being  any necessity to delete that particular  entry or  to amend  the residuary  entry by excluding those  goods therefrom.  It would 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 sub-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 in error in holding that the impugned  provisions were  ultra vires the Orissa Act as they amounted to "double taxation." [80A-E]       6.  (a) There  was no substance in the contention that the two  notifications of December 29, 1977 having been made in supersession  of all previous notifications issued on the subject their effect was to wipe out all tax liability which accrued under  the earlier  notifications of  May 23,  1977. [80G-H] 34         (b) The  word "supersession" in the notifications of December 29,  1977 was  used in  the same sense as the words "repeal and  replacement" and, there fore, does not have the effect of  wiping out  the tax  liability under the previous notifications. All  that was  done by  using the  words  "in supersession  of   all   previous   notification"   in   the Notifications of  December  29,  1977,  was  to  repeal  and replace the  previous notifications  and not to wipe out any liability incurred  under the previous notifications. [146C- D]       (c)  Both  sections  3B  and  5(1)  in  express  terms conferred  power   upon  the   State  Government   to  issue notification from  time to  time. Under these provisions the State Government  can issue  a notification  and repeal  and replace it by another notification. [81C]      (d) The  issuance of the notifications became necessary by reason  of the  change brought  about in  the  scheme  of taxation in  1977. 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. Under the  amended section if the State Government wanted to tax any goods Or class of goods at a higher or lower rate it issued notifications  specifications specifying  such  rate. Since no  rate of  lax was  specified in the new section but was left to the State Government to fix it, it was necessary to  issue   a  notification   consolidating   all   previous notifications on  the subject  in respect of goods liable to purchase tax  which the  State Government did. [82E; 83A; C; D]       7.  (a) Timber  contracts were not works contracts but were agreements to sell standing timber. [146D]      (b) Timber  contracts were  not transactions of sale or purchase of  standing trees  agreed to be severed- They were merely agreements  to sell  such trees.  The property in the trees passed  to the respondent firm only in the trees which were felled, that is, in timber, after all the conditions of the contract  had been  complied with  and after such timber was examined and checked and removed from the contract area. The impugned  provisions, therefore,  did not  apply to  the transactions covered by the Timber Contracts [98 A-B]       (c)  A conspectus of the terms of the Sale Notice, the Special Conditions  of Contract,  the General  Conditions of

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Contract and the various statutory provisions shows that the heading "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.  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 did  not pass  to the  respondent firm when each of the contracts  was made. The signing of the Timber Contracts did not result in a concluded contract because each contract was conditional  upon the  y State  Government ratifying the acceptance of the bid, the ratification order did not become an unconditional  contract for the sale of specific goods in a deliver able state for the respondent firm had no right to sever the trees and take them away before  complying with  the  other  conditions  of  the contract, namely, furni 35 shing a  Coupe Declaration Certificate within the prescribed time, registering  the property  mark or  trade mark, making the security  deposit and  so on. This apart, the respondent firm was  not at liberty to fell trees of his choice nor was he entitled to remove the felled trees by any route which it liked but only by specified routes. [95F-H; 96B-C; 97A-B]       (d)  Although under  rule  40  of  the  Orissa  Forest Contract Rules  1966, Rules  stipulates that the respondent, firm was not entitled to any compensation for loss sustained by reason of fire, tempest, disease, natural calamity or any wrongful act  of a third party this only showed that after a Timber  Contract  was  concluded  the  risk  passed  to  the respondent firm.  Under section  26 of the Sale of Goods Act when the property is transferred to the buyer, the goods are at the  buyer’s risk  whether delivery had been made or not; but  this   section  is  qualified  by  the  phrase  "unless otherwise agreed."  The Timber  Contracts in  this case were subject to  contract to  the contrary. This is made clear by rule 44 which states that "all forest produce removed from a contract area in accordance with these rules shall be at the absolute disposal of the forest contractor." [97E-H]       8.  (a) On the question whether the words "timber" and "logs" mean  the same  thing in  commercial parlance  the no material had  been produced by the parties. Where a term has not been  statutorily defined  or judicially interpreted and there is  insufficient material  on record as to the meaning of the  words, the  Court must seek to ascertain its meaning in common  parlance with such aid as is available to it. The court may  take the  aid of  dictionaries in  such cases  to ascertain its  meaning in  common parlance. In doing so, the Court must  bear 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 would have to select the particular  meaning  which  would  be  relevant  to  the context in which it has to interpret that word. [104E; 105B- C; 146G-H]       (b)  The Orissa  Act does not define the term "timber" or "logs." The statutory definition of "timber" given in the Orissa Forest  Act, 1972  is  that  timber  includes  "trees fallen or  felled and  all wood  cut up or sawn." The Madras Forest Act,  1882 and  the Indian  Forest Act  1927, the two Acts in  force in the State of Orissa prior to the enactment of the  Orissa Forest  Act, 1972  too  have  not  given  any exhaustive definition  of the  term "timber."  But  what  is apparent from these definitions is that the word "timber" is not confined  merely to  felled trees  in  the  forests-  In

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subsequent Act  like the  Orissa Forest  Produce (Control of Trade) Act,  1981 the  concept that  timber  is  not  merely felled trees has been emphasised. Therefore. a conspectus of the  meanings  given  to  the  term  "timber"  in  statutes, different dictionaries and as judicially interpreted by this Court as  well as  by some  High Courts  shows that it means "building material,  generally wood,  used for  building  of houses, ships  etc.- and  the word  is applied  to  wood  of growing trees capable of being used for structural purposes. Hence,  collectively   to  the   trees  themselves."  A  log according to the dictionaries means a bulky mass of wood now usually an  unhewn portion  of a felled tree or a length cut off for  firewood. These logs will be nothing more than wood cut up or 36 sawn and  would be  timber. Similarly, a beam is timber sawn in a particular way. So too ratters would be timber logs put to a  particular use.  In ordinary parlance a plank would be flattened and smoothed timber.                                   [105C; F; 106C; 107A-D; F]       Mohanlal  Vishram v. Commissioner of Sales Tax, Madhya Pradesh, Indore  [1969] 24  STC 101; G. Ramaswamy and others v. The State of Andhra Pradesh and others [1973] 32 STC 309, approved and       Krupasindhu  Sahu &  Sons v. State of Orissa [1975] 35 STC 270. overruled.       9.  (a) Sales  of dressed  or sized  logs having  been assessed to  sales tax,  sales to  the  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   that   the retrospectively substituted definition of "dealer" in clause (c) of section 2 of the Orissa Sales Tax Act, 1947 is valid. [147B-C]       (b)  Sales of  logs by  the respondent firm during the period June 1, 1977 and December 31, 1977 would be liable to tax at  the rate of ten percent. Assuming that the sales had been assessed to tax at the rate of six percent as contended by reason  of the period of limitation prescribed by section 12(8) of the Orissa Act, the respondent-firms assessment for the relevant  period cannot  be re-opened  to reassess  such sales at ten per cent. [147D-E]       10.  (a) The  Bamboo Contract  is not  a lease  of the contract area  to the   respondent company in CA 219182. Nor is it  a grant  of an easement to the respondent company, as it was not a grant of any right for the beneficial equipment of any  of the  respondent company. In addition to the right of entry  there are  other important rights flowing from the contract. It  is a  grant of  a profit  a prendre  which  in Indian law  is a  benefit to  arise out  of  land  and  thus creates an  interest  is  immovable  property.  A  profit  a prendre is  a benefit  arising out  of land  and in  view of section 3(26)  of the  General Clauses Act, it is "immovable property" within  the meaning  of the  Transfer of  Property Act. [147F-H]       (b)  There are countervailing factors which 80 to show that a  Bamboo contract  is not a contract of sale of goods. It is  a grant  of exclusive right and licence to fell, cut, obtain and  remove bamboos.  The person giving the grant the Governor of  the State,  is referred  to as  "grantor";  the consideration payable  is "royalty" which is not a term used in legal  parlance for the price of goods sold. It is not an agreement to sell bamboos standing in the contract area with the accessory  licence to  enter  upon  such  area  for  the

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purpose of  felling and  removing bamboos  nor is  it for  a particular felling  season only.  It is  an agreement  for a period ranging from fourteen, thirteen and eleven years with the option  to renew  the  contract  for  further  terms  of twelves years. The payment of royalty has no relation to the actual quantity  of bamboos  cut and removed. The respondent company was  bound to  pay a minimum royalty and the royalty paid was  always in excess of the royalty due on the bamboos cut in  the contract  areas. The  Bamboo contract  conferred upon the respondent-company a 37 benefit to  arise out  of land, namely, the right to cut and remove bamboos  which would  grow from the soil coupled with several ancillary  rights and was thus a grant of a profit a prendre. Being  a profit a prendre or a benefit to arise out of land  any attempt  on the part of the State Government to tax the  amounts payable under the Bamboo Contract would not only be ultra vires the Orissa Act but also unconstitutional as being  beyond the  State’s taxing power under Entry 54 in List II  in the  Seventh Schedule  to  the  Constitution  of India.                                    [119C; E; 120B-D; 121G-H]       11.  The decision of Firm Chhotabhai Jethabhai Patel & Co. v.  The State  of Madhya Pradesh [1963] SCR 476 on which the appellant  relied is not good law and has been overruled by decisions  of larger  Benches of  this Court.  (State  of Madhya Pradesh v. Yakinuddin [1963] 3 SCR 13) [148A]       M/s  Mohanlal Hargovind  of Jubbulpore v. Commissioner of Income  Tax C.P.  & Berar Nagpur L.R. [1949] 76 I A. 235; ILR 1949  Nagpur 892;  AIR 1449  PC 311;  Ananda  Behra  and another v.  The State of Orissa and another [1955] 2 SCR 919 and Smt.  Shantabai v.  State of  Bombay & Orissa [1959] SCR 265 275-6 referred to; and      Board of  Revenue Etc.  v. A.M. Ansari Etc.[1976] 3 SCR 661 held 1 inapplicable.      12. (a) The case of State of M.P. v. Orient Paper Mills Ltd. [1977]  2 SCR 1219 on which the appellant relied is not good law  as that  decision was  given per  incurium and had laid down  principles of  interpretation which  are wrong in law. The  basic and salient features of the agreement before the Court  in Orient  Paper Mills’  Case were the same as in the case of Mahadeo v. State of Bombay and the Court was not justified in  not adverting to that case and the other cases referred to  on the  ground that  these cases dealt with the general law of real property. [142 H; 143A].      (b) The  enunciation of  law made  by the  Court in the Orient Paper  Milts  case  that  a  document  should  be  so construed as  t o  bring it within the ambit of a particular statute relevant  for the  purpose of the dispute before the court and  that in  order to  do so, the Court could look at only such of the clauses of the document as also to just one or more,  of the consequences flowing from he document which would fit  in with the interpretation which the court wanted to put  on the  document to make that statute applicable, is fraught with  considerable danger  and mischief  as  it  may expose  documents   to  the   personal   predilictions   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. [139E-G]      (c) Secondly,  in observing  that the State Government, for reasons  best known  to it had "left the exploitation of the forest  resources in  part to  the private  sector"  the court had  overlooked that it was a matter of policy for the State to  decide whether such transactions should be entered

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into or  not, whether  the transactions  entered into by the State was for the industrial development of 38 the State and whether the transaction ensured employment for the people of the area and so on.       (d)  Thirdly, the  nature and  meaning of  a  document cannot be  deter mined  by its  end-result  or  one  of  the consequences which  flow from  it. In  look in merely at the end-result of  the agreement  the court  overlooked a firmly established principle  that both  the agreement and the sale must relate  to the same subject matter and therefore, there cannot be  an agreement relating to one kind of property and a sale as regards another. [141C-D]        (e)  In  coming  to  the  conclusion  that  the  term "royalty" used  in the  document  before  it  was  merely  a ’euphimism" for  the "price of timber". the court overlooked the  fact   that  the  amount  of  royalty  payable  by  the respondent was  consideration for  all the  rights conferred upon it  under the  contract though  it was to be calculated according to the quantity of bamboos felled.[141H; 142A]       13.  Where there  are two or more conflicting views of this court  on the same point the proper course for the High Court or  even for  smaller Benches of this court is to find out and follow the views expressed by larger Benches of this court in  preference to  those expressed by smaller benches- This practice  has crystallised  into a rule of law declared by this Court. [142E-F]      U.O.I.  v.   K.S.  Subramanian   [1977]1  SCR  87,  92, followed.       14. A works contract is a compendious term to describe conveniently a  contract for  the  performance  of  work  or services in  which the  supply of  materials or  some  other goods  is  incidental.  In  the  instant  case,  the  timber Contracts being  agreements relating to movable property and the Bamboos  Contracts being  a  grant  of  an  interest  in immovable property,  cannot be works contracts. The payee of the price,  namely, the  Government has not undertaken to do any work  or labour.  It was the contractor who had to enter upon the  land to  fell the trees and remove them. So is the case of Bamboo Contracts.                                                 [144H; 145A]       Commissioner  of Sales  tax, M.P. v- Purshottam Premji [1970] 26 STC 38, 41 S.C., referred to.

JUDGMENT:       CIVIL  APPELLATE JURISDICTION:  Civil Appeal  Nos. 219 220 of 1982.       From  the Judgment  and Order  dated 19.9.1979  of the High Court of Orissa in D.J C. Nos. 811 & 1048/77.      Anil B. Divan and R. K. Mehta for the Appellants.      S.,T. Desai,  S.R.  Banerjee  and  Vinoo  Bhagat,  B.R. Aggarwal,  Miss  Vijaylakshmi  Menon  Vinod  Bobde  for  the Respondents. 39       The Judgment of the Court was delivered by       MADON J. These two Appeals by Special Leave granted by this Court  are against the judgment and order of the Orissa High Court  allowing 209 writ petitions under Article 226 of the Constitution of India filed before it.      Genesis of the Appeals       On  May 23,  1977, the  Government of  Orissa  in  the Finance Department issued two Notifications under the Orissa Sales Tax  Act 1947  (Orissa  Act  XIV  of  1947).  We  will

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hereinafter for  the sake  of brevity  refer to  this Act as "the Orissa  Act".  These  Notifications  were  Notification S.R.O.  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-B  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, 1979, 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 promulgation on December 29,  1977, of  the  Orissa  Sales  Tax  (Amendment) Ordinance 1977  (Orissa Ordinance  No, 10  of 1977  ), which amended the  Orissa Act, two other notifications were issued on December  29, 1977,  by the  Government of Orissa in the- Finance   Department,   namely   Notification   No.   67178- C.T.A.135/77(Pt.) F(S.R.O.  No900/77) and  Notification  No. 67181-C.T.A.  135/77-F   (S.R.O.  No.   901/77).  The  first Notification was  expressed to  be made  in exercise  of the powers conferred  by section  3-B of  the Orissa  Act and in supersession of  all previous  notifications issued  on that subject. By  the  said  notification  the  State  Government declared that  the goods set out in the Schedule to the said Notification were  liable to  be taxed  on the  turnover  of purchase with effect from January 1. 1978. Entries Nos. 2 40 and 17  in the  Schedule to  the said Notification specified bamboos agreed to be severed and standing trees agreed to be severed respectively.  The second Notification was expressed to be  made in  exercise of  the powers  conferred  by  sub- section  (1)   of  section  5  of  the  Orissa  Act  and  in supersession of  all previous  notifications in that regard. By the  said notification the State Government directed that with effect  from January  1, 1978,  the tax  payable  by  a dealer under  the Orissa  Act on  account of the purchase of goods specified  in column  (3) of  the Schedule to the said Notification would  be at  the rate  specified against it in column (3)  thereof. In  the said    Schedule  the  rate  of purchase tax  for bamboos  agreed to be severed and standing trees agreed  to be  severed was prescribed as ten per cent. The relevant  entries in  the Schedule  in that  behalf  are Entries Nos. 2 and 17. The Orissa Tax (Amendment) Ordinance, 1977, was  repealed and  placed  by  the  Orissa  Sales  Tax (Amendment) Act, 1978 (Orissa Act No. 4 of 1978).      As many  as 209 writ petitions under Article 226 of the Constitution of India were filed in the High Court of Orissa challenging the  validity of the aforesaid two Notifications dated May  23, 1977,  and the  said Entries Nos. 9 and 17 in each of  the said  two notifications dated December 29, 1977 (hereinafter  collectively  referred  to  as  "the  impugned provisions"). The  petitioners before  the High  Court  fell into two  categories. The  first category consisted of those who has entered into agreements with the State of Orissa for the purpose  of  felling,  cutting  obtaining  and  removing bamboos from forest areas "for the purpose of converting the bamboo into  paper pulp  or for  purposes connected with the

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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 The Titaghur Paper Mills Company Ltd. and another v.  State of  Orissa and  other (and  other cases)1, the High Court allowed all the (1) (1980) 45 S.T.C. 170. 41 said writ  petitions and  qauashed 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 ill the matter, challenging the correctness  of the said judgment of the High Court. The Respondents in Civil Appeal No. 219 of 1982 are the Titaghur Paper Mills Company Limited (hereinafter referred to as ’the Respondent Company")  and one Kanak Ghose, a shareholder and director of the Respondent Company. The Respondents in Civil Appeal No.  220 of  1982 are Mangalji Mulji Khara, a partner of the  firm of  Messrs. M.M.  Khara, and the said firm. The Chief Conservator  of Forests, Orissa, the Divisional Forest Officer,  Rairkhol   Division.  and  the  Divisional  Forest Officer, Deogarh  Division have also been joined as proforma Respondents to the said Appeal.      Facts of C. A. No. 219 of 1985 D      The Respondent Company is a public limited company. Its registered office  is situated  at Calcutta  in the state of West Bengal.  The Respondent  Company carries  on inter alia the business  of manufacturing  paper. For  this purpose  it owned at the relevant time three paper mills-one at Titaghur in the State of West Bengal, the second at Kankinara also in the State  of west  Bengal and  the third at P. O. Choudwar, Cuttack District, in the State of Orissa. For the purpose of obtaining raw  materials for  its business  of manufacturing paper, the Respondent Company entered into a Bamboo Contract dated January  20, 1974,  with the  State  of  Orissa.  This agreement was  effective for a period of fourteen years from October 1,  1966, in  respect of  Bonai Main  Areas of Bonai Division, for a period of thirteen years of with effect from October 1,  1967, in  respect of  Kusumdih P.  S.  Of  Bonai Division; and  for a period of eleven years with effect from October 1,  1969, in  respect of  Gurundia Rusinath P. S. Of Bonai Division,  with an option to the Respondent Company to renew the  agreement for  a further  period of  twelve years from October 1, 1980. For the present it is not necessary to refer to  the other  terms and  conditions  of  this  Bamboo Contract.      After the  said two  Notification dated  May 23,  1977, were issued, the Sales Tax Officer, Dhenkanal Circle, Angul, Ward (the  Third Appellant  in Civil Appeal No. 219 of 1982) issused to 42 the manager  of the  Respondent  Company’s  mill  at  P.  O. Choudwar a  notice dated August 18, 1977, under Rules 22 and 28(2) of  the Orissa  Sales Tax  Rules, 1947,  stating  that though the  Respondent Company’s  gross turnover  during the year immediately  preceding June  1, 1977,  had exceeded Rs.

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25,000; it had without sufficient cause  failed to apply for registration as  a dealer  under section 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 Second Appellant in Civil Appeal No. 219  of 1982  as also  to the  Chief  Secretary  to  the Government of  the State of Orissa. As no reply was received to the  said letter,  the Respondent  company and  the  said Kanak Ghosh filed writ petition in the High Court of Orissa, being O.J.C No. 811 of 1977, challenging the validity of the said two  Notifications dated  May 23,  1977, and  the  said notice. While  the said  writ petition  was part-heard,  the said  two  Notifications  were  replaced  by  the  said  two Notifications dated  December  29,  1977.  Accordingly,  the Respondent Company  applied for  amendment of  the said writ petition. It  also filed along with Kanak Ghosh another writ petition, being  O.J.C. No.  740 of  1978,  challenging  the validity not  only of  the said  two Notifications dated May 23, 1977,  but also of Entries Nos. 2 and 17 of the said two Notifications dated  December 29,  1977, and the said notice dated August  18 1977,  on the  same grounds as those in the earlier writ petition.      The principal  contentions  raised  in  the  said  writ petitions were    that  the  subject-matter  of  the  Bamboo Contract was not a sale or 43 purchase of  goods but was lease of immovable property or in any event   was  the creation  of an  interest in  immovable property by way of grant of profit a prendre which according to the  Respondent Company  amounted in  Indian  law  to  an easement under  the Indian  Easements Act,  1882 (Act  V  of 1882), and  that for  the said reason the amounts of royalty payable under the Bamboo Contract could not be made exigible to either  sales tax  or purchase tax in the exercise of the legislative competence  of the  State, and,  therefore,  the impugned provisions  were unconstitutional  and ultra  vires the Orissa  Act. It  was further  contended that  the Bamboo Contract was  a works  contract and for the said reason also the transaction  covered by it was not exigible to sales tax or    purchase  tax. It  was also contended that as the said Notifications dated  December 29, 1977, were expressed to be made in  supersession of  all earlier  notifications on  the subject, the liability, if any, under the said Notifications dated May  23, 1977,  was wiped out. The said writ petitions prayed for  quashing the impugned provisions and for writ of mandamus against  the respondents  to  the  said  petitions, namely, the  State of Orissa, the Commissioner of Sales Tax, Orissa, and  the said  Sales Tax  Officer, restraining  them from giving  any effect  or  taking  any  further  steps  or

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proceedings against  the Respondent  Company on  the asis Or 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  contention 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 petitioner therein. 44 Facts of C. A. No. 220 of 1982      Messrs. M.M.  Khara, Second  Respondent to Civil Appeal No. 220  of 1982 (hereinafter referred to as "the Respondent Firm"), is  a-partnership firm of which the first Respondent to the  said Appeal, Mangalgi Mulji Khara, is a partner. The Respondent Firm  carried on  business at  P. O. Sambalpur in the District  of Sambalpur  in the  State of  Orissa and was registered as  a dealer  both under  the Orissa  Act and the Central Sales  Tax Act,  1956 (Act  LXXIV of 1956), with the Sales Tax  Officer, Sambalpur  I Circle. The business of the Respondent Firm  so far as concerns this Appeal consisted of bidding at  auction held  by the  Government  of  Orissa  in respect of  trees standing in forest areas and if it was the highest  bidder,   entering  into   an  agreement  with  the Government for  felling and  removing such  trees and in its turn selling  the trees felled by it in the shape of logs to other. The  procedure followed  by the  State of  Orissa  in giving forest  areas was  to  publish  notices  of  proposed auction  sales  of  timber  and  other  forest  products  in particular forest  areas.  After  the  auctions  were  held, ratification orders  would be issued by the State Government to the forest contractors who were the highest bidders  as also  an agreement would be entered into between the  State of  Orissa through  its Governor  and the forest contractor  in respect of the forest produce governed by the agreement.      During the  relevant period,  the Respondent  Firm  was successful at  five auction  sales  held  by  the  State  of Orissa. Its  bids were ratified by the State Government. The Respondent Firm  also entered  into five separate agreements (hereinafter  referred   to  as  "Timber  Contractors")  for felling and  removing trees  standing in  such forest areas. Three of  the said five Timber Contracts were for the period October 31,  1977, to  January 31,  1979, the fourth was for the period  October 1,  1977 to  December 31,  1978, and the fifth was for the period October 28, 1977 to July 31, 1979.      After the  said Notifications  dated May  23, 1977 were issued, the  Respondent Firm  along with  its  said  partner Mangalji Mulji  Khara filed  a writ  petition in  the Orissa High Court, being O.J.C. No. 1048 of 1977, against the State of Orissa,  Commissioner of  Commercial Taxes, Orissa, Sales Tax Officer,  Sambalpur Circle,  Divisional Forest  Officer, Roirkhol Division,  and Divisional  Forest Officer, Deogarth

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Division. Two main grounds were taken in the 45 said writ  petition, namely,  (l) 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- D      While the said writ petition was pending, the Sales Tax Officer, Sambalpur  I Circle,  by his assessment order dated November 28, 1978, assessed the Respondent Firm to tax under the Orissa  Act for  the period  April 1, 1977, to March 31, 1978. He  held that  the Respondent Firm had paid royalty to the Forest  Department in the aggregate sum of Rs. 11,52,175 on which  purchase tax  at the  rate of  ten  per  cent  was payable by  it. It was further stated in the said assessment order that the Respondent  Firm had not shown this amount in its gross  turnover.  Accordingly,  the  Sales  Tax  Officer enhanced the  gross turnover  to include  this  amount.  The amount of  purchase tax  assessed  on  the  Respondent  Firm amounted to Rs. 1,16,217.50p. Thereupon, the Respondent Firm and its  partner amended  the said  writ petition No. O.J.C. 1048 of  1977  and  challenged  the  validity  of  the  said assessment order  and prayed  for quashing  the same.  On an application  made  by  the  Respondent  Firm  and  its  said partner, by  an interim  order the  High  Court  stayed  the recovery of  the amount  of purchase tax pending the hearing and final disposal of the said writ .      Apart  from  the  Respondent  Firm,  203  other  forest contractors who had entered into similar agreements with the State Government also filed writ petitions in the High Court challenging the  validity of the impugned provisions. By its judgment under appeal, 46 the High  Court allowed  the  said  petition  filed  by  the Respondent Firm.  As in  the case of the writ petition filed by the  Respondent Company  and very  probably for  the same reason, the  High Court  did not pass any order quashing the said assessment  order consequent  upon it  holding that the impugned provisions were ultra vires the Act. Judgment of the High Court      All the  said  209  writ  petitions  were  heard  by  a Division Bench  of  the  Orissa  High  Court  consisting  of S.K.Ray, C.J.,  and N.K.  Das,  J.  The  main  judgment  was delivered by  Das. J.,  while Ray,  C.J., delivered a short, concurring judgment.  Das, J.  rejected the  contention that the  effect   of  the   word  ’supersession’   used  in  the Notifications dated  December 29,  1977, was to wipe out the liability under  the earlier  Notifications  dated  May  23, 1977. He  held that  the Notifications  dated  May  23,1977, remained in force until the Notifications dated December 29, 1977, came into operation. So far as the other points raised

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before the  High Court  were concerned,  Das, J., summarized the conclusions  reached by  the court  in paragraphs 19 and 2() of his judgment as follows:      "19. For the reasons stated above, we hold as follows:      (1)  That the  bamboos all i 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           arc ultra vires the provisions of the 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, arc 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 47      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 series of sales in question the first sale,  that is  the taxable  event, started  from  the Divisional Forest  Officer and  that the  Divisional  Forest Officer was  the taxable  person who had sold taxable goods, namely, timber,  and that as what was sold by the Divisional Forest Officer  was purchased  by the petitioners before the High Court  the identity of goods sold and purchased was the same, and  that where  such a  sale was  taxed, the purchase thereof was  excluded from  the levy  of tax  by  virtue  of sections 3-B  and 8  of the  Orissa Act and consequently the levy of  purchase tax  by the impugned provisions was bad in law.      In view  of its  above findings, the High Court allowed all the  writ petitions and quashed the impugned provisions. The High  Court made  no order  as to  the costs of the writ petitions.      We will  set out the submissions advanced at the Bar at the hearing  of these  Appeals when we deal with the various points which fall to be decided by us. In order, however, to test the  correctness of  the judgment  of the High Court as also  of  the  rival  contentions  of  the  parties,  it  is necessary to  see  first  the  relevant  provisions  of  the constitution of  India as  also of the Orissa Act and of the various notifications issued thereunder. Constitutional provisions      The Orissa  Act received  the assent  of the  Governor- General of India on April 26, 1947, and was published in the Orissa Gazette  on May  14, 1947. Under section 1(13) of the Orissa Act, section 1 was to come into force at once and the rest of  the Orissa  Act on  such  date  as  the  Provincial Government  may   by  notification  in  the  Orissa  Gazette appoint. The  rest of  the Orissa Act was brought into force on August l, 1947. The Orissa Act is thus a pre-constitution Act. At  the date  when it was  enacted as also when it came into  force?   the  constitutional  law  of  India  was  the Government of 48

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India Act,  1935, prior  to  its  amendment  by  the  Indian Independence  Act,   1947.  Under   section  100(3)  of  the Government of  India Act 1935, the Legislature of a Province alone had  the power to make laws for a province or any part thereof in  respect any of the matters enumerated in List 11 in the  Seventh Schedule  to that Act, namely the Provincial Legislative List.  Entry 48  in the  provincial  Legislative List provided  for "Taxes  on  the  sale  of  goods  and  on advertisements". Thus,  under the  Government of  India Act, 1935, Sales  tax 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 news  papers" and  "Taxes on  advertisements other than advertisements published  in  newspapers"  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 , List ll in the Seventh schedule to the  Constitution,   namely,  the   State   List’   By   the constitution (Sixth  Amendment )  Act, 1956,  a  new  Entry, namely Entry  92A, was  inserted in the Union List and Entry 54 in  the State  List was substituted by a new Entry. Entry 92A in the Union List reads as follows:           "92A. Taxes on the sale or purchase of goods other      than newspapers,  where such  sale  or  purchase  takes      place in the course of inter-State trade or commerce."      The amended Entry 54 in List ll reads as follows:           "54. Taxes  on the sale or purchase of goods other      than newspapers, subject to the provisions of Entry 92A      of List I." 49      We  are   not  concerned  in  these  Appeals  with  the amendment made  in  Entry  55  in  the  State  List  by  the Constitution (Forty second Amendment ) Act, 1976. We are not concerned with Entry 92-B inserted in the Union List or with the extended  meaning given  to the  expression "tax  on the sale or  purchase of goods" by the new clause (29A) inserted in Article  366 of  the Constitution whereby that expression inter alia  includes a  tax on  the transfer  of property in goods (whether  as goods  or in some other form) involved in the execution  of a  works  contract,  by  the  Constitution (Forty-sixth  Amendment)  Act,  1982.  We  are  equally  not concerned in  these Appeals with the restrictions imposed by Article 286 of the Constitution on a State’s power to levy a tax on certain classes of sales and purchases of goods. The Orissa Act      In keeping  with  the  legislative  history  of  fiscal measures in general, the Orissa Act has been amended several times. Thus,  by the middle of July 1981 it had been amended twenty-eight times.  It is  needless to  refer  to  all  the provisions of  the Orissa  Act or  of the various amendments made therein  except such  of them  as are  relevant for the purpose of these Appeals.

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    The Orissa  Act when  enacted levied  a tax only on the sales of  goods taking  place in  the province of Orissa. By the Orissa Sales tax (Amendment) Act, 1958 (Orissa Act No.28 of 1958),  a purchase tax was for the, first time introduced in the State of Orissa with effect from December 1, 1958.      The tax under the Orissa Act is levied not on goods but on sales and purchases of goods or rather on the turnover of sales and  turnover of purchases of goods of a dealer. Under section 4(2)  of the  Orissa Act, a dealer becomes liable to pay tax  on sales  and purchases  with effect from the month immediately following  a period  not exceeding twelve months during which  his gross  turnover exceed 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 50 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,      directly  or   otherwise,   whether   for   commission,      remuneration  or   other  valuable   consideration  and      includes-           (i) ...a  company, ...  firm or  association which      carries on such business;           Explanation-The manager  or agent  of a dealer who      resides outside  Orissa and who carries on the business      of purchasing  or selling  or supplying goods in Orissa      shall, in  respect of such business, be deemed(l to l c      a dealer for the purposes of this Act".      It was on the basis of the above Explanation to section 2(c) that  the notice  impugned in  Civil Appeal  No. 219 of 1982 was issued to the manager of the Respondent Company and he was  sought to  be made  liable to purchase tax under the said Notifications dated May 23, 1977.      Under the  aforesaid definition  of the  term  "dealer" before a  person can be a dealer, he must be carrying on the business of  purchasing or selling or supplying goods. There was no  definition of  the word "business" in the Orissa Act and the orissa High Court had interpreted it as connoting an activity carried on with the object of making profit. By the Orissa Sales  Tax (Amendment) Act 1974 (Orissa Act No. 18 of 1974), a  definition of  "business" was  for he  first  time inserted as clause (b) in section 2, the original clause (b) which defined  the term contract" having been omitted by the Orissa Sales  Tax (Amendment)  Act, 1959. after the decision of this  Court in  The State of Madras v. Gannon Dunkerley & Co. (Madras) 51 Ltd1. The  effect of  this definition of the term "business" was to  do away  with the requirement of profit motive. As a consequence of  the decision  of the  Orissa High  Court  in

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Straw Products  Limited v.  State of Orissa and others2, the above definition  of the  term "dealer"  in clause  (c)  was substituted with  retrospective effect  by the  Orissa Sales Tax (Amendment)  Ordinance, 1979 (Orissa Ordinance No. 11 of 1979),  which   was  replaced   by  the   Orissa  Sales  Tax (Amendment) Act,  1979 (Orissa  Act No.  24 of 1979). In the Straw Product’s Case the petitioner company had entered into two agreements  with the State of Orissa. From the facts set out in  the judgment of the High Court in that case it would appear that  these two agreements were similar to the Bamboo Agreement  before   us.  The   Divisional  Forest   Officer, Balliguda Division,  called upon  the petitioner  company to reimburse to  him the  amount of  sales tax  to which he had been 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 carried on business  in a  particular commodity  depended  upon  the volume, frequency, continuity and regularity of transactions of purchase  and sales  in a  class of  goods, and  as these ingredients were  not satisfied  in the cases before it, the transactions were not exigible to sales tax. The judgment in that case  was delivered  on May  3, 1977. The State as also the Commissioner of Sales Tax, (1) [1949] S.C.R. 379. (2) (1978) 42 S.T.C. 302-(1977)1 C.W.R. 455. 52 Orissa, have  come in  appeal by Special Leave in this Court against the  said  judgment  and  these  appeals  are  still pending, being Civil Appeals Nos. 1237-1238 of 1979 State of Orissa and  others v.  Straw Products Limited and others and Civil Appeals  Nos. 1420-1421  of 979  Commissioner of Sales Tax, Orissa and another v. Straw Product Limited and others. However, to  get over  the judgment  of the  High Court, the State Government issued the two impugned Notifications dated May 23,  1977, which  were replaced along with others by the said two Notifications dated December 29, 1977. Further, the Governor  of   Orissa  promulgated   the  Orissa  Sales  Tax (Amendment and Validation) Ordinance, 1979 (Orissa Ordinance No. I  l of  1979), substituting  with retrospective  effect from the  date of  the Orissa Act the definition of "dealer" given in  clause (c)  of section  2. The  said Ordinance was repealed and replaced by the Orissa Sales Tax (Amendment and Validation) Act,  1979 (Orissa  Act No.  24 of  1979).  This amending and validating Act came into force with effect from July 19,  1979, being  the date  of the  promulgation of the said Ordinance. Section 3 of the said amending Act validated assessments or re-assessments, levy or collection of any tax

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or imposition of any penalty made or purporting to have been made under  the Orissa  Act before  July 19, 1979, as if all such acts  had been done under the Orissa Act as so amended, notwithstanding anything  contained in  any judgment, decree or order  of any  court or  other authority to the contrary. The substituted definition of "dealer", omitting the portion thereof not relevant for our purpose, reads as follows:      "(c) ’Dealer’  means any  person  who  carries  on  the      business   of   purchasing,   selling,   supplying   or      distributing goods,  directly or otherwise, whether for      cash  or   for  deferred  payment  or  for  commission,      remuneration  or   other  valuable   consideration  and      includes-           (i) ...  a company,  ... firm or association which      carries on such business;      X X X X           Explanation I-y- and every local branch of 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. 53           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 carrying on  the   business  of  purchasing,  selling,  supplying  or distributing goods.  Writ petitions challenging the validity of this  amending and validating Ordinance and Act have been filed in  this Court under Article 32 of the Constitution of India and  are still  pending. These writ petitions are Writ Petition Nos.  958 of 1979 Orient Paper Mills and another v. State of Orissa and others and Writ Petition No. 966 of 1979 Straw Products  Limited and  another v.  State of Orissa and others.      We are  concerned in  these Appeals only with purchases and  sales   of  goods   and  not   with  their   supply  or distribution. The terms "sale" and "purchase" are defined in clause  (g)   of  section   2.  Clause   (g),  omitting  the Explanation which  is not relevant for our purpose, reads as follows:           "(g)  ’Sale’   means,  with  all  its  grammatical      variations and  cognate expressions,  any  transfer  of      property in goods for cash or deferred payment or other      valuable  consideration,   but  does   not  include   a      mortgage, hypothecation, charge or pledge and the words      "buy" and "purchase" shall be construed accordingly;      X    X    X    X    X 54      The expressions  "goods". "purchase  price"  and  "sale price" are  defined in clause (d), (ee) and (h) of section 2

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as follows:           " (d)  ’Goods’ means all kinds of movable property      other  than   actionable  claims,   stocks,  shares  or      securities and  includes all  growing crops,  grass and      things attached  to or  forming part  of the land which      are agreed before sale or under the contract of sale to      be severed,           " (ee)  ’Purchase Price’  means the amount payable      by a  person as valuable consideration for the purchase      or supply  of any  goods less  any sum  allowed by  the      seller as  cash discount  according to  ordinary  trade      practice, but  it shall include any sum charged towards      anything done  by the seller in respect of the goods at      the time  of or  before deli  very of  such goods other      than the  cost of  freight or  delivery or  the cost of      installation when such cost is separately charged;           "(h) ’Sale  Price’ means  the amount  payable to a      dealer as  consideration for  the sale or supply of any      goods, less  any sum allowed as cash discount according      to ordinary  trade  practice,  but  including  any  sum      charged for  anything done  by the dealer in respect of      the goods at the time of, or before delivery thereof".      As the  liability of  a dealer  to pay  tax  under  the Orissa Act  depends upon  his gross  turnover exceeding  the limit prescribed  by ‘  section 4(2), it is necessary to 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". G      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 55      than those  declared under section 3-B effected or made      during a given period;      X              X              X                   X           "(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 (I)  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  his  taxable      turnover;           Provided that  the State Government may, from time      to time, by notification and subject to such conditions      as they  may impose,  fix a  higher  rate  of  tax  not      exceeding thirteen  per cent  or any  lower tax payable      under this  Act on  account of  the sale or purchase of      any  goods   or  class   of  goods  specified  in  such      notification;      The words  "at the  rate of  six per  cent" in the main subsection (I)  were substituted  for the words "at the rate of five  per cent" and the words "not exceeding thirteen per cent" were  substituted for the words "not exceeding ten per

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cent" in  the first  proviso thereto by the Orissa Sales Tax (Amendment) Act,  1967 (Orissa  Act No.  7  of  1976),  with effect from May 1, 1976.      Amongst the  amendments made  by the  Orissa Sales  Tax (Amendment) Ordinance,  1977, which  were re-enacted  by the Orissa Sales Tax (Amendment) Act, 1978, was the substitution of sub-section  (I) of  section  5  and  the  first  proviso thereto by  a new  sub-section (1).  Thus, with  effect from January 1, 1978 sub-section (1) reads as follows: 56      5. Rate of Tax           (1) The  tax payable  by a  dealer under  this Act      shall be  levied on  his taxable turnover at such rate,      not exceeding  thirteen percent,  and subject  to  such      conditions as  the State  Government may,  from time to      time, by notification, specify;      X              X              X                   X      The other  proviso to  the said sub-section (1) are not relevant for  our purpose.  Sub-section (2) (A) of section S defines the  expression "taxable  turnover" as  meaning that part of  a dealer’s  gross turnover  during any period which remains after  deducting therefrom the turnover of sales and purchases specified in that subsection.      Section 3-B confers upon the State Government the power to declare what goods or classes of goods would be liable to tax on  the turnover  of purchases.  Section  3-B  reads  as follow.      "3-B. Goods liable to purchase tax      The  State  Government  may,  from  time  to  time,  by notification, declare  any goods  or class  of goods  to  be liable to tax on turnover of purchases:           Provided that no tax shall be payable on the sales      of such  goods or  class of  goods declared  under this      section "      This section was inserted in the Orissa Act with effect from December  1, 1958,  by the Orissa Sales Tax (Amendment) Act, 1958.      As the  tax under  the Orissa  Act is  intended to be a single  point   levy,  section  8  confers  upon  the  State Government the  power 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 57      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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point in  a series of sales. The goods so prescribed have no relevance to these Appeals.      Notifications under the Act      In exercise  of the  powers conferred by section 3-B of the Orissa Act the State Government from time to time issued notifications declaring  what goods or classes of goods were liable to  tax on  the turnover of purchases. As a result of the amendments  made in  the rates  specified in sub-section (1) of  section 5  and the first proviso to that sub-section by the  Orissa Sales  Tax, (Amendment) Act 1976, with effect from May  1,1976, all these notification were superseded and a  fresh  list  of  goods  declared  under  section  3-B  by Notification No. 20209C.T.A.L.-14/76-F, dated April 23,1916. All the  notifications issued  from time  to time  under the first proviso to sub-section (1) of section 5 specifying the rates of  purchase tax  on goods  declared under section 3-B were also  superseded and  new  rates  of  purchase  tax  in respect of  the goods  declared in  the said  new list  were specified with  effect from  May 1.1976, by Notification No. 20212-C.T.A.-14/76-F, dated  April 23,1976. But is these two Notifications which were amended by the impugned Notifica- 58 tions  dated   May  23,   1977.  The   said   two   impugned Notifications are as follows:      "Notification S.R..O.No. 372/77 dated the 23rd May 1977           In exercise of the powers conferred by section 3-B      Of the  Orissa Sales  Tax Act,  1947 (Orissa  Act 14 of      1947), the  State Government  do  hereby  declare  that      standing trees  and bamboos  agreed to be severed shall      be liable  to tax  on turnover  of purchase with effect      from the  first day  of June,  1977 and direct that the      following amendment  shall be  made in the notification      of Government  of Orissa, Finance Department No. 20209-      CTA-14/76-F., dated 23rd April 1976.                          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 -----------------------------------------------------------           (1)                      (2) -----------------------------------------------------------           2-A                 Bamboos agreed to be severed.           16-A                Standing trees agreed to be                               Severed.      "Notification S.R.O.  No; 373/77  dated  the  23rd  May 1977-           In exercise  of the  powers conferred by the first      proviso to  sub-section (1)  of section 5 of the Orissa      Sales Tax  Act, 1947 (Orissa Act 14 of 1947), the State      Government  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 59      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)

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------------------------------------------------------------      16-A     Bamboos agreed to         Ten per cent               served to be      2-A  Standing trees agreed    Ten per cent."               to be severed      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,   1916,  all   these  notifications   were superseded and  new rates  specified with effect from May 1, 1976, by  Notification No. 20215-C-T.A.-14/76 F. dated April 23, 1976.  By Notification  No. S.R.A.  374/77 dated May 23, 1977, made  in exercise of the powers conferred by the first proviso  to   sub-section  (1)   of  section  5,  the  State Government directed  that with effect from June 1, 1977, the said Notification No. 20215-C.T.A. -14/76-F. dated April 23, 1976, should  inter alia be amended by inserting a new entry therein as  Entry No.  86-A, By this entry the rate of sales tax on  timber was  enhanced to ten per cent, Tn view of the amendment made in sub-section (1) of section 5 by the Orissa Sales Tax  (Amendment)  Ordinances  1977  (replaced  by  the Orissa  Sales   Tax  (Amendment)   Act,  1978),   the  State Government issued  three Notifications,  (1)  declaring  the goods liable  to purchase  tax, (2)  specifying the rates of purchase tax  on such goods. and (3) specifying the rates of sales  tax.   The  relevant  portions  of  the  notification declaring the goods liable to purchase tax read as follows:           "Notification  No.  67178-C.T.A.  135/77  (Pt.  )-      Fdated the 29th December 1977. 60           S.R.O.No.900/77-In exercise of powers conferred by      section 3-B  of the  Orissa Sales Tax Act, 1947 (Orissa      Act 14  of 1947),  and in  supersession of all previous      notifications  issued   on  the   subject,  the   State      Government do  hereby declare  that the goods mentioned      in column  (2) of  the schedule  given below  shall  be      liable to tax on turnover of purchase, with effect from      the first day of January, 1978.                           SCHEDULE   Serial No.             Description of goods ------------------------------------------------------------      (1)                         (2) ------------------------------------------------------------  X            X          X                    X      2.                  Bamboos agreed to be severed  X             X         X                    X      17.                 Standing trees agreed to be severed  X             X         X                    X . "           The  relevant   portions   of   the   Notification specifying the rates of purchase tax read as follows:      Notification No.67181-C.T.A.  135/77-F. dated  the 29th December 1977           S.R.O. NO.  901/77-  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 1971) and in supersession      of all  previous notifications  in this  regard,  State      Government do  hereby direct  that with effect from the      first day  of January, 1978 the tax payable by a dealer

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    under the  said Act  on account  of the purchase of the      goods specified  in column  (2) of  the schedule  given      below, shall  be at  the rate specified against each in      column (3) thereof; 61                           SCHEDULE   Serial No.      Description of goods1          Rate of Tax ------------------------------------------------------------      (1)                (2)                         (3) ------------------------------------------------------------      X            X           X               X      2.          Bamboos agreed to be         Ten per cent                  severed      X           X            X               X      17.         Standing trees agreed to    Ten per cent be                  served      X           X           X                X      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 (I) 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      or 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 Sl.No.          Description of goods             Rate of Tax ------------------------------------------------------------  (1)                 (2)                            (3) ------------------------------------------------------------  X             X               X             X  101          All other articles            Seven percent".  Entries Nos. 2 and 17 in the schedule to each of the said 62 Notifications Nos.-  67178-C.T.A.-135/17 (Pt.)-F  and 67181- C.T.A135/77-F were also struck down by the High Court by its judgment under appeal. The ambit of the Orissa State’s taxing power-      The validity  of the  impugned provisions is challenged on two grounds: (1) they levy a tax on what is not a sale or purchase of  goods and are, therefore, unconstitutional, and (2) assuming  the subject-matter  of the impugned provisions is a  sale or purchase of goods, they levy a tax on the same goods both  at the  sale point  and purchase-point  and  are therefore, ultra  vires the Orissa Act. In order to test the correctness of  these challenges, it is necessary to bear in mind the ambit of the Orissa State’ s power to levy a tax on the sale or purchase of goods This power is subject to a two fold  restriction-one   Constitutional;   and   the   other, statutory. The Constitutional restriction on the legislative competence of  the Orissa  State in this behalf is shared by it in  common with  all other  States, while  the  statutory restriction is self-imposed and flows from the provisions of the Orissa Act.      We have already set out earlier the relevant provisions of the  Government of  India Act., 1935, the Constitution of India and the Orissa Act. To recapitulate, the Orissa Act is

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a pre-Constitution  - Act  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 List  II in  the  Seventh Schedule to  that Act.  After the  coming into  force of the Constitution  of   India  the  power  of  the  Orissa  State Legislature to  enact law  imposing a  tax on  the  sale  or purchase of  goods (other than newspapers) is to be found in Articles 245(1) and 246(3) of the Constitution of India read with Entry  54 of  the Constitution of India. Thus, Entry 54 in the  State List  in the  Constitution of  India is,  with certain modifications,  the successor  entry to  Entry 48 in the Provincial  Legislative List  in the Government of India Act, 1935.      While Entry  48 spoke  of "taxes on the sale of goods", Entry 54 speaks of "taxes on the sale or purchase of goods". The addition  of  the  word  "purchase"  permits  the  State Legislature to  levy a  II purchase tax and does not confine its taxing power merely to levying 63 a sales  tax. Sale  and purchase  are  merely  two  ways  of looking at the same 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 of  the Government of India Act, 1935, came up for interpretation by this Court  in The  Sales Tax  officer, Pilibhit  v. Messrs. Budh Prakash  Jai Prakash. This Court held in that case that there having  existed at  that 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 ultra vires.      In State  of Madras  v. Gannon Dunkerly & Co., (Madras) Ltd., another  Constitution Bench of this Court held that at the time when the Government Or India Act, 1935, was enacted the expression "sale of goods" was a term of well-recognized import in  the general law relating to sale of goods and the legislative practice  relating to that topic and, therefore, that expression  must be  interpreted when  used in the said Entry 48  as having the same meaning as in the sale of goods Act,  1930.   The  Court  further  held  that  any  attempt, therefore, to  give to  the expressions  "sale", ’ goods" or "sale of goods" an artificial meaning or an enlarged meaning or  to   bring  within   their  scope   what  would  not  be comprehended  within   it   would   be   ultra   vires   and unconstitutional. The  court further  observed (at page 413- 4):      " ...  both under  the common  law and  the statute law      relating to  sale of  goods in England and in India, to      constitute a  transaction of  sale there  should be  an      agreement, express  or implied, relating to goods to be      complete (1) [1955] I S.C.R. 243, 246- 64      by passing  of title  in those  goods.  It  is  of  the

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    essence of this concept that both the agreement and the      sale should  relate to  the same  subject-matter. Where      the goods  delivered under  the contract  are  not  the      goods contracted  for, the purchaser has got a right to      reject them,  or to  accept them  and claim damages for      breach of  warranty. Under  the law,  therefore,  there      cannot be an agreement relating to one kind of property      and a  sale as  regards another.  We are accordingly of      opinion  that   on  the   true  interpretation  of  the      expression ’sale  of goods’  there must be an agreement      between the  parties for  the sale of the very goods in      which eventually property passes-"      In that  case the  definition of  term  "sale"  in  the Madras General  Sales Tax  Act, 1939,  was  enlarged  by  an amendment so  as to include "a transfer of property in goods involved in  the execution  of a  works  contract"  and  the definition of  "turnover" was  expanded to include within it the amount  payable for  carrying out  a works contract less such portion  as may  be prescribed.  A  new  definition  of "works contract"  inserted in  the said  amendments included within its meaning inter alia the construction, fitting but, improvement or repair of any building, road, bridge or other immovable property.  The Court  held these  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  specification contained in  the agreement  and in  consideration therefore 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. (Madras)  Ltd. 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:  sec,  for instance, Bhopal  Sugar Industries Ltd. M.P. and another .v. D.P. Dube,  Sales Tax  Officer, Bhopal  Region,  Bhopal  and another (1) A.I.R. 1964 SC 1037. 65 K.L. Johar  and Company  v. Deputy  Commercial  Tax  Officer Joint Commercial  Tax Officer.  Harbour Div  II.  Madras  v. Young, Men’s  Indian Association  (Reg.) Madras and others ; and State  of Maharashtra and another v. Champalal Kishanlal Mohta2.      In Addition  to the above Constitutional limitations on the Orissa State’s power to tax sales or purchases of goods, there are  other restrictions  imposed by sections 3-B and 8 of the Orissa Act. A State is free when there is a series of sales in  respect of  the same goods to tax each one of such sales or  purchases in that series or to levy the tax at one or more  points  in  such  series  of  sales  or  purchases. Legislation of  all States  in this  respect is not uniform. Some States have adopted a single-point levy, others, a two- point levy; and yet others, a multi-point levy. The State of Orissa has  adopted a single point levy. It has done this by enacting the  provision to  section 3-B  and the  proviso to section 8.  Under the  proviso to  section  3-B  no  tax  is payable on  the sales  of goods  or class  of goods declared under that  section to be liable to taxes on the turnover of

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purchase-. The  proviso to  section 8  states that "the same goods shall  not be taxed at more than one point in the same series of  sales or purchases by successive dealers". Where, therefore, In  a series of sales by successive dealers sales tax or purchase tax is levied at a particular point, neither sales tax nor purchase tax can be levied at another point in the same  series ; and similarly can be levied in respect of the same transaction or any other transaction of sale of the same goods.      As any  attempt on  the part  of the State to impose by legislation sales  tax or  purchase tax  in respect  of what would not  be a  sale or  a sale of goods or goods under the Sale of Goods Act, 1930, is unconstitutional, any attempt by it to  do  so  in  the  exercise  of  its  power  of  making subordinate  legislation,   either  by  way  of  a  rule  or notification would be equally unconstitutional; and so would such an act on the part of the authorities under a Sales Tax Act  purporting  to  be  done  in  the  exercise  of  powers conferred (1) [1965] 2 S.C.R. 112. (2) [1970] 3 S.C.R. 680. (3) [1971] 1 S.C.R. 46. 66 by  that  Act  or  any  rule  made  or  notification  issued thereunder. Similarly where any rule or notification travels beyond the  ambit of the parent Act, it would be ultra 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 purchase  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 impugned provisions a new class of goods not known to law sought to  be created  and made exigible to purchase tax and that this  attempt on  the part of the  State Government was unconstitutional as being beyond its legislative competence. The High Court held that the impugned provisions amounted to a tax  on an agreement of sale and not on a sale or purchase of goods.  It further  held  that  in  the  case  of  Bamboo Contracts, the  impugned provisions also amounted to levying a tax on a profit a prendre.      The term  "goods" is defined in clause (7) of section 2 of the Sale of Goods Act as follows      (7) ’goods’  mean every  kind of movable property other      than actionable  claims and  money; and  includes stock      and shares, growing crops, grass and things attached to      or forming  part of  the land  which are  agreed to  be      served before sale or under the contract of sale ;" 67      We have  already reproduced  earlier the  definition of

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"goods" given in clause (d) of section 2 of the, Orissa Act. However for  the purposes of ready reference and comparison, we are  reproducing the  same here again. That definition is as ’follows:           "(d) ’Goods’  means all  kinds of movable property      other  than   actionable  claims,   stocks,  shares  or      securities and  includes all  growing crops,  grass and      things attached  to or  forming part  of the land which      are agreed before sale or under the contract of sale to      be severed "      What is  pertinent to note, however, is that under both the definitions  the term  ’goods" mean all kinds of movable property   (except   the   classes   of   movable   property specifically excluded) and includes growing crops, grass and things attached  to or  forming part  of the  land which are agreed to  be severed  before sale  or under the contract of sale. The  Transfer of  Property Act, 1882 (Act IV of 1882), does not give any definition of the term "movable property", but clauses  (36) of  section 3  of the General Clauses Act, 1897 (Act  X of  1897), clause  (27) of  the Orissa  General Clauses Act,  1937 (Orissa Act I of 1937), and clause (9) of section 2  of the Registration Act, 1908 (Act XVI) of (1908) do. Clause  (36) of  section 3  of the  General Clauses  Act provides as follows:           "(36) ’movable  property, shall  mean property  of      every description, except immovable property."      The definition  in the Orissa General Clauses Act is in identical terms.  The definition  in the Registration Act is as follows:           "(9) ’moveable property’ includes 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, 68 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  any  thing      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 allowances,  rights  to  ways,  lights,  ferries, fisheries or  any other  benefit to  arise out  of land, and things attached  to the  earth or  permanently  fastened  to anything I) which is attached to the earth, but not standing timber, growing crops nor grass."      What is  pertinent to  note about  these definitions is that things  attached to  the earth  are immovable property. The expression "attached to the earth" is defined in section 3 of the Transfer of Property Act as follows:

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    " ’attached to the earth, means-      (a)  rooted in  the earth,  as in the case of trees and           shrubs;      (b)  imbedded in  the earth, as in the case of walls or           buildings; or      (c)  attached to  what is so imbedded for the permanent           beneficial  enjoyment  of  that  to  which  it  is           attached."        Thus,  while trees  rooted in the earth are immovable property as  being things attached to the earth by reason of the definition of the term "immovable property" given in the General Clauses  Act, the Orissa General Clauses Act and the Registration Act, read with the definition of the expression "attached to  the earth"  given in  the Transfer of Property Act, standing  timber is  movable property  by reason of its being excluded from the definition of 69 "immovable property" in the Transfer of Property Act and the Registration Act  and by being expressly included within the meaning  of   the  term  "movable  property"  given  in  the Registration  Act.   The  distinction  between  a  tree  and standing timber  has been pointed out by Vivian Bose, J., in his separate but concurring judgment in the case of Shrimati Shantabai v. State of Bombay and others 1 as follows:           "Now, what  is  the  difference  between  standing      timber and  a tree?  It is  clear that  there must be a      distinction because  the Transfer of Property Act draws      one in  the  definitions  of  ’immovable  property  and      ’attached to  the earth’;  and it  seems to me that the      distinction must  lie in  the difference between a tree      and timber.  It is  to be  noted that  the exclusion is      only of ’standing timber’ and not of ’timber trees ’           "Timber is  well enough  known to be-wood suitable      for building  houses, bridges,  ships, etc., whether on      the tree  or cut  and seasoned.’  (Webster’s Collegiate      Dictionary). Therefore,  ’standing timber’  must  be  a      tree that  is in  a state  fit for  these purposes and,      further, a  tree that  is meant  to be  converted  into      timber so shortly that it can already be looked upon as      timber 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 (1) [1959] S.C.R. 265, 275 6. 70      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

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(including  bamboos)   rooted  in  the  earth  being  things attached to the earth are immovable property and if they are standing  timber   are  movable  property  trees  (including bamboos) rooted  in the earth which are agreed to be severed before sale  or under  the contract  of sale  are not only a movable property but also goods.      In this  connection it may be mentioned that in English law there  exists (or  rather existed)  a difference between fructus  natwriles   and   fructus   industriales.   Fructus naturales are  natural growth  of the  soil, such as, grass. timber and fruit on trees, which were regarded at common law as part  of the  soil. Fructus  industriales are-  fruits or crops produced  "in the  year, by the labour of the year" in sowing and  reaping, planting,  and gathering  e.g. corn and potatoes. Fractus  industriales are  traditionally  chattels being considered  the "representative"  of  the  labour  and expense of the occupier and thing independent of the land in which they  are growing  and were not treated as an interest in land.  Fructus naturales  are regarded until severance as part of  the soil  and an  agreement conferring any right or interest in  them  upon  a  buyer  before  severance  was  a contract or sale of an interest in land and were, therefore, governed by  section 4  of the Statute of Frauds of 1677 (29 Car. II  c. 3). If they were severed before sale, section 17 of that  Statute applied  P (see  Benjamin’s Sale  of Goods, Second Edition,  para  90,  p.  62)  This  distinction  was, therefore, important  in England  for the  purposes  of  the formalities required  under the Statute of Frauds. Under the definition of  goods’ given  in section  62 (1)  of the  old English Sale  of Goods  Act of  1893, "goods" included inter alia all  industrial growing crops and things attached to or forming part  of the  land which  were agreed  to be severed before sale  or under  the contract of sale. The formalities required for  a contract  for the sale of goods of the value of L10  and upwards  by section  17 of the Statute of Frauds were re-enacted in section 4 of the Sale of Goods Act, 1893. This section  was repealed by the Law Reform (Enforcement of Contracts) Act,  1954. The  definition of ’goods’ in section 61 (1) of the new Sale of Goods Act, 1979, is the same as in 71 the earlier  Sale of  Goods Act.  Thus, the  position now in English law  is that crops and other produce whether fructus naturales or  fructus industriales  (except in the case of a sale without  severance on  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.  The State of Bombay 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: (I)  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  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  of  the interpretation placed  on Entry 54 in List II in the Seventh Schedule to  the Constitution of India by this Court a State cannot levy  a tax  on the  sale or purchase of any property

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other than "goods" .      The submission  of the  Respondent  that  the  impugned provisions levied  a purchase  tax on immovable property and not on  goods and hence travelled beyond the taxing power of the State  Government under the said Entry 54 was based upon the omission in the impugned provisions of the words "before sale or  under the  contract of  sale." It  was  urged  that unless these  words  qualified  the  phrase  "agreed  to  be severed", standing  trees and  bamboos would  not be "goods" within the  meaning of  the definition  of that  term in the Sale of  goods Act  and the  Orissa Act. The High Court held that the impugned provisions amounted to levying a tax on an agreement of  sale and  not  on  actual  sale  or  purchase. According to  the High  Court, on  tax can be imposed unless the taxable  event (namely,  the transfer of property in the goods from  the  seller  to  the  buyer)  takes  place;  and standing trees including bamboos) being (1) [1959] Supp. 2 S.C.R. 339. 349- 72 unascertained goods, under the forest contracts entered into by the State Government, they continue to be the property of the State  Government until felled and, therefore, the title to such  trees or  bamboos is  transferred in  favour of the forest contractor  only when the trees or bamboos are felled and severed  after complying  with  the  conditions  of  the forest contract. We find that there is a fallacy under lying the  above   submissions  of  the  Respondents  and  in  the reasoning of  the High  Court, the  fallacy  being  to  read merely the  description of  the goods  given in the impugned provisions by  itself  and  not  in  conjunctions  with  the governing  words  of  the  said  provision.  These  impugned provisions declare  that standing trees agreed to be severed and bamboos  agreed to  be severed shall be liable to tax on the turnover  of purchases.  The tax  that is  levied  under section 3-B  is not on goods declared under that section but on the turnover of purchases of such goods. It one reads the Notifications issued under section 3-B and 5 (1) as a whole. it is  clear that  the taxable  event is not an agreement to sever standing  trees or bamboos but the purchase of bamboos or standing trees agreed to be severed.      Does the absence of the words "before sale or under the con tract  of sale"  make any  difference to this position ? The answer  in our opinion must be in the negative. The very use of  the word  "agreed" in the description of goods shows that there  is to  be an agreement between the buyer and the 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  the first  blush, therefore, it  would appear  that the  goods which  form the subject matter of the impugned provisions are either bamboos and standing  P 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. 73

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    (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 the seller to the buyer,      the contract  is called  a sale, but where the transfer      of the  property in  the goods  is to  take place  at a      future time  or subject to some condition thereafter to      be fulfilled,  the contract  is called  an agreement to      sell.           (4) An  agreement to  sell becomes a sale when the      time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred."      Thus, where  there is  a transfer from the buyer to the seller of property in the goods which are the subject-matter of the  agreement to  sell, the  contract of sale, is a sale but when  the transfer  of property  in the goods is to take place  at  a  future  time  or  subject  to  some  condition thereafter to be fulfilled, it is an agreement to sell which become a  tale when  the time elapses or such conditions are fulfilled In  the first case the contract is executed, while in the second case it is executory      The distinction  between an  agreement to sell and sale and the  legal consequences  flowing  from  each  have  been succinctly stated  in Benjamin’s  Sale of Goods, paras 25-26 at page 23, as follows:           "Agreement to  sell .  .An Agreement  to  sell  is      simply a  contract, and as such cannot give rise to any      rights in  the buyer  which are  based on  ownership or      possession, but  only to claims for breach of contract.      In the normal case at least, so long as the property in      the goods  remains in  the seller, they are his to deal      with as  he chooses (except that he may be in breach of      his contract  with  the  buyer);  they  are  liable  to      seizure in  distress or  execution as his property; and      they  pass   to  the   trustee  in  the  event  of  his      bankruptcy.           Sale. The Sale of Goods Act 1979 defines a sale in      the following passages:  first ’where  under a  contract of sale the property  in the goods is transferred from the seller to the buyer  the contract is called a sale’; and secondly, ’an agreement to sell becomes a sale when the time elapses or 74           the conditions  are fulfilled subject to which the      property in  the goods  is to  be  transferred.  It  is      therefore possible  for a  sale  within  the  statutory      meaning to  come about ill one of two ways: either by a      contract which  itself operates  to transfer  the goods      from the  ownership of the seller to that of the buyer,      the property passing when the contract is made; or by a      contract which  is initially only an agreement to sell,      but is  later performed  or executed by the 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

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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  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 terms of the contract,  the conduct  of the parties and circumstances of the  case. Further, unless a different intention appears, the rules  contained in  sections 20  to 24  are  rules  for ascertaining the  intention of the parties as to the time at which the  property in  the goods  is to  pass to the buyer. Sections 20 to 23 provide as follows:           "20. Specific goods in a deliverable state.           Where there  is an  unconditional contract for the      sale of  specific goods  in a  deliverable  state,  the      property in  the goods  passes to  the buyer  when  the      contract is made, and it is immaterial whether the time      of payment  of the price or the time of delivery of the      goods, or both, is postponed." 75 "21. Specific goods to be put into a deliverable state.      Where there  is a  contract for  the sale  of  specific goods and  the seller  is bound to do something to the goods for the  purpose of  putting them  into a deliverable state, the property  goes not pass until such thing is done and the buyer has notice thereof."           "22. Specific  goods m  a deliverable  state, when      the seller  has to  do anything  thereto  in  order  to      ascertain price. Where there is a contract for the sale      of specific  goods in  a  deliverable  state,  but  the      seller is  bound to  weigh, measure,  test or  do  some      other act  or thing with reference to the goods for the      purpose of  ascertaining the  price, the  property does      not pass  until such act or thing is done and the buyer      has notice thereof."      "23. Sale of unascertained goods and appropriation.      (1)  Where   there  is  a  contract  for  the  sale  of unascertained or  future goods  by description  and goods of that  description   and   in   a   deliverable   state   are unconditionally appropriated  to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of  the seller,  the property  in the goods thereupon passes to  the buyer.  Such assent  may be expressed or imp- lied,  and   may  be   given  either  before  or  after  the appropriation is made.      (2) Delivery to the Carrier.           Where in  pursuance of  the contract,  the  seller      deli- vers  the goods  to the  buyer or to a carrier or      other bailee  (whether named  by the  buyer or not) for      the purpose  of transmission to the buyer, and does not      reserve the  right of  disposal, he  is deemed  to have      unconditionally   appropriated   the   goods   to   the      contract."      We are  not concerned  with section  24 which  provides when property  in the  goods passes to the buyer where goods are delivered 76 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

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    they are  in such  state that the buyer would under the      con tract 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 eligible to tax is not an executory contract of  sale but  an executed  contract of  sale or  in other words,  not an  executory con  tract 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  arc identified and  agreed upon at the time the contract of sale is made, and the con tract is unconditional and further such standing trees  or bamboos  arc in a deliverable state, that is, nothing remains to be done except for the buyer to enter upon the land of the seller and to fell and remove the trees Of  bamboos,  as  the  case  may  be,  without  any  let  or hindrance. If  these factors  exist, then unless a different intention appears  either from  the terms of the contract or can be  infer red  from the conduct of the parties and other circumstances of  the case,  the property  in such  standing trees and  bamboos would  pass from seller to the buyer when the contract  is made  and it is immaterial whether the time of payment  of the  price or  the time of taking delivery of standing trees  agreed to be severed or bamboos agreed to be severed or  both is  postponed. If,  however,  there  is  an unconditional contract  for the  sale of  standing trees  or bamboos which  are unascertained,  then unless  a  different intention appears, the property in them would be transferred to the  buyer  when  the  standing  trees  and  bamboos  are ascertained and  it would  be equally immaterial whether the time of  payment of the price or the time of taking delivery of standing  trees agreed to be severed or bamboos agreed to be severed  or both  is postponed. In either event, the sale and purchase would be completed before severance as under 77 the impugned provisions there has to be a completed purchase of standing  trees or  bamboos agreed  to be severed for the impugned provisions to apply. The severance obviously cannot be before  sale because in that case the property would only pass and the sale completed after severance and the impugned provisions would  have no  application. Therefore,  for  the impugned provisions  to apply  the severance of the standing trees or  bamboos must  not be  before sale  but  under  the contract of  sale,  that  is,  after  the  sale  thereof  is completed. The  absence in  the impugned  provisions of  the words "before sale or under the contract of sale" thus makes ’no  difference.   The  subject-matter   of   the   impugned provisions is goods and the tax that is levied thereunder is on the completed purchase of goods.      The fallacy  underlying the reasoning of the High Court is that  it has  confused the question of the interpretation of the impugned provisions with the interpretation of Timber Contracts and  the Bamboo Contract. On the interpretation it placed upon  the Timber  Contracts it came to the conclusion that the  property in  the standing  trees passed only after severance and  after complying  with the  conditions of that contract ar  d, 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

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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  Bamboo  Contract  and  the  Timber  Contracts correct, the  transactions covered  by  them  would  not  be liable to  be taxed  under the  impugned provisions  and any attempt or action by the State to do so would be illegal but the validity of the impugned provisions would not be 78 affected thereby.  The challenge  to  the  validity  of  the impugned    provisions    on    the    ground    of    their unconstitutionality must, therefore, fail. Double taxation      Another ground  on which the High Court invalidated the impugned provisions  was that  bamboos agreed  to be severed and trees  agreed to be severed were the same as bamboos and timber after  they are felled and as bamboos and timber were liable to  tax at  the sale-point,  the taxation of the same goods at  the purchase point amounted to double taxation and was contrary  to the  provisions  of  the  Orissa  Act.  The general rule  of construction  is that a taxing statute will not be  so construed  as to result in taxing the same person twice in  respect of  the same  income or transaction. There is, however,  nothing to  prohibit the  legislature from  so enacting it.  If what  the High  Court held were correct, it would not be double taxation in the strict sense of the term because the  same person is not being taxed twice in respect of the  same transaction  but the  same transaction is being taxed twice  though in  different hands, that is, the seller in a transaction Or sale is being subjected to sales tax and the purchaser  in the same transaction is being subjected to purchase tax.  Not only does the Orissa Act expressly forbid this but it also forbids the levying of tax at more than one point in the same series of sales or purchases by successive dealers. The  provisions in  this behalf  are to be found in the proviso  to section  3-B and  the proviso  to section 8. Under the proviso to section 3-B, no tax is to be payable on the sales  of goods  or class  of goods  declared under that section to  be liable  to tax on the turn over of purchases. Under the proviso to section 8, the same goods are not to be taxed at  more than one point in the same series of sales or purchases by  successive  dealers.  According  to  the  High Court, under  the Orissa  Act all  goods are liable to sales tax unless  exempted from  tax by the State Government under section 6, and, therefore, if particular goods are liable to sales tax,  no purchase  tax is  leviable in  respect of the same  goods   unless  the   State  Government  issues  three notifications, namely,  (I) 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

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79      We find  that the  High  Court  has  misunderstood  the scheme     of  taxation   under  the   Orissa  Act.  As  the Notifications dated  December 29,  1917, 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 was  six  per  cent.  The  rate specified in  section 5  (1) was  for  both  sales  tax  and purchase tax.  As under the Orissa Act a dealer is liable to pay tax  on his turnover of sales as also on his turnover of purchases and  as  purchase  tax  is  payable  only  on  the turnover of  purchases of  those declared under section 3-B, in respect  of the  goods not  so declared a dealer would be liable to  pay sales  tax. Under the proviso to section 3-B, when any  goods are  declared to  be liable  to tax  on  the turnover of  purchases, no  tax is  payable on  the sales Or such goods.  Prior to January 1, 1978, a notification was to be issued by the Slate Government under the first proviso to section 5  (1) only  when it  wanted to  fix a  rate of  tax higher or  lower than  that specified in section 5(1). If no such  notification  was  issued,  then  the  tax  which  was payable, whether it was sales tax or purchase tax, was to be at the  rate mentioned  in section  5 (1).  The illustration given by  the High  Court was  in respect of goods for which under the first proviso to section 5(1) the State Government had notified  a rate of tax different from that mentioned in section 5(1).  Where, however, any goods were declared under section  3-B  to  be  liable  to  tax  on  the  turnover  of purchases, the  notification prescribing  a higher  or lower rate of  sales tax issued under the first proviso to section 5(1) would there upon cease to be operative by reason of the operation of  the proviso  to section  3-B and  it  was  not necessary to repeal expressly that notification. It was also not  necessary   for  the   State  Government   to  issue  a notification fixing  the rate  of  purchase  tax  unless  it wanted to  fix a rate higher or lower than that specified in section 5  (1). Where  no such  notification was issued, the rate of purchase tax would be the one which was mentioned in section 5(1), 80      After January  1, 1978,  the scheme of taxation is that no rate  of tax  is specified  in the  Orissa Act  but under section 5(1)  the State  Government is  given the  power  to notify from  time to time the rate of tax, whether sales tax or purchase tax, by issuing notifications. The notifications issued under  section 5  (1) fixing  the rate  of sales tax, namely,   Notification   No.   67184-C.T.A.-135/77-F   dated December 29,  1977, does not contain any entry in respect of bamboos or  timber or  in respect  of bamboos  agreed to  be severed or standing trees agreed to be severed. If they were 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 arc declared under  section 3-B  to be  liable  to  tax  on  the turnover  of   purchases,  the   residuary  entry   or  that

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particular entry  would automatically  cease to  operate  in respect of those goods by reason of the proviso to section3- 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  sub  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 respect to the impugned provisions was that the two  Notifications dated  December 29, 1977, having been made in  "supersession" of all previous Notifications issued on the subject, the effect was to wipe out all tax liability which had  accrued under  the Notifications  dated  May  23, 1977. The  High Court  held that  to hold that the liability was so  wiped out  would amount  to giving  a  retrospective effect to  the Notifications dated December 29, 1977, and as the Legislature  had not conferred upon the State Government the  power   to  issue  notifications  having  retrospective effect, to  so hold would be to render the said Notification void. The  High Court  referred to  a number of decisions on the question  of the  power to  make subordinate legislation having retrospective effect. 81      We find it unnecessary for the purpose of deciding this point to  refer to  any of the authorities cited by the High Court. Both  the Notifications  dated December 29, 1977, are in express terms made with effect from January 1, 1918. They do not  at all purport to have any retrospective effect and, therefore, they  could  not  affect  the  operation  of  the earlier Notifications  dated May  23, 1977,  until they came into force on January 1, 1978. Further, both section 3-B and section 5(1)  in express  terms confer  power upon the State Government to  issue  notifications  "from  time  to  time". Section 3-B  provides that "the State may, from time to time by notifications,  declare... "goods liable to purchase tax. Prior to  January 1, 1978, the proviso to sub-section (l) of section 5 provided that "The State Government may, from time to time  by notification...fix  a higher  rate not exceeding thirteen per cent or any lower rate of tax.. " Section S (I) as amended  with effect  from January,  1978, provides  that "The tax  shall be  levied...at  such  rate,  not  exceeding thirteen per  cent...as the  State Government may, from time to time  by notification,  specify." Thus,  the Power of the State Government  to  issue  notification  under  these  two sections is  to be  exercised by it "from time to time" and, therefore, the State Government can under section 5(1) issue a  notification   and  repeal  and  replace  it  by  another notification enhancing  or lowering  the  rate  of  tax  and similarly it  can issue  a notification  under  section  3-B declaring particular goods or class of goods to be liable to tax on the turnover of purchases 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

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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, 82 the expression  ’in suerssion  of all previous notification’ that was  done  was  to  repeal  and  replace  the  previous notifications  by   new  notifications.   By  repealing  and replacing the previous notifications by other notifications, the result  was not  to wipe out any liability accrued under the  previous  notifications.  If  this  contention  of  the Respondents  were  to  be  accepted,  the  result  would  be startling.  It   would  mean,   for  example,  that  when  a notification has been issued under section 5 (13 prescribing a rate  of tax, and that notification is later superseded by another notification  further enhancing the rate of tax, all tax liability  under the  earlier notification  is wiped out and no  tax can  be collected  by the  State  Government  in respect of  any transactions effected during the period when the earlier notification was in force.      The two Notifications dated December 29, 1977, impugned by the  Respondents were  not the  only notifications  which were issued  on that  date. There  was another  notification issued on  that date, namely, Notification No. 67184-C.T.A.- 135/77-F, directing  that with  effect from January l, 1978, the rate  of tax payable by a dealer under the Orissa Act on account of  the sale of goods specified in column (2) of the Schedule to  the said  Notifications would  be at  the  rate specified against  each in  column (3) thereof. The issuance of these  three Notifications  became necessary by reason of the change  brought about  in the  scheme of taxation by the Orissa Sales  Tax (Amendment) Ordinance, 1977. Prior to that Ordinance, the  rate of  tax was as specified in sub-section (l) of  section  5  with  power  conferred  upon  the  State Government by  the first  proviso to that sub-section to fix by notification  issued from  time to  time a higher rate of tax not exceeding the limit mentioned in the said proviso or to fix  from time  to time a lower rate of tax on account of the sale  or  purchase  of  any  goods  or  class  of  goods specified in such notification. Thus, if no notification was issued by  the State  Government enhancing  or lowering  the rate of  tax, the  tax, whether  sales tax  or purchase tax, payable by  a dealer  would be at the rate specified in sub- section (1)  of section 5 which at the relevant time was six percent. In  pursuance of  the power  conferred by  the said proviso, the  State Government  had from time to time issued notifications enhancing  and in some cases lowering the rate of tax  payable on  account of  either sale  or purchase  of goods. The  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 83 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

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Orissa Act. It was for this reason that the Notification No. 67184-C.T.A-135/17-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 purchase 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 left to the Government to  specify the  rate of tax by notification both in respect  of sales tax and purchase tax, from the date the amending Ordinance  of 1977  came into  force,  namely  from January 1,  1978, it  was necessary  to issue a notification consolidating all  previous notifications  on the subject in respect of  goods liable  to purchase  tax which  the  State Government did  by  the  impugned  Notification  No.  67178- C.T.A.-135/77-(Pt)-F. dated  December  29,  1977,  declaring what goods  would be  liable  to  tax  on  the  turnover  of purchases with effect from January 1, 1978. Unless, however, the rate  of purchase  tax in  respect of  these  goods  was specified under  the  new  section  5(1)  the  goods  though declared to  be liable  to tax  on the  turnover of purchase would not  be exigible  to any  tax at  all, it,  therefore, became  necessary   for  the   State  Government   to  issue Notification No.  67181-C.T.A.-135/77-F. dated  December 29, 1977, specifying  the rates of purchase tax with effect from January 1, 1978. Exigibility to tax-Preliminary Contention-      The question  which now  remains to be considered is as regards the  exigibility to  purchase  tax  of  the  amounts payable under  the Bamboo Contract and the Timber Contracts. Before  we   address  ourselves  to  this  question,  it  is necessary to  dispose of  a preliminary contention raised by the Appellant  with respect to this part of the case. It was submitted that the question whether a particular contract is a sale  or purchase  of goods  is a  question of  fact or  a question of  interpretation  of  documents  and  one  to  be decided by 84 the assessing  authorities and,  therefore,  if  this  Court holds that the impugned provisions are valid (as we have now done), it should not go into the question of the exigibility to purchase  tax of  the transactions in question. This plea was not  raised at  any stage  before the High Court but has been raised  for the first time in the Petitions for Special Leave to  Appeal, and  that too  only with  respect  to  the Bamboo Contract  though during  the course of hearing before us, it was raised with respect to the Timber Contracts also. Before the High Court the matter proceeded on the basis that the question  of validity  of the impugned provisions and of the exigibility  to purchase tax of the transactions covered by  the  Bamboo  Contract  and  the  Timber  Contracts  were inextricably linked  together as  if the impugned provisions were issued  only 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 assessing authorities to ascertain . the facts  and to  interpret the  documents in  question, if there be any, and to decide whether a particular transaction

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is exigible  to tax.  Here, however,  the facts  are not  in dispute and  the determinations  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 consider that the whole judgment of the High Court has  been reversed,  particularly in  view of the fact that in  their writ  petitions the  Respondent  company  had challenged the  notice issued to it to file a return and the Respondent Firm  had challenged  the assessment  order  made against it  and,  therefore,  feel  free  to  determine  the question afresh. In either event the matter would ultimately come back  for decision to this Court and that too after the lapse of  several years-a consequence not to be contemplated with equanimity  by this  Court. We,  therefore, reject this preliminary contention raised by the Appellant. 85 Timber Contracts      We will  first take  up the  Timber Contracts. The High Court held  that standing trees were unascertained goods and continued to  be the  property of the State Government until felled and,  therefore, the title to them was transferred to the forest  contractor only  when the  trees were  felled or severed by  him after  complying with  all the conditions of the forest  contract and  as the impugned provisions applied only to  standing trees,  that is,  to  trees  before  their severance, purchase tax was not attracted and any attempt to levy purchase  tax on  the amounts  payable under the Timber Contracts would  amount to  taxing an  agreement of  sale of goods and  not a  completed sale  or purchase  of goods. The High Court  further held  that the trees so severed in which the property  passed to the forest contractor were liable to sales  tax   by  reason   of  the   retrospectively  amended definition of  the term  "dealer" in clause (c) of section 2 of the  Orissa Act  and they  could not, therefore, be again made liable  to purchase  tax. The  High Court also rejected the contention  of  the  Appellant  State  that  timber  and dressed or  sized logs were different commercial commodities and that  sales tax  could, therefore,  be levied  on  both. According to  the High  Court they  were the  same commodity and, therefore,  they could  not be made liable to sales tax at two  points in  the same  series of sales. The High Court did not  decide the  question whether  the Timber  Contracts were works  contracts. This point was, however, urged before us "on behalf of the Respondent firm. We will deal with this point separately  but for the present suffice it to say that according to  us none  of the  Timber Contracts  is a  works contract.      On behalf  of the Appellant State it was submitted that the Timber  Contracts 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

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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 payment  of price  was postponed was irrelevant. It was the Appellant’s 86 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  Rule,  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.      While setting  out the facts of Civil Appeal No. 220 of 1982, we  have outlined  the procedure followed by the State of Orissa  in entering  into forest contracts. The notice of public auction  with which we are concerned was published in the Orissa Gazette and was headed "Sale Notice of Timber and Other Forest  Products...."  This  Sale  Notice  related  to different forest produce and was in three parts. Part I gave "the list  of timber  and other  forest  products"  for  the session 1977-78  which would be "sold by public auction" and the places  and dates  where such  auction sales  were to be held. Clause  2 of Part I of the Sale Notice stated that the sale lots  were subject to the Special Conditions of Sale as published in  Part  II  of  the  Sale  Notice,  the  General Conditions of  Sale as  published in  Part III  of the  Sale Notice so  far as  they may be applicable and the Conditions mentioned in  the sanctioned  form of  agreement.  Clause  3 stated that  the successful  bidders shall  be bound  by the Orissa Forest  Act. 1972,  the Forest  Contract  Rules,  the Orissa Timber  and other  Forest Produce  Transit Rules, and all other relevant rules in force or which might hereinafter come into force and promulgated under the Orissa Forest Act, 1972.      Under condition 1 of the Special Conditions of Sale set out in  Part II  of the  Sale Notice, the contract period of timber  coupes   was  to  commence  from  the  date  of  the ratification of  sale by  the competent authority and was to include the  number of  working months mentioned in the sale notice against  each lot.  Condition 2  stated the  time and manner  of  "payment  of  purchase  price"  in  full  or  by instalments. Under  condition, the  intending  bidders  were asked to  inspect the  coupes and lots before bidding in the auction and  their act  of  bidding  was  to  be  deemed  as sufficient proof  of their  having inspected  the coupes the coupes and satisfied themselves about the correctness of the quality and quantity of the 87 produce and  the area  of the contract. Condition 9 provided that no  extension of  time for working any coupe beyond the contract period as published in the Sale Notice and declared in the  auction hall  would be  allowed  except  under  very exceptional   circumstances.   Under   condition   14,   the prescriptions  contained   in  the   working  plan,  working schedule and  their amendments or the executive instructions of the  higher authority  and local rules were to be binding 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 of sales tax, the same was to be adjusted  from the  earnest money deposit or the security

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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. a      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 4,  intending bidders  were to  deposit as earnest money a sum of Rs. 200 . In the case of unsuccessful bidders this amount was to be refunded immediately after the auction was held  and in  the case  of successful bidders the amount was to  be adjusted  towards  the  security  deposit.  Under condition 10,  a  bidder  whose  bid  was  conditionally  of finally accepted  by the  Divisional Forest  Officer was  to make the  security  deposit  in  cash.  On  payment  of  the security deposit,  the bidder  was  to  sign  the  necessary agreement but  the signing  of such  agreement  was  not  to confer any  right on the bidder unless the sale was ratified by the  competent authority  and the  ratification order was communicated to him. No sale of any lot was to be considered valid or  complete unless these conditions had been complied with and  in the  event of  failure to do so, the Divisional Forest Officer  was to  be at  liberty to quash the sale and forfeit the 88 earnest money  or the  security deposit, as the case may be, and resell  the lot  and recover  from the successful bidder who had  failed to  comply with the conditions the shortfall on such  resale. Condition  12 provided  for the  payment of purchase price in full or by instalments. Under condition 15 orders of  ratification of  sale by  the competent authority were to be communicated to the successful  bidder   by  the   Divisional   Forest   Officer specifying there  in the dates of the payment of instalments in accordance  with condition  12  and  the  period  of  the contract. Under  condition 16,  the contractor  was  not  to commence the work in the contract area before the payment of the first  instalment or  the full consideration money if it was payable  in one  instalment and  before  furnishing  the coupe declaration  certificate or  intimation about starting work, as  the case  may be,  as required  by Rule  12 of the Forest Contract  Rules. Under condition 18, an agreement was to be  executed by  the competent authority on behalf of the Government and  a copy  thereof was  to be  delivered to the contractor as soon as may be.      On its  bids being accepted the Respondent Firm entered into five  Timber Contracts  in the  forms prescribed in the Schedule to  the Forest  Contract Rules. The main heading of each of these Timber Contracts is ’Forest Contract-Agreement Form’ and  the long  heading states that it is "An agreement for the  sale and  purchase of forest produce". Under clause 1, the  forest produce "sold and purchased under" the Timber Contract was  to be  as specified  in Schedule I thereof and the forest  area in  which it  was 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

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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 trees and the other about 4-1/2’ 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 U  forest produce  was to  be extracted  by the  forest contractor only 89 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 Firms’s  case inasmuch  as the  Timber  Contracts were in  respect of a certain number of existing trees. This provision was  there because  the Timber Contract was in the form which  is the prescribed form of contract in respect of all forest  produce and  under Rule  33 of    the  1  Forest Contract Rules  all forest contracts are required to be made in this  form. Clause 4 started that the routes by which the said forest produce was to be removed from the contract area and  the  depots  at  which  it  was  to  be  presented  for examination were  to be  those specified  in  Schedule  111. Under clause  5, it  was agreed that the Timber Contract was to be  subject to  the Forest  Contract Rules and conditions laid down  in the  Sale Notice except to the extent that the said Rules  and conditions were deemed to be modified to the extent prescribed  in Schedule  IV. Under  Schedule 4 to the contract, the  Forest  Contract  Rules  were  deemed  to  be modified by  the Special  Conditions in  the Sale Notice. By clause 6  the forest contractor bound himself to perform all acts and  duties required and to abstain from performing any act forbidden  by or  under the Orissa Forest Act, 1972, and the Forest  Contract  Rules  and  by  the  Timber  Contract. Schedule II  set out  the number  and amounts of instalments and the dates of payment of the instalments.      The bids  given by the Respondent Firm were ratified in due course  by the Government of Orissa and the fact of such ratification was  communicated to the Respondent Firm by the Divisional  Forest   Officer.  Each  of  these  notification letters specified  the number and amounts of the instalments payable by  the Respondent  Firm and  the  dates  when  each instalment was  payable. Each  of these ratification letters required  the  Respondent  Firm  to  take  delivery  of  the particular coupe within one and half months from the date of issue of  the ratification  order and  to get the Respondent Firm’ s property hammer mark registered in the office of the Divisional Fores’  Officer on  payment  of  the  appropriate registration  fee.   Each  of  these  letters  required  the Respondent Firm  not to  commence work  in the contract area before the  payment  of  the  first  instalment  and  before furnishing the  Coupe Declaration  Certificate or intimating in  writing  that  it  intended  to  commence  work  from  a particular date,  as the case may be, as required under Rule 12 Of 90 the  Forest   Contract  Rules.   By  the  said  letters  the Respondent  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

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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  the 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 Forest Act confers powers upon the  State Government  to make rules inter alia for the cutting, sawing, conversion and removal of trees and timber, and  the  collection,  manufacture  and  removal  of  forest produce,  from  protected  forests  Under  section  37,  any infringement of  a rule  made under section 36 is an offence punishable with  imprisonment for a term which may extend to one year  or with fine which may extend to Rs. 2000 or both. Under section  45(1) the  control of  all rivers  and  their banks as  regards the  floating of  timber as  well  as  the control of all timber and other forest produce in transit by land or  water is  vested in  the State  Government and  the State Government  is conferred  the power  to make  rules to regulate the  transit and possession of all timber and other forest produce,  including rules  prescribing the  routes by which alone  timber or other forest produce may be imported, exported or  moved into,  from or  within the  State, and to provide for  punishment of  imprisonment which may extend to one year  or fine  which may extend to Rs. 1,000 or both for any breach of such rules.      Under  rule   2  of  the  Forest  Contract  Rules,  all contracts whereby 91 the Government  sells forest  produce to  a  purchaser  are, subject to  the Forest  Contract Rules in so far as they are applicable, and  the Forest  Contract Rules are deemed to be binding on  every  forest  contractor.  The  Forest  Officer executing a forest intricate is, however, given the power to vary the  rules by  express provision  in such  intricate. A "forest contract’  is defined  in clause  (1) of  Rule 3  as meaning ’  a contract  whereby Government agrees to sell and purchaser agrees  to  buy  forest  produce"  and  a  ’forest contractor’ is  defined in  clause (2)  of Rule 3 as meaning "the person  who purchases produce under a forest contract". Under Rule  6, a  forest contract  is to  carry with  it  an accessory licence  entitling the  forest contractor  and his servants and  agents to  go Upon  the land  specified in the contract and  to  do  all  acts  necessary  for  the  proper extraction  of   the  forest  produce  purchases  under  the contract. Under  Rule 6  where a  period is specified in the forest contract  for the  extraction of  the forest  produce purchased under  the contract,  time is  deemed to be of the essence of  such contract  and upon  the completion  of  the specified period  the contractor’s  right under the contract is to  cease and  any forest  produce not removed 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,

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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 the Range Officer of the concerned range  to stop extraction if the contractor fail s to pay  any instalment  due from him within the grace period of ten  days beyond  the date  fixed  for  payments  of  the instalment. It is equally open to these officers 92 to stop work in the contract area if the contractor fails to pay two  instalments due  from him.  Under Rule  12,  before commencing  any   work  in  the  contract  area  the  forest contractor is  to sign  and submit  to the Divisional Forest Officer  or   the-e  concerned   Range  Officer   a  written declaration to the effect that he or his authorized agent or both have  been shown  the boundaries  and limits of the lot covered by  the contract  by  the  Range  Officer  or  by  a subordinate deputed by him for the purpose and that the area shown on  the ground  agrees with the area delineated on the map  annexed  to  the  forest  contract  and  until  such  a declaration has been given, the Divisional Forest Officer or the Range  Officer may  refuse to allow any work to commence and the contractor is not to be entitled to any compensation for any loss that might be sustained by him by reason of any delay in  commencing the work owing to such refusal. Rule 12 further provides  that if  such declaration is not furnished within one  and a  half months from the date of issue of the ratification order,  the Divisional  Forest  Officer  is  to cancel the  contract, forfeit  the security  deposit, resell the contract  at the  risk of the contractor and recover the shortfall from  him. Condonation of delay in furnishing such intimation or  declaration is  expressly  prohibited.  Under Rule 13,  a forest  contractor is  not to  remove any forest produce from the contract area unless it is accompanied by a permit signed  by the  contractor or  his authorized  agent. Such permits  are to  be obtained  on payment from the Range Officer. Further, the divisional Forest Officer or the Range Officer, as  the case  may be,  has the  power to withdraw a permit book,  if in  his opinion,  such permit book has been misused for  unlawful gain.  In the event of such withdrawal the forest  contractor is  not entitled  to any compensation for any loss that might be sustained by him for any stoppage of his  work in  or extraction from the contract area. Under Rule 14,  the method  employed by  the forest contractor for extraction of  forest produce  along forest  roads is  to be subject    to  the approval of the Divisional Forest Officer and the  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

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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 93 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 the various kinds of forest produce removed by him from the contract area in such form as the Divisional Forest Officer may  prescribe or  approve, and such accounts are to be open  to inspection  at any time by the Divisional Forest Officer or  by any  subordinate duly authorized by him. Rule 20 prescribes  the  mode  of  felling  standing  trees.  The Divisional Forest  Officer has  the power  to  stop  further felling until these provisions are complied with. Under Rule 21, the  Divisional Forest Officer is to divide the contract area into  such number  of sections  as he may think fit and has the  power to regulate and confine the operations of the forest contractor  within these  sections in accordance with the provisions  set out  in the  said Rule.  Under the  said Rule, the  work is  to be allowed progressively from section to section. When the forest contractor begins his operations under the contract, he is to be allowed to carry out cutting operations in  sections Nos.  I and  2 E only. As soon as he begins cutting  operation in  section No.  3 he is deemed to have surrendered all his rights to standing trees in section No. 1. When he begins cutting operations in section No. 4 he is deemed to have surrendered all his rights to the standing trees in  section No.  2 and  so on, throughout the contract area. Under  Rule 22, the forest contractor unless otherwise directed to  do so  in  writing  by  the  Divisional  Forest Officer, is  to register  his property mark or trade mark in the  Office   of  Divisional   Forest  Officer  and  get  it registered  by   paying  the  registration  fee  in  respect thereof. No  timber is to be conveyed from the contract area without the  impress of  the forest  contractor’s registered property or  trade mark,  and the  Divisional Forest Officer and his  subordinates have  the right  to mark  any piece of timber with  the Government hammer mark before it is removed from the stump-side beyond the limits of such 94 checking  station  as  the  Divisional  Forest  Officer  may appoint in  writing. Under Rule 34, if the forest contractor makes default  in the  payment of  the consideration for his contract or  any instalment  thereof or  does  not  pay  the compensation assessed  under  any  of  the  Forest  Contract Rules, the  contract is  liable  to  be  terminated  by  the authority competent  to do  so. The  termination  is  to  be notified to the forest contractor and the contract is deemed to have  been terminated  unless the  contractor 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

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necessary 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  she 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  condition 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 contract  including all  accessory licences are to cease and all  the forest  produce remaining  within the  contract area or  at the depots is to become the absolute property of the Government.  Under Rule  36, ’if  in the  opinion of the State Government  it is  considered necessary  to supply any kind of  forest produce from any contract area to the people in case  of flood,  famine, cyclone and other calamities and if the  contractor does not supply the materials at the rate fixed by  the Government, such contract can be terminated by the Government  in  writing  by  a  written  notice  to  the contractor and  from  the  date  of  such  termination,  the contractor is to forfeit all his rights in the coupes. Under Rule 40,  a forest  contractor is  not to be entitled to any compensation for any loss that may be sustained by reason of fire,  tempest,  disease,  pest,  flood,  drought  or  other natural calamity  or by reason of any wrongful act committed by any third party or 95 by reason  of the  unsoundness or  breakage  of  any  forest produce   purchased by  him or for any loss sustained by him through any  operation undertaken  in the  interest of  fire conservancy.  He  is  equally  not  entitled  to  claim  any reduction or refund of the sums payable or paid by him under his contract  on the ground that the roads provided by the e Forest Department  or any other department  are insufficient or in  bad order or remain closed under any special order or that the  quantity of  produce falls  short of  any quantity specified in  the schedule annexed to the contract or in the sale notice or that the area of the contract area differs in any way from that indicated in the schedule attached to the- e contract. Under Rule 44, all forest produce removed from a contract area  in accordance  with the forest Contract Rules is to be at the absolute disposal of the forest contractor.      Bearing in  mind the terms and conditions of the Timber Contracts-not only  those expressly set out therein but also those incorporated  therein by  reference, namely, the terms of the  Sale Notice, the Special Conditions of Contract, the General Conditions  of Contract  and the  various  statutory provisions-we have  now to determine whether the property in the trees  which were  the  subject  matter  of  the  Timber Contracts passed to the Respondent Firm while the trees were still standing or after they were severed. In the first case the impugned  provisions would apply and the amounts 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

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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 96 Forest Contract Rules defines a "forest contract" as meaning "a contract  whereby Government agrees to sell and purchaser agrees to  buy forest  produce." That  this is  also such an agreement is  borne out  by the  long heading  of the Timber Contracts which  describes these  contracts as "an agreement for the  sale and  purchase of forest produce." In fact, the signing  of  the  Timber  Contracts  did  not  result  in  a concluded contract  because each  contract  was  conditional upon the  State Government  ratifying the  acceptance of the bid  given   by  the   Respondent  Firm.   Even  after   the ratification order  was issued by the Government, it did not become an  unconditional contract  for the  sale of specific goods in  a deliverable state for the Respondent Firm had no right to  severe the  trees and take them away before it had complied with  the other  conditions of the contract set out above. To  recapitulate   the most  important amongst  them, under Rule  12 of  the Forest  Contract Rules the respondent Firm had  to furnish  a Coupe Declaration Certificate within one and  half months of the issue of the ratification order. If it  did not do so, the contract would stand cancelled. It had also  under Rule  22 of  the Forest  Contract  Rules  to register within  the same  period its property mark or trade mark  with  the  Divisional  Forest  Officer.  Further,  the Respondent Firm  could not  commence any  work unless it had given the  required security  deposit and  before paying the first instalment  as  under  the  Timber  Contracts  in  the present Appeals  the amounts  were payable  by  instalments. That  the  property  in  the  trees  did  not  pass  to  the respondent Firm  while the trees were standing is also shown by the  fact that  the  Divisional  Forest  Officer  or  the concerned Range  Officer  had  the  power  to  stop  further removal of  the felled  trees until  the Respondent Firm had paid the  amount required to make up the excess of the value Of  the   felled  trees  removed  over  the  amount  of  the installments already  paid by  it and  under Rule 9-A it was further  open  to  the  Divisional  Forest  Officer  or  the concerned Range  Officer to stop further work if there was a default in  payment of  any instalment  or in payment of any two instalments  and the  contract could  also be terminated under Rule  33 for  such default.  Further work  or  removal could not  be stopped  or the  contract  terminated  if  the property in  the trees  had passed  to the  Respondent  Firm because in  such event  the only  remedy open  to the seller would be  to sue  for 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 he severed by it if it 97 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

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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  authorized 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 contract within the period of the contract, on the expiry of such period  it would  lose all  rights to  the trees not so removed.      It is  true that  under  Rule  40  if  the  trees  were destroyed by  reason of fire, tempest, disease, pest, flood, drought or  other natural  calamity  or  by  reason  of  any wrongful act  committed by  any third  party or by reason of the unsoundness  or breakage  of any  trees which  were  the subject-matter of  the contract, the Respondent Firm was not entitled to  any compensation  for any loss sustained by it. This would  show that after a Timber Contract was concluded, the risk  passed to the Respondent Firm. Under section 26 of the Sale of Goods Act, the goods remain at the seller’s risk until the  property in the goods is transferred to the buyer and when the property is transferred to the buyer, the goods are at  the buyer’s  risk whether  delivery has been made or not. Section 26 is, however, qualified by the phrase "Unless otherwise agreed."  Thus,  this  section  is  subject  to  a contract to  the contrary  and what  we have stated above is sufficient to show that the Timber Contracts were subject to a contract to the contrary and under them the risk passed to the Respondent  Firm before  the property passed to it. This is made  abundantly clear  by Rule 44 which states that "All forest produce  removed from  a contract  area in accordance with these  rules shall  be at  the absolute disposal of the forest contractor."      It is,  therefore, clear that the Timber Contracts were not 98 transactions of sale or purchase of standing trees agreed to be  severed. They were merely agreements to sell such trees. As pointed  out above, each stage of the felling and removal operations was governed by the Forest Contract Rules and was under the  control and  supervision of  the Forest Officers. The property passed to the Respondent Firm only in the trees which were  felled,  that  is,  in  timber,  after  all  the conditions Of contract had been complied with and after such timber  was  examined  and  checked  and  removed  from  the contract area;  The impugned  provisions therefore,  did not apply to the transactions covered by the Timber Contracts.      It will  be useful  in the  context of  the conclusions which we have reached to refer to the decision of this Court in Badri  Prasad v.  State   of Madhya  Pradesh &  Anr.  the question in  that case  was whether  there was a contract of sale of  standing 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.

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Act No.  I of  1951). The Court held that under the terms of the contract  the trees  had to be felled before they become the property  of the appellant. The Court observed (at pages 390-1)           "It will  be noticed  that  under  cl.  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      s. 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 tile  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.  But before  that      happened the trees had vested in the state."      It is pertinent to note that conditions 16 to 18 of the special Conditions  of Sale  which form  part of  the Timber Contracts also (1) [1969] 2 S.C.R. 380. 99 prescribe the  girth of the trees which are to be felled and the height  above the  ground level  at which they are to be felled. Timber and Logs.      On our  above finding  that the  transactions under the Timber Contracts  are sales  of  Timber  and  not  sales  of standing trees  agreed to  be severed the tax which would be attracted would  be sales tax and not purchase tax under the impugned provisions.  This would,  however,  be  so  if  the Divisional Forest  Officer were a dealer. Under the terms of the Timber  Contracts  the  Respondent  Firm  is  liable  to reimburse the  Divisional Forest Officer the amount of sales tax he  would which  be liable to pay. T he question whether the Divisional Forest Officer is a dealer within the meaning of that  term as defined in clause (c) of section 2 prior to its being  substituted  with  retrospective  effect  by  the Orissa Sales tax (Amendment and Validation) Act, 1979, which repealed and  replaced the Ordinance with the same title, is pending before  the Court in Civil Appeals Nos. 1237-1238 of 1979 and  1420-1421 of  1979 Whatever  be the position under the  old   definition,  after   the  substitution   of  that definition with  retrospective effect  by the said Amendment and Validation Act, the Divisional Forest Officer ought be a dealer. The  validity of  this amendment  is, however,  also under challenge  in this Court in Writ Petitions Nos. 958 of 1979 and  966 of  1979. We  therefore, express no opinion on either OF  these questions.  It was,  however, submitted  on behalf of the Respondent Firm that assuming these challenges fail, it  would be  called upon  to reimburse the Divisional Forest  Officer   According  to  the  Respondent  Firm,  the Divisional Forest  Officer. would  not be  entitled to do so because it  had made sized and dressed logs from the timbers which it  had purchased  under the  Timber Contracts and had sold such  logs and  paid sales  tax  on  these  sales  and, therefore, to  tax the  sales of  timber to them would be to levy the tax at an earlier point in the same series of sales which is  not  permissible  by  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

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or to prevent needless litigation in the future.      Though under  section 8  the State  Government has  the power to 100 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 of 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 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 also be levied at another point.      We will  first see how different High Courts have dealt with this  question. In  Saw Bros.  and Co.  v. The State of West Bengal1  all learned  Single Judge of the Calcutta High Court held  that planks  sawed out  of  logs  are  different things from logs and timber in its nascent state. No reasons are given in that Judgment for reaching this conclusion,      In Bachha  Tewari  and  another  v.  Divisional  Forest Officer, West  Midnapore  Division,  and  others2  the  same learned Judge  held that  the the  chopping of  timber  into firewood was  a manufacturing  process. and,  therefore, the imposition of  a tax  on timber and on firewood manufactured from that  timber did  not amount  to  double  taxation  The question in  both those  cases was  whether sawing of planks and chopping of timber into firewood amounted to manufacture so as  to make  the assessee  liable to pay sales tax on the manufactured goods.  This is  a different question from that to which  we have  to address  ourselves. We  may,  however, point out  that even where the question is whether a certain process has resulted in a manufacture, the resultant product must be  a different commercial commodity and merely because certain articles  are known  by different  names it does not mean that  they are  different commercial  commodities if in fact they  are merely different forms of the same commodity. Thus, in  Tungabhadra Industries  Ltd. Kurnool v. Commercial Tax Officer,  Kurnool3, hydrogenated groundnut oil, commonly called ’Vanaspati’  was held  by this  Court to be groundnut oil within  the meaning of Rules S (I) (k) and 18 (2) of the Madras General Sales Tax (Turn- (1) [1963] 14 S.T.C. 878. (2) [1963] 14 S.T.C. 1067. (3) [1960] 11 S.T.C. 827; (1961) 2 S.C R 14 101 Over and  Assessment) Rules,  1939. The  Court further  held that the  processing of  groundnut oil  to  render  it  more acceptable to  the customer  by improving  its quality would not render  the oil  a commodity  other than  groundnut oil. Similarly, in  the State  of Gujarat  v. Sakarwala  Bros.(l) this Court  held that  ’pates’, ‘harda’ and ‘alchidana’ were sugar in  different forms  and fell within the definition of sugar in  Entry 47  of Schedule to the Bombay Sales Tax Act, 1959.      A decision  more relevant  to our  purpose than the two Calcutta decisions  is a decision of a Division Bench of the Madhya  Pradesh   High  Court   in   Mohanlal   Vishram   v. Commissioner of‘  Sales Tax  Madhya Pradesh,  Indore(2).  In that case 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

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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 and  others v.  The State of Andhra Pradesh and others(3)  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 swan  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,  out sizes,  etc. treating  them as general goods. The contention of assessees was that these goods were timber which  was taxable at the first point of sale and the first point  of sale was when the Forest Department sold the standing timber  trees to  them and,  therefore, the planks, rafters, cut  sizes, etc.,  sold by  them could not again be made liable to sales tax (1) [1967] 19 S. T.C.24 (S.C.) ( (2) [1969] 24 S.T.C. 101. (3) [1973] 32 S.T.C. 309. 102 treating those  goods as  different commercial  commodities. The  Division  Bench  held  that  in  dealing  with  matters relating to the general public, statutes are presumed to use words in  their popular  rather than their narrowly legal or technical sense,  and that as the provision levying a tax on timber was  directed to  deal with a matter affecting people generally, as  timber is  in common  use the  word  "timber" would have  the same meaning attached to it as in the common and ordinary  use of  language. The  Division Bench  further held that  although dictionaries  are not  to  be  taken  as authoritative exponents  of the  meanings of words used in a statute, it  was a  well-known rule  of courts  of law  that words should  be taken  to be used in the ordinary sense and courts  are,   there  fore,  sent  for  instruction  to  the dictionaries in  the absence  of any legislative or judicial guidance. The  Division Bench  then referred  to the meaning given to  the word  "timber" in  different dictionaries. The Division Bench  also considered  the meaning  in  commercial parlance of the term "timber". In that case the assessees in their affidavits  had asserted that timber in the commercial field also  meant planks,  cut  sizes,  etc.  There  was  no convincing denial  by the  Government of that assertion. The Division Bench  then turned  to the  "Rules for gradation of cut sizes  of timber"  prepared and issued in October, 1960, by the  Indian Standards  Institution which  showed the word "timber" was freely used for kinds of standard cut sizes for building purposes.  The Division Bench also looked at Indian Airlines Quotation  No. 406  of April 26, 1972, in which the words  used   were  "timber   teak-wood"  setting   out  the particular  sizes   thereafter.  The   Division  Bench  also referred to  the other documentary evidence produced in that case and  held that  the documents  and affidavits before it clearly made  out that  even the  cut sizes  of timber  were commonly known  as timber  in  commercial  field  and  that, therefore, both  in the  popular sense and in the commercial sense, the  word "timber" had the same meaning. The Division Bench also  laid 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,

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rafters, cut  sizes, etc.,  were sawn  or cut  from logs  of woo(3,  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 103 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(l) a  Division Bench  of that  High Court  held that timber logs and sized timber U 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 satisfied  if timber  logs were  supplied.  In Kripasindhu Sahu  &  Sons  v.  State  of  Orissa(2)  another Division Bench  of the  same High Court held that the dictum in the Rajani Timber Traders’ case was too widely stated and it did not indicate the meaning of the word "timber" as used in common parlance in commercial circles and it also did not purport to  specify the  meaning of  the  expression  "sized timber" as used in that judgment. The Division Bench further held that  timber in  common parlance  in Orissa took within its ambit  only long  and big  sized logs of wood ordinarily used in  house construction  as beams  and pillars  and that when timber  was converted  into planks,  rafters and  other wood products  like tables  and chairs  or cut  into various small sizes  so as  to be unfit for use as beams and pillars and similar  such uses they could not be termed as timber in common parlance  though  they  may  retain  their  essential character as  wood because  the essential  characteristic of timber  as  a  commercial  commodity  was  lost  after  such conversion. The  judgment in that case does not indicate any basis for  holding that  the word  "timber"  had  in  common parlance in  Orissa  the  meaning  which  according  to  the Division Bench  it bore. It is also curious to note that one learned Judge was common to both the Division Benches though in each case the judgment was delivered by the other learned judge-      Having seen  how the  different High  Courts have dealt with this  question, we will now ascertain the true position for our- (1) [1974] 34 S.T.C. 374. (2) [1975] 35 S.T.C. 270. 104 selves. In  Ganesh Trading  Co., Karnal  v. State of Haryana and another(l)  Hedge, J.,  speaking for this Count, said: ’ This Court  has firmly  ruled that  in finding  out the true meaning of  the entries in a Sales Tax Act, what is relevant is not  the dictionary  meaning, but  how those  entries are understood  in  common  parlance,  specially  in  commercial circles". Applying  this  principle,  the  Court  held  that although rice  was produced  out of  paddy,  paddy  did  not continue to be paddy after dehusking and that when paddy was dehusked and  rice produced,  there  was  a  change  in  the identity of  the goods  and, therefore,  rice and paddy were two different  things in ordinary parlance.A careful reading - of  the judgment  in that  case shows  that there  was  no evidence before  the court  to show  how "paddy"  and "rice" were understood  in commercial  circles or  what these words

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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 material on  the record  to show  what the word "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  savering 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 that  is stated  is that  timber commercially does not remain the same after being cut, sized and shaped,  and, therefore,  there was no legal obstruction to tax an altogether different commercial commodity at sale- point. (1) [1973] 32 S.T.C. 623, 625 (S.C.) 105      In view  of this  state of  the record  we must seek to ascertain the  meaning of these two terms in common parlance with such  aid as  is available to the Court. It is now well settled that  the dictionary  meaning of  a word  cannot  be looked at  where that  word has  been statutorily defined or judicially interpreted but where there is no such definition or  interpretation,   the  court   may  take   the  aid   of dictionaries to  ascertain the meaning of a word in common 1 parlance. In  doing so  the court  must bear  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, therefore have to select the particular meaning which would be  relevant  to  the  context  in  which  it  has  to interpret that word. The Orissa Act does not define the term ’’timber" or  "logs". Orissa  is, however,  a State which is rich in  natural wealth  and mostly all, if not all, forests in the State of Orissa are protected or reserved forests and come within  the purview  of the  Orissa Forest  Act,  1972, which was  an Act  passed to  consolidate and amend the laws relating to  the protection and management of forests in the State of  Orissa.  The  real  object  behind  the  issue  of impugned provisions  was to  levy purchase  tax on  standing trees agreed to be severed and bamboos agreed to be servered in view  of the  judgment of  the Orissa High Court in Straw Products Ltd, v. State of Orissa in which it was held that a Divisional Forest  Officer was  not a dealer and, therefore, not liable  to pay  sales tax  and hence could not call upon forest contractors  to reimburse  him in respect thereof. In view of  this background,  it  would  be  relevant  for  our purpose to  look at  the statutory  definition of  the  term "timber". given  in the  Orissa Forest’ Act, 1972. That term is defined  in clause  (n) of  section 2  of that Act, which reads as follows.           "(n) ’timber’  includes trees fallen or felled and      all wood cut-up or sawn."      Prior to  the enactment of the Orissa Forest Act, 1972, there were  two Forest Acts in force in the State of Orissa,

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namely, the  Madras Forest Act, 1882 (Madras Act V of 1882), and the  Indian Forest  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. Udaygiri  Taluks. The  Indian Forest  Act applied  to the rest of  the State.  Both these  Acts were repealed in their application to the State Of H 106 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 fallen, 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 connection, it would not be out of  place to  see how  this word  has  been  defined  in subsequent legislation  In  August  1981  trade  in  certain forest produce  in Orissa  was made a State monopoly and the Orissa Forest  Produce (Control  of Trade) Act, 1981 (Orissa Act No. 22 of 1981), was passed to achieve that purpose. The list of  forest produce  set out  in the  definition of that term given  in clause  (c) of section 2 of that Act includes timber of  any species  specified  in  clause  (j)  of  that section. Clause  (j) of  section  2  defines  "timber  "  as meaning "marketable wood, round, sawn or fashioned, straight piece of  and above two metres in length, standing or felled (excluding fuel) of the following categories, namely:-". The portion of  the definition omitted above lists the different species of  timber. The  definition of  "timber given in the Orissa  Forest   Produce  (Control   of  Trade)  Act  is  an exhaustive definition inasmuch as the object of that Act was to create  a State  monopoly of  trade in  specified  forest produce  and   therefore  such  forest  produce  had  to  be particularized. What  is, however, pertinent is that even in subsequent legislation  the cardinal  concept that timber is not merely felled trees has been underlined and emphasized.      On turning  to various  dictionaries, we  find that the dictionary meaning  largely  coincides  with  the  statutory meaning of  the word "timber". While discussing the question of the subject-matter of the impugned provisions we have set out the  definition of  the word  "timber" contained  in the Webster Collegiate  Dictionary occurring ring in the passage from the judgment of Vivian Bose, J, in 107 Shrimati Shantabai  v State  of Bombay The relevant meanings of the term "timber" given in the Shorter Oxford Dictionary, Third Edition,  are "building  material generally; wood used for the  building of  houses, ships, etc., or for the use of the carpenter,  joiner, or  other artisan".  This definition also states that the word is "applied to the wood of growing trees capable  of being  used for structural purposes; hence collectively to  the trees themselves". Amongst the meanings given in  the Concise  Oxford Dictionary, Sixth Edition, are "wood prepared for building, carpentry, etc;. trees suitable for this;  woods, forests,  piece of wood, beam". One of the meanings of  the word "timber" given in Webester’s Third New

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International Dictionary,  is "wood used for or suitable for building (as  a house  or boat)  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  Shorters Oxford English Dictionary  defines "beam"  inter alia  as  a  large piece of squared timber, long in proportional 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  Webester’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 shape and form  to a  roof, and bear the outer covering of slates, tiles, thatch,  etc."  The  Concise  Oxford  Dictionary  and Webster’s New  International Dictionary  define "rafter"  in very much  the same way; the first defines it as "one of the sloping beams  forming framework  of a roof" and the seconds as "one  of the  often sloping beams that sup- port a roof." Rafter would  also, therefore,  be timber  or log  put to  a particular use.A   "plank"  is  defined  in  Shorter  Oxford English Dictionary as "a long flat piece of smoothed timber, thicker than a board, specially a length of timber sawn to a thickness of  from two to six inches, a width of nine inches or more, and eight feet or H 108 upwards  in   length."  According   to  the  Concise  Oxford Dictionary it  is a "long wide piece of timber, a few inches thick" and  according to  Webster’s Third  New International Dictionary, it  is "a  heavy thick  board that  in technical specifications usually  has a thickness of 2 to 4 inches and a width of at least 8 inches." The exact thickness and width of a  plank may be of importance in technical specifications but in  ordinary parlance  planks  would  be  flattened  and smoothed timber.  Such flatness  and smoothness  can only be achieved by  using a  saw and  other implements required for that purpose.  The same  would be  the case  when timber  is rounded or  shaped.  The  statutory  definitions  of  timber extracted above  read along  with the  meaning of  the  word "timber" given in different dictionaries would show that the conclusion reached  by the  Madhya  Pradesh  High  Court  in Mohanlal  Vishram  v.  Commissioner  of  Sales  Tax,  Madhya Pradesh, Indore,  and by the Andhra Pradesh High Court in G. Ramaswamy and  others v.  The State  of Andhra  Pradesh  and others is  more germane  to our  purpose than the two Orissa cases  neither  of  which  has  referred  to  the  statutory definition of  the word  "timber" in  the relevant statutes. The observations  of the  Orissa High  Court in  the case of Krupasindhu Sahu  & Sons  v. State  of Orissa that timber in common parlance  in Orissa  takes within its ambit only long and  big  sized  logs  of  wood  ordinarily  used  in  house construction as  beams and  pillars but  not when  timber is converted into  planks, rafters and other wood products like tables and  chairs cannot,  therefore, be said to be correct so far  as planks and rafters are concerned. In our opinion, planks and rafters would also be timber.      The result  is that  sales of  dressed or sized logs by

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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    deciding  that  the retrospectively substituted definition of "dealer" in clause (c) of section 2 of 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,  3 1977,  by reason  of Notification No. S.R.O. 374/77 dated May 23, 109 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  would be  liable to  pay sales tax not at the rate of six per cent but at the rate of ten per cent and it might be argued that the Respondent Firm has been  under-assessed or part of its turnover of sales of logs has  escaped assessment.  The assessment  order made on the Respondent  Firm referred  to earlier  includes both the amount of  purchase tax  and sales  tax but  this is  not  a composite assessment  order but  a severable one because the turn over  of sales  as also  the turnover of purchases have been shown  separately and  the  amount  of  sales  tax  and purchase tax  have  equally  been  shown  separately.  Thus, though as  a result  of our holding that the amounts paid by the Respondent  Firm under  the  Timber  Contracts  are  not eligible to purchase tax, the assessment order would require to  be   modified  and   corrected,  such  modification  and correction would  not affect  the  rest  of  the  assessment order.  The   question  then   is  "Whether  the  sales  tax authorities can reopen the assessment of the Respondent Firm so far as the turnover of sales of logs is concerned?" Under sub-section (8)  of  section  12  of  the  Orissa  Act,  the Commissioner of  Sales Tax or those sales tax authorities to whom such  power is  delegated have  the power  to reopen an assessment but  under section  12(8) the  exercise  of  this power is  subject to  a period of limitation, namely, thirty six months  from the expiry of the year to which that period for which  the assessment  is to  be reopened relates. Since three years  have long  since expired from the year to which the period  in question relates, it would not now be open to the sales  tax authorities  assuming it  was a  case for re- opening the  assessment, to  reopen  the  Respondent  Firm’s assessment and tax the turnover of sales of dressed or sized logs at  the rate  of ten  per cent instead of six per cent. This question,  of course, would not arise for any period on or after January 1, 1978, on which date the substituted sub- section (1)  of section  5 came  into force,  as  under  the notification issued  under the  substituted sub-section (1), no separate  rate of  tax is  specified either for timber or logs  or   any  of  the  other  goods  which  we  have  been considering above and all of them would fall for the purpose of payment of sales tax under the residuary 110 Entry No. 101 of the Notification No. 67184-C.T.A. 135/77/1- ; dated  December 29, 1977, and would be liable to sales tax at the  rate of  seven percent  and there  would thus  be no

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under-assessment or escapement of assessment. Bamboo Contract      We  will   now  ascertain  the  nature  of  the  Bamboo Contract. Unlike  the Timber  Contracts, 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 Or  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  Company Limited."  The  second  and  the  third recitals of the Bamboo Contract are as follows:      "AND WHERAER 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 incidental therewith.           AND WHEREAS  the Grantor  has agreed  to grant the      said  licence   to   the   Company   subject   to   the      restrictions,   terms    and   conditions   hereinafter      appearing."      Clause T  of the  Bamboo Contract is headed "Arc a over which the  grant operates".  Sub-clause (a) of clause I sets out the  dates of  commencement of  the Bamboo  Contract  in respect of different contract areas. Under Sub-clause (b) of clause l,  the forest produce "sold and purchased" is stated to be  as specified  in Schedule I and to be situated in the areas indicated in Schedule V. Under the said subclause, the grantor understood  to render at all times to the Respondent Company all  possible facilities  to enable it to extract II and obtain  its  requirements  of  bamboos  upto  the  limit imposed by 111 the Bamboo Contract. Under clause II, the quantity of forest A produce "sold and purchased" is stated to be "all the said forest produce which now exist or may come into existence in the contract  area which  the Company  may fell, cut, obtain and remove  from the  said area in accordance with the time- table given  in Schedule  V during  the period... " and then the periods in respect of different areas, already mentioned while reciting  the facts  of Civil  Appeal No. 219 of 1982, have been  set out.  Clause III  provides  that  the  Bamboo Contract can be terminated in accordance with the provisions in that  behalf  contained  in  the  Forest  Contract  Rules subject to  the right of the Respondent Company to appeal to the State  Government in  which case  the Respondent Company could with  the previous permission of the State Government, on such  conditions as  the Government  might think  fit  to impose, be  entitled "to  carry on  its business in terms of the agreement"  until the  final decision by the Government. Under clause  IV, the  Respondent Company is given an option to renew  the Bamboo  Contract for  a further term of twelve years. Under clause V, the Respondent Company was to perform all acts  and duties  and to  refrain  from  doing  any  act forbidden by  the Orissa Forest Act, 1972, and to give a sum of Rs.  58,190 as  security  for  the  due  performance  and observance by  it of the terms of the Bamboo Contract, which sum was  to be  returned to  it on  the expiry of six months after the  termination or expiry of the Bamboo Contract. The

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Grantor was  to be  entitled to forfeit the said deposit and to appropriate the whole or part thereof in the 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 112 make up  the minimum  royalty payable  for the year owing to gregarious or  sporadic flowering of bamboos in the contract areas or  from any  cause whatsoever  not being  due to  the negligence on  the part of the Respondent Company or failure on its  part to  extract the  minimum number of bamboos. The amount of  royalty was to be calculated on all bamboos which the Respondent  Company would  cut from  the contract  area, whether such  bamboos were removed or not, to be ascertained as provided  in clauses  XI and  XII. Under  clause XI,  for ascertaining  the  quantity  of  the  bamboos  so  cut,  the Respondent Company  was to  remove the  bamboos through such river ghats,  railway, motor  and other  transport depots as may be agreed upon between the parties from time to time and under clause  XII, the  royalty was to be paid in advance in such manner that it would always be in excess of the royalty actually due.  Under clause XIV, for the purpose of checking the felling  and keeping an account of all bamboos to be cut by the  Respondent Company,  the Forest  Department had  the right to  employ such  staff as  it might deem necessary and was to  have free  access to  the contract  area and  to the books and  other records of the Respondent Company. Further, the Respondent  Company was  to  submit  to  the  Divisional Forest Officer  a yearly  account of bamboos cut and removed from the  contract area  and under clause XV the company was to issue  to the  carter of  each cart or the driver of each truck on its leaving the forest a machine numbered pass of a pattern to  be approved by the Chief Conservator of Forests, Orissa. Such  pass was  to state the number of bamboos which each cart  or truck  would carry.  Clause XVI prescribed the routes by  which the  bamboos were to be removed as also the depots at  which they  were to be presented for examination, Under clause  XVII, at  every naka the checking staff was to check each cart or truck with the pass referred to in clause XV before  such cart  or truck  left the depot. Clause XVIII gave to the Respondent Company, subject to such restrictions as might  be imposed  from time  to time  by the  Divisional Forest  Officer,   Bonai  Division,  the  right  during  the continuance of  the Bamboo  Contract to use any lands, roads or streams  outside the  licensed areas which belonged to or were under  the control  of the  Grantor for the purposes of having free ingrees to or egrees from the contract areas and also to  such lands,  roads or  streams within  the contract areas. Under clause X[X, the Respondent Company was bound to meet the local demands of bamboos in which event the royalty

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on such bamboos was not to be paid by the Respondent 113 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 a 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 immediate purpose  of "carrying  on the necessary operations in connection with the said business". Clause XXII expressly reserved and  excepted to  the  Grantor  in  regard  to  the contract area  granted to  the Respondent  Company (l  ) the possession and  beneficial ownership  in the  soil  and  all mines and  minerals upon,  in or under the contract area and the right  to make  such use  of the  soil,  to  erect  such buildings or  structures and  install such plant upon it and subject it  to such operations for the purpose of extraction of minerals  or otherwise  as the Grantor might deem proper, (2) the  surface of  the licensed  areas and  all.  grazing, cultivating and  other surface  E rights  other  than  those expressly granted  to the  Respondent Company  by the Bamboo Contract, (3)  the right  to all trees other than trees made over to  the Respondent  Company and the natural products of the soil other than bamboos, (4) the right of the Grantor to destroy bamboos  in any  portion of  the contract  areas for silvicultural purposes  Including the raising of plantations subject in  each case to the minimum area limit of 500 acres per annum  and further  subject to  giving in  place of such area  equal  facilities  for  bamboos  extraction  in  other convenient areas,  and (5) the right to extract bamboos from any portion  in the contract areas for departmental works in Bonai Forest  Division subject  to a  limit of 5,000 bamboos yearly. Clause  XXIII prescribed  cutting rules for bamboos. Clause XXIV  conferred upon the Respondent Company the right to extract  fuel from  areas allotted  for that  purpose  in order to  meet the fuel requirements of domestic consumption in the houses and offices of H 114 the persons  employed by it in "connection with its business in the  contract areas"  subject to  the payment  of a fixed royalty per tonne. Under that clause, the Respondent Company had the  right to  cut and  collect such poles of unreserved species and  creepers as might be necessary for construction of rafts on obtaining a permit in that behalf and on payment of royalty  according to the schedule of rates. Under clause XXV, the  Grantor, if so required by the Respondent Company, was to  lease to  it a suitable site or sites to be selected by it  out of  such sites  as were  at the  disposal of  the Grantor within  the licensed areas for the erection of store houses, sheds,  depots, bungalows,  staff offices,  agencies and other buildings of a like nature bonafide required by it "for the purposes of the business connected with" the Bamboo Contract rent  free for  the term  of such  contract.  Under

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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 said 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  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 annual  coupe from  which bamboos were to be cut for the Respondent Company  to take  delivery of  them in as much as the  bamboos   then  became   ascertained  goods.   In   the alternative it  was submitted  that the property passed when the Respondent  Company started the work of cutting bamboos. According to  the Appellant, in either event property passed before the bamboos were severed. So far as the bamboos which were not in existence at the date of the Bamboo Contract but were to  come into  existence thereafter  were concerned, it was submitted that as they were future goods once they came 115 into existence  and became ripe for cutting, the property in them passed  to the Respondent Company in the same way as in the case  of bamboos  in existence at the date of the Bamboo Contract.      While discussing  the subject-matter  of  the  impugned provisions we  have already held that they apply where there is a  completed con-  tract of  purchase and the property in the goods  which are  the  subject-matter  of  the  contract passes from  the seller  to the  buyer when  the contract is made. In  other words,  the purchase  would be complete when the standing  trees or  bamboos are specific goods, that is, when v’  they are  identified agreed  upon at  the time  the contract of  sale is made, and the contract is unconditional and  further  such  standing  trees  or  bamboos  are  in  a deliverable state that is, nothing remains to be done except for buyer  to enter  upon the land of the seller and to fell and remove the trees or bamboos, as the case may be, without any let  or hindrance.  The very submission of the Appellant with respect  to when  the property passes to the Respondent Company in the case of the Bamboo Contract are sufficient to show  that   the  impugned   provisions  cannot   have   any application to the case. The Bamboo Contract like the Timber Contract is  also made  subject to the Forest Contract Rules and while  with Timber  Contract we have pointed out that by reason of the operation of those Rules property in the trees passed to  the forest contractor after the trees were felled and taken  to the  inspection points  and there  checked and examined and  thereafter removed from the contract area. The same position would apply to the case of the Bamboo Contract assuming for  the sake  of argument that it is a contract of sale of goods.      In this  view of  the matter,  the impugned  provisions would have  no application and the amounts payable under the Bamboo Contract  would not  be exigible  to purchase tax. By

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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 116 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 prendre  is a  right to take something      off another person’s land. It may be more fully defined      as a  right to enter another’s land to take some profit      of the  soil, or  a portion of the soil itself, for the      use of  the owner  of the  right  The  term  ’profit  a      prendre’ is  used  in  contradistinction  to  the  term      ’profit a  prendre’, which  signified a  benefit  which      had’ to  be rendered  by the possessor of land after it      had come  into his  possession.A profit  a prendre is a      servitude.       "241. Profit a prendre as an interest in land.           A profit  a prendre is an interest in land and for      this reason  any disposition of it must be in writing.A      profit a  prendre which gives a right to participate in      a portion only of some specified produce of the land is      just as much an interest in the land as a right to take      the whole of that produce. . .      "242. What may be taken as a profit a prendre.           The subject  matter of  a profit a prendre, namely      the substance which the owner of the right is by virtue      of the  right entitled to take, may consist of animals,      including fish  and fowl,  which are on the land, or of      vegetable matter  growing or  deposited on  the land by      some agency  other than  that of man, or of any part of      the soil  itself, including  mineral accretions  to the      soil by  natural forces.  The right  may extend  to the      taking of the whole of such animal or vegetable matters      or merely  a part of them. Rights have been established      as profits  a prendre  to take  acorns and  beech mast,      brakes, fern,  heather and  litter,  thorns,  turf  and      peat, boughs and branches of growing trees, rushes, 117           freshwater fish,  stone, sand and shingle from the      seashore A  and ice  from a  canal; also  the right  of      pasture and  of shooting  pheasants. There is, however,      no right  to take seacoal from the foreshore. The right      to take  animals ferae  naturae while they are upon the      soil belongs to the owner of the soil, who may grant to      others as  a profit  a prendre a right to come and take      them by  a grant  of hunting,  shooting, fowling and so      forth."      A profit  a prendre  is a  servitude for it burdens the land or  rather a  person’s ownership  of land by separating

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from the  rest certain portions or fragments of the right of ownership to  be enjoyed  by persons other than the owner of the thing  itself (see  Jowitt’s Dictionary  of English Law, Second Edition,  Volume 2,  page  1640.  under  the  heading "Servitude"). "Servitude"  is a wider term and includes both easements and  profits 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 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,  certain other  land not  his  own".A  profit  a prendre when  granted in  favour of  the owner of a dominant heritage for  the  beneficial  enjoyment  of  such  heritage would, therefore,  be an  easement but it would not be so if the grant  was not  for  the  beneficial  enjoyment  of  the grantee’s heritage. 118      Clause (26)  of section  3 of  the General Clauses Act, 1897, defines  "immovable property"  as including inter alia "benefit to arise out of land". The definition of "immovable property" in clause (f) of section 2 of the Registration Act 1908, illustrates  a benefit to arise out of land by stating that immovable  property "includes...rights  to ways, lights ferries, fisheries  or any  other benefit  lo arise  out  of land". As  we have  seen earlier,  the Transfer  of Property Act, 1882,  does  not  give  any  definition  of  "immovable property"  except   negatively  by  stating  that  immovable property does not include standing timber, growing crops, or grass. The  Transfer  of  Property  Act  was  enacted  about fifteen years  prior to the General Clauses Act, However, by section 4  of the  General Clauses  Act, the  definitions of certain  words   and   expressions,   including   "immovable property" and "movable property", given in section 3 of that Act are  directed to  apply also,  unless there  is anything repugnant in  the subject  or context,  to all  Central Acts made after  January 3 1968, and the definitions of these two terms, therefore,  apply when  they occur in the Transfer of Property Act.  In Ananda  Behra and  another v. The State of Orissa and  another (1)  this Court has held that a profit a prendre is  a benefit  arising out  land and that in view of clause (26)  of section  3 of the General Clauses Act, it is immovable property  within the  meaning of  the Transfer  of Property Act.      The earlier decisions showing what constitutes benefits arising out  of land  have been  summarized in  Mulla on The Transfer of  Property Act,  1882", and it would be pertinent to reproduce  the whole  of that  passage. That  passage (at pages 16-17 of the Fifth Edition) is as follows:

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    "A ’benefit  to arise  out of  land’ is  an interest in      land and therefore immovable property. The first Indian      Law Commissioners  in their  report of  1879 said  that      they had  ’abstained from the almost impracticable task      of defining the various kinds of interests in immovable      things which  are considered  immovable  property.  The      Registration  Act,   however,  expressly   includes  as      immovable property  benefits to arise out of land, here      diary allowances,  rights of  way lights,  ferries  and      fisheries’. The definition of immovable property in the      General Clauses  Act applies to this Act. The following      have been held to be immovable (1) 11955] 2 S. C. R. 919 119      property:-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      immovable property;  a right  of way;  a ferry;  and  a      fishery; a lease of land". B      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 "an  agreement for  the sale  and  purchase  of forest produce",  the Bamboo  Contract is  in express  terms described as  "a grant  of exclusive  right and  licence  to fell, cut,  obtain and  remove bamboos...for  the purpose of converting the  bamboos into  paper  pulp  or  for  purposes connected  with   the  manufacture  of  paper...."  Further, throughout the Bamboo Contract, the person who is giving the grant, namely,  the Governor  of the  State  of  Orissa,  is referred to  as the  "Grantor." While  the Timber  Contracts speak of the consideration payable by the forest contractor, the  Bamboo   Contract  provides  for  payment  of  royalty. "Royalty" is not a term used in legal parlance for the price of goods  sold. "Royalty"  is defined in Jowitt’s Dictionary of English  Law, Fifth  Edition, Volume  2,  page  1595,  as follows.           "Royalty, a  payment reserved  by the grantor of a      patent, lease  of   a   mine   or   similar   right,   and   payable proportionately to  the use made of right by the grantee. It is usually a payment of money, but may be a payment in kind, that is,  of part  of the  produce of  the exercise  of  the right.      Royalty also means a payment which is made to an author      or composer  by a  publisher in respect of each copy of      his work which is sold, or to an inventor in respect of      each  article  sold  under  the  patent."  We  are  not      concerned with the second meaning of the word H 120 "royalty" given  in Jowitt. Unlike the Timber Contracts, the Bamboo Contract is not an agreement to sell bamboos standing in the  contract areas  with an  accessory licence  to enter upon such  areas /  for the  purpose of felling and removing the bamboos  nor is  it, unlike  the  Timber  Contracts,  in respect of  a particular  felling  season  only.  It  is  an

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agreement for  a long  period extending  to fourteen  years, thirteen years  and eleven  years with  respect to different con tract  areas with an option to the Respondent Company to renew the contract for a further term of twelve years and it embraces not only bamboos which are in existence at the date of the  contract but also bamboos which are to grow and come into existence  thereafter. The payment of royalty under the Bamboo Contract  has no  relation to  the actual quantity of bamboos cut  and removed. Further, the Respondent Company is bound to  pay a minimum royalty and the amount of royalty to be paid  by it  is always to be in excess of the royalty due on the bamboos cut in the contract areas.      We may  pause here  to note what the Judicial Committee of the  Privy Council had to say in the case of Raja Bahadur Kamkashya Narain Singh of Ramgarh v. Commissioner of Income- tax, Bihar  and Orissa  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 cr 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 and      search, to dig and sink pits, to erect engines an (1) (1943)11 I.T.R. 513 P.C. 121      machinery, coke ovens, furnaces and form railways and ,      roads. All  these  and  the  like  liberties  show  how      fallacious it  is to  treat the lease as merely one for      the acquisition of a certain number of tons of coal, or      the agreed  item of royalty as merely the price of each      ton of coal."       Though the case before the Judicial Committee was of a lease of  a coal mine and we have before us the case a grant for the  purpose of  felling, cutting  and removing  bamboos with various  other rights  and licences  ancillary thereto, the above  observations of  the Judicial  Committee are very pertinent and apposite to what we have to decide.      Under the  Bamboo Contract,  the Respondent Company has the right to use all lands, roads and streams within as also outside the  contract areas  for the purpose of free ingress to and  egress from the contract areas. It is also given the right to  make dams  across streams,  cut canals, make water courses,  irrigation   works,  roads,   bridges,  buildings, tramways and  other work useful or necessary for the purpose of its  business of  felling, cutting,  and removing bamboos for the  purpose of  converting the  same into paper pulp or for purposes  connected with  the manufacture  of paper. For this purpose  it has  also the right to use timber and other forest produce  to be  paid for  at the  current schedule of rates. The  Respondent Company has the right to attract fuel from areas  allotted for  that purpose  in order to meet the fuel requirements  of the domestic consumption in the houses and offices of the persons employed by it and to pay a fixed royalty for this purpose. Further, the Government was bound,

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if required  by the  Respondent Company,  to lease  to it  a suitable site  or sites  selected by  it for the erection of store  houses,  sheds,  depots,  bungalows,  staff  offices, agencies and other buildings of a like nature.      We have  highlighted above only the important terms and conditions which  go to show that the bamboo Contract is not and cannot  be a  contract of sale of goods. It confers upon the Respondent  Company a  benefit to  arise  out  of  land, namely,   the right  to cut  and remove  bamboos which would grow from  the soil couple with several ancillary rights and is thus  a grant  of a  profit a  prendre. It is equally not possible  to  view  it  as  a  composite  contract  one,  an agreement relating  to standing bamboos agreed to be severed H 122 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,  integral  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  dent 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 alike nature required fourth purpose of  its business.  The terms  and conditions  of the Bamboo Contract  leave no  doubt that  it confers  upon  the Respondent Company  a benefit  to arise  out of  land and it would thus  be an  interest in  immovable property.  As  the grant is of the value exceeding Rs. 100, the Bamboo Contract is compulsorily registrable. It is, in fact, not registered. This is,  however, immaterial  because it  is a  grant b the Government  of   an  interest  in  land  and  under  section Registration Act  it is  exempt from  registration. The High Court was,  therefore, right  in  holding  that  the  Bamboo Contract was  a grant  of a profit prendre, though the grant of such  right not being for the beneficial enjoyment of any land of the Respondent Company  it would not be an easement. Being a  profit a  prendre or a benefit to arise out of land any attempt  on the  part of the State Government to tax the amounts payable  under the Bamboo Contract would not only be ultra vires  the Orissa  Act but  also  unconstitutional  as being beyond the State’s taxing power under Entry 54 in List II in the Seventh Schedule to the Constitution of India.      We will  now turn  to the authorities cited at the Bar. The cases  which have  come before  the courts on this point have mainly  involved  the  question  whether  the  document before the  court required  registration. After  the  coming into force of the Constitution of India and the introduction of land reforms with consequent abolition of ’Zamindari’ and other proprietary into rests in land, the question whether a particular document was a 123 grant of  a proprietary interest in land has also fallen for determination by  various courts. It is unnecessary to refer to all  the decisions  which were  cited before  us  and  we propose to  confine ourselves  to considering  only such  of

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them as are directly relevant to the question which  we have to decide. Of the High Court decisions the one most in point is that  of a  Full Bench  OF the Madras High Court in Seeni Chettiar  v.   Santhanathan  Chettiar   and  others.(l)  The question in  that case  was whether a document which granted to the  defendant a  right to  enjoy the  produce of all the trees on  the bank  and bed  of a tank as also the grass and the reeds  and further  to cut  and remove  the trees  for a period exceeding four years required registration. The court held that  the document  was not  a lease because it did not transfer to  the defendant  exclusive possession of the tank but conferred upon him merely a right of access to the place for the  reasonable enjoyment  of what  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 2):-           "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  par ties  agree that  the thing  sold      shall be immediately with drawn from the land, the land      is to be considered as a (1) I.L.R. (18971 20 Mad. 58 F.B. (2) [1875] 1 C.P.D. 35, 39. H 124           mere warehouse of the thing sold, and the contract      is for goods."      So far  as the  decisions of  this Court are concerned, the  one   which  requires   consideration  first   is  Firm Chhotabhai Jethabai  Patel &  Co. (and  other cases)  v. The State of  Madhya Pradesh.  This was  one of  the  two  cases strongly relied upon by the Appellant, the other being State of Madhya  Pradesh &  Ors. v,  Orient Paper  Mills Ltd2. The facts in  Chhotabhai’s Case  were that  the petitioners  had entered into  contracts  with  the  proprietors  of  certain estates and  mahals in  the State  of Madhya  Pradesh  under which they  acquired the  right to  pluck, collect and carry away tendu  leaves; to  cultivate, culture  and acquire lac; and to  cut and carry away teak and timber and miscellaneous species of trees called hardwood and bamboos. On January 26, 1951, the  Madhya Pradesh  Abolition of  Proprietary  Rights (Estates, Mahals, Alienated Lands) Act, 1950 (Madhya Pradesh Act I  of 1951),  came into force and on the very next day a notification was issued under the said Act putting an end to all proprietary  rights in  estates,  mahals  and  alienated villages and  vesting the same in the State for the purposes of the State free of all encumbrances with effect from March 31, 1952.  The petitioners  therupon approached  this  Court under Article  32 of the Constitution of India praying for a writ  prohibiting   the  State   of  Madhya   Pradesh   from

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interfering with  the rights  which they  had acquired under the contracts with the former proprietors. It was averred in the petitions  that not  only had  the petitioners  paid the consideration under  the said  contracts but  had also spent large sums  of money  in the  exercise of their rights under the said  contracts. This  Court  held  that  the  contracts appeared to be in essence and effect licenses granted to the petitioners to cut, gather and carry away the produce in the shape tendu  leaves, lac,  timber or wood and did not create any interest  either in  the land or in the trees or plants. In arriving  at this  conclusion the  Court  relied  upon  a decision of  the Judicial  Committee of the Privy Council in Messrs Mohanlal  Hargovind of  Jubbulpore v. Commissioner of income-tax, C.P. & Berar, Nagpur3. In that case the assesses carried on (1) [19531 S.C.R. 476. (2) [1977] 2 S.C.R. 149. ( 3) L.R.  [1949] 76  I.A. 235; ILR 1949 Nag. 892; A.l.R. 1949 P.C. 311. 125 business as  manufacturers and  vendors of bidis composed of tobacco contained  or rolled  in tendu leaves. The contracts entered into by the assesees 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 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 Messrs Mohanlal Hargovind’s Case (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, which, of course,      implies the  right to  appropriate them  as  their  own      property. The  small right  of cultivation given in the      first of  the two contracts is me rely ancillary and is      of no more significance than would be, e.g., a right to      spray a  fruit tree  given to the person who has bought      the crop  of  apples.  The  contracts  are  short  term      contracts. The, picking of the leaves under them has to      start at  once or  practically at  once and  to proceed      continuously."      According to  this Court, the contracts entered into by the petitioners  before it  related to  goods  which  had  a potential existence  and there was   sale of a right to such goods as  soon as  they came  into existence,  the  question whether the  title passed on the date of the contract itself or later  depending upon  the intention of the parties. This Court, therefore,  came to the conclusion that the State had no right to interfere with the petitioners’ rights under the said contracts.      As we  will later  point  out,  the  authority  of  the decision in  Chhotabhai’s Case has been considerably shaken, if not  wholly eroded,  by subsequent pronouncements of this Court. For the 126 present it  will be  sufficient for us to point out that the reliance placed  in Chhotabhai’s Case on the decision of the

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Judicial Committee  in Messrs Mohanlal Hargovind’s Case does not appear  to be  justified for  the contracts  before  the Judicial Committee  and before  this Court were different in their contents and this Court appears to have fallen into an error in  assuming that they were similar. For instance, the contracts before the Privy Council were short term contracts while those  before the  Court in Chhotabhai’s Case were for different periods  including terms  of five  to even fifteen years. Apart  from this,  we  have  pointed  out  above  the features which  go to  make the Bamboo Contract a benefit to arise out  of land. These features were conspicuously absent in the contracts before the court in Caotabhai’s Case.      The decision  next in  point of  time on this aspect of the case is Ananda Behare and another v. The State of Orissa and another.  The petitioners in that case had obtained oral licenses for  catching and appropriating fish from specified sections of the Chilka Lake from its proprietor, the Raja of Parikud, on  payment of  large sums  of money  prior to  the enactment of  the Orissa Estates Abolition 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  recognize 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 3  (1) of the Constitution of India, filed petitions in this Court under Article 32 of the Constitiution. In  their petition,  the petitioners  claimed that the  ; transactions  entered into  by the were sales of future goods,  namely, fish  in the  sections  of  the  lake covered by  the licences  and that  a  s  fish  was  movable property, the  sai 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 amounted  to a  licence to  enter on the land coupled with  a grant to catch and carry away the fish which right was a profit and in England it would be regarded as an interest in  land because it was a right to take some profit of the soil 127 for the  use of the owner of the right in and India it would be regarded as a benefit arising out of the land and as such would be immovable property. The Court then pointed out that fish did  not come  under the  category of property excluded from the  definition  of  "immovable  property".  The  Court further held  that if  a profit  a prendre  is  regarded  as tangible immovable  property, then the ’property’ being over Rs. 100  in value,  the document  creating such  right would repuire to be registered, and if it was intangible immovable property, then  a registered  instrument would  be necessary whatever the  value; but as in the case before the Court the sales were  all oral  and  therefore,  there  being  neither writing nor  registration, the  transactions passed no title or  interest   and  accordingly   the  petitioners   had  no fundamental  rights   which  they  could  enforce,    Ananda Behera’s Case  was the  first decision in which Chhotabhai’s Case was distinguished. The relevant passage in the judgment (at pages 9234) is as follows:           "It is  necessary to  advert  to  Firm  Chhotabhai      Jethabai Patel & Co. v. The State of Madhya Pradesh and

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    explain it  because it  was held  there that a right to      pluck, collect  and carry  away’ tendu  leaves does not      give the owner of the right any proprietary interest in      the  land  and  so  that  sort  of  right  was  not  an      ’encumbrance’ within  the meaning of the Madhya Pradesh      Abolition of  Proprietary Rights  Act. But the contract      there was  to  ’pluck,  collect  and  carry  away,  the      leaves. The  only kind  of leaves that can be ’plucked’      are those  that are  growing on trees and it is evident      that there  must be  a fresh drop of leaves at periodic      intervals. That  would make  it a  growing crop  and  a      growing crop  is expressly exempted from the definition      of ’immovable  property’ in  the Transfer  of  Property      Act. That  case is  distinguishable and  does not apply      here".      The next  decision which  was  cited  and  on  which  a considerable debate  took place  at  the  Bar  was  Shrimati Shantabhai v.  State of  Bombay &  Others. The faces in that case were  that by an unregistered document the petitioner’s husband had  granted 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 128 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  of  any  of  her fundamental rights.  The majority of the learned Judges held that if  the document  were considered  as conveying  to the petitioner any  part or  share in  her husband’s proprietary right, no  such part  or share  was conveyed  to her  as the document was  not registered and assuming that any such part or share  was conveyed,  it had  become vested  in the State under section  3 of  the said  Act;  if  the  document  were considered as a licence coupled with a grant, then the right acquired by  the petitioner would be either in the nature of a profit  a prendre  which being  an interest  in  land  was immovable property and would require registration and as the document was  not registered, it did not operate to transmit to her  any such profit a prendre as held in Ananda Behera’s Case; and  if the  document were  construed as  conferring a purely personal  right under  a contract,  assuming  without deciding that a contract was property" within the meaning of Article 19(1)(f)  and 31(1)  of the  Constitution, she could not  complain  as  the  State  had  not  acquired  or  taken possession of  the contract  which remained her property and as the  State was not a party to the contract and claimed no benefit under it, the petitioner was free to sue the grantor upon  that   contract  and   recover  damages   by  way   of compensation; and  assuming the  State was also bound by the

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contract, she could only seek to enforce the contract in the ordinary way  and sue  the State  if so  advised  and  claim whatever damages  or compensation  she might  be entitled to for the  alleged breach of it. After so holding the majority of the learned Judges observed (at page 269):           "This aspect of the matter does not appear to have      been brought  to the notice of this when it decided the      case 129      of Chhotobhai  Jethabai Patel  and Co.  v. The State of      Madhya Pradesh  and had  it been  so done,  we have, no      doubt that  case would not have been decided in the way      it was done."      Unlike the  majority of the Judges, Vivian Bose, J,. in his separate judgment considered in detail the nature of the document in  that case.  Vivian Bose,  J,. pointed  out  the distinction between  standing timber  and a  tree.  We  have earlier extracted  those passages  from the  learned Judge’s judgment. The  learned  Judge  then  pointed  out  that  the duration of  the grant  was for a period of twelve years and that it  was evident  that trees  which  would  be  fit  for 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 fall 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 the petitioner had no fundamental right which she could enforce.      According to  learned Counsel  for the  Appellant,  the judgment of  Vivian Bose,  J,. in  that  case  was  not  the judgment  of  the  Court  since  the  other  learned  Judges expressly refrained  from expressing  any opinion  as to the actual nature  of the  transaction  under  the  document  in question. Learned  Counsel submitted  that  what  the  Court really held in that case was that there was no breach of any fundamental right  of the petitioner which would entitle her to approach this Court under Article 32 of the Constitution, and this  decision was,  therefore, not an authority for the proposition that a document of the type before the Court was a grant  of a  profit a prendre as held by Vivian Bose. J It is true as contended by learned Counsel 130 that the  majority expressly  refrained  from  deciding  the nature of  the document  because, as  it pointed out, in any view of  the matter,  the petition  would fail and it would, therefore, be  difficult to  say that  what Vivian Bose, J,. held was  that the  decision of  the Court as such. However, the judgment  of Vivian  Base, J., is a closely reasoned one which carries  instant conviction  and cannot, therefore, be lightly brushed  aside as  learned Counsel  has attempted to do. It  is also  pertinent to note that the majority in that case pointed  out the  principal errors into which the Court

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had fallen  in Chhotabhai’s Case and disapproved of what was decided in that case.      The decision  to which we must now advert is Mahadeo v. The State  of Bombay (and connected petitions). The facts in that case  were that  some proprietors of Zamindaris situate in territories,  then  belonging  to  the  State  of  Madhya Pradesh and  on the  reorganization of States transferred to the erstwhile  State of  Bombay, granted  to the petitioners right to  take forest  produce, mainly  tendu  leaves,  from forests  included   in  their   Zamindaris.  The  agreements conveyed to  the petitioners in addition to the tendu leaves other forest  produce like  timber, bamboos,  etc., the soil for making bricks, and the right to build on and occupy land for the  purpose of  their business.  In a  number of cases, these rights  were spread  over  many  years.  Some  of  the agreements were  registered  and  the  others  unregistered. After the  coming into force of the Madhya Pradesh Abolition of Proprietary  Right’s (Estates,  Mahals, Alienated  Lands) Act, 1950,  the Government  disclaimed  the  agreements  and auctioned the  rights afresh,  acting under section 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. The  Court examined  the  terms  of  the  agreements  in  question  and concluded that under none of them was there a naked right to take leaves  of tendu trees together with a right of ingress and of regress 131 from the  land but there were further benefits including the right to  accupy the  land, to  erect buildings  and to take other  forest   produce  not  necessarily  standing  timber, growing crop  or grass.  The Court further held that whether the right  to the  leaves could  be regarded as a right to a growing crop  had to  be examined  with reference to all the terms  of   the  documents   and  all  the  rights  conveyed thereunder and  that if  the right  conveyed comprised  more than the  leaves of  the trees,  it would  not be correct to refer  to   it  as   being  in   respect  of  growing  crops simpliciter. On an examination of the terms of the documents and the  rights conveyed  thereunder the  Court came  to the conclusion that  what was  granted to the petitioners was an interest in immovable property which was a proprietary right within the meaning of the said act and, therefore, it vested in the  State. With reference to Chhotabhai Case relied upon by the  petitioners. Hidayatullah,  J., as  he  then  was  , speaking for the court, said  (at page 346):      " It  is clear  from  the  foregoing  analysis  of  the      decision in Chhotabhai’s Case that on a construction of      the documents  there under  consideration an adopting a      principle enunciated  by the  privy Council in Mohanlal      Hargovind of  Jubbalpure v.  Commissioner of Income tax      Central Provinces  and Berar and relying upon a passage      each in Benjamin on Sale and the well-known treatise of      Baden-Powell,   the Bench  came to  the conclusion that      the documents  there under consideration did not create

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    any interest  in land  and did not constitute any grant      of any  proprietary interest  in the  estate  but  were      merely contracts  or licenses  given to the petitioners      to cut,  gather and carry away the produce in the shape      of tendu  leaves, or lac, or timber or wood’. But then,      it necessarily followed that the Act did not purport to      affect the  petitioners’ rights  under the contracts or      licences. But  what was  the nature  of those rights of      the petitioners?  It is plain, that if they were merely      contracual rights, then as pointed out in the two later      decisions, in  Ananda Behera  v. The  State of  Orissa,      Shantabai’s case,  the State  has not acquired or taken      possession of  those rights but has only declined to be      bound by the agreements to which they were not a party.      If, on  the  other  hand,  the  petitioners  were  mere      licensees, then  also, as  pointed out in the second of      the two cases cited, the licences came to T-l 132      an end on the extinction of the title of the licensors.      In either  case there  was no question of the breach Or      any fundamental  right of  the petitioners  which could      support the  petitions which  were presented under Art.      32 of  the Constituion. 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  as  a      precedent."      We may  also usefully  reproduce the following passages (at page 354) from the concluded portion of the judgment:           "From this,  it is  quite clear  that forests  and      trees be longed 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 ss. 3      and 4  of the  Act. The  decision in  Chhotabhai’s case      treated these  rights as  bare  licences,  and  it  was      apparently given  perincuriam and cannot; therefore; be      followed." (Emphasis supplied)      Faced with  this  decision,  learned  Counsel  for  the Appellant sought  to distinguish  it on  the ground that the terms of the agreements in that case were different from the terms of  the Bamboo  Contract. We are unable to accept this submission. It is unnecessary to set out in detail the terms of the agreements in  Mahadeo’s Case. The differences sought to be  pointed out  by learned Counsel for the Appellant are unsubstantial and  make no  difference.  The  essential  and basic features  are the  same and the same interpretation as was placed upon the agreements in Mahadeo’s Case must, there fore, apply to the Bamboo Contract.      In  State   of  Madhya  Pradesh  v.  Yakinuddin(1)  the respondents had  entered into  agreements  with  the  former proprietors of  certain  estates  in  the  State  of  Madhya Pradesh acquiring the right to pro pagate lac, collect tendu leaves and  gather fruits  and flowers of Mahua leaves. Some of these documents were registered and others (1) [1963] 3 S.C.R. 13. 133 unregistered. On the coming into force of the Madhya Pradesh Abolition of  Proprietary Rights (Estates, Mahals, Alienated Lands)  Act,   1950,  the   State  of  Madhya  Pradesh  took possession of  all the  villages comprised in the respective

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estates of  the proprietors  who had  granted the  aforesaid rights to  the respondents  and  refused  to  recognize  the respondents’  rights.   The  respondents   thereupon   filed petitions under  Article 226 of the Constitution in the High Court of  Madhya Pradesh and the High Court relying upon the decision in  Chhotabhai’s Case,  granted to  the respondents the reliefs  claimed by  them.A Bench of five Judges of this Court allowed  the appeals  filed by  the  State  of  Madhya Pradesh. In  its judgment, this Court considered its earlier decisions in  Shantabai v.  State of  Bombay and  others and Mahadeo v.  the State  of Bombay and observed as follows (at page 21):           "In view  of these considerations, it must be held      that these cases  are equally governed by the decisions aforesaid of this Court, which have overruled the earliest decision in the case  of Chhotabhai  Jethabai Patel and Co. v. The State of Madhya Pradesh.      In Board  of Revenue  Etc. v.  A.M. Ansari  Etc.(1) the respondents were the highest bidders at an auction of forest produce,  namely,   timber,  fuel,   bamboos,  minor  forest produce, bidi  leaves, tanning  barks, parks,  mohwa,  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  then as  if  these  documents  were  leases  of immovable  property.   The  respondents   there  upon  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  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,  (l) that these were agreements of short duration of nine lo ten months, (2) that they did not create any estate or interest in the (1) (1976] 3 S.C.R 661. H 134 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  the agreement or which might have come into existence during  the short  period of  the currency  of the agreements, and  that the  right of the respondents to go on the land  was only  ancillary to  the real  purpose  of  the contract. The Court observed as follows (at page 667):           "...Thus the  acquisition by  the respondents  not      being an interest in the soil but merely a right to cut      the fructus  naturales, we are clearly of the view that      the    agreements    in    question    possessed    the      characteristics of  licences  and  did  not  amount  to      leases so  as to  attract the  applicability of Article      31(c) of the Stamp Act".           "The conclusion  arrived at  by us  gains strength      from the judgment of this Court in Firm Chhotabhai jethabai Patel and Co. &  Ors. V.  The State  of Madhya Pradesh where contracts and agreements  entered into  by person  with  the  previous proprietors of certain estates and mahals in the State under which they  acquired the  rights to pluck, collect and carry away tendu  leaves, to  cultivate, culture, and acquire lac,

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and to  cut and carry away teak and timber and miscellaneous species of  trees called  hardwood and  bamboos were held in essence and effect to be licences."           "There is,  of course, a Judgment of this Court in      Mahadeo v.  State of  Bombay where seemingly a somewhat      different view  was expressed  but the  facts  of  that      course were  quite distinguishable.  In that case apart      from the  bare right to take the leaves of tendu trees,      there were  further benefits  including  the  right  to      occupy the  land to  erect buildings  and to  take away      other forest  produce not  necessarily standing timber,      growing crop  or grass  and the rights were spread over      many years."      We fail  to see  how this authority in any way supports the case  of the  Appellant before  us or  resuscitates  the authority of  Chhotabhai’s Case.  In Ansari’s Case the Court seems to  have assumed  that Chhotabhai’s  Case  dealt  with short term  contracts while,  as we have seen above, most of the contracts in Chhotabhai’s 135 Case were  of far greater duration extending even to fifteen years, nor  was the  Court’s attention  drawn to the case of State Or  Madhya Pradesh  v. Yakinuddin. While the agreement in Ansari’s Case was a mere right to enter upon the land 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 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 s 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 and others v.  Orient Paper  Mills Ltd.,  the second  of the two cases on  which learned  Counsel for the Appellant relied so strongly in  support  of  his  submission  that  the  Bamboo Contract was  a contract of sale of goods. The facts in that case as  appearing from  the  judgment  of  the  High  Court reported as  Orient Paper  Mills Ltd.  v.  State  of  Madhya Pradesh and  Others(l) were that the President of Indicating on behalf  of the  former Part  State of Vindhya Pradesh had entered into  an agreement  with the  respondent.  The  said agreement was  a registered  instrument and  was styled as a lease and  under it  the respondent acpuired the right for a period of  twenty years  with an  option of  renewal  for  a further period  of twenty  years to  enter upon  "the leased area" to  fell, cut or extract bamboos and salai wood and to remove, store  and utilize  the same  for meeting  the  fuel requirement of  its paper  mill.A copy of the said agreement has been  produced before  us. Some of the terms of the said agreement were  the same  as those  contained in  the Bamboo Contracts as  also in  the case  of Mahadeo  v. The State of Bombay. The  said agreement  provided for payment of royalty including a  minimum royalty.  It also  conferred  upon  the respondent the right to take on lease such (1) [1972] 28 S.T.C. 532.

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136 suitable site  or sites as were at the disposal of the State Government within  "the leased  area" for  the  erection  of store  houses,  sheds,  depots,  bungalows,  staff  offices, agencies and  other buildings  of  a  like  nature  bonafide required for the purposes of its business connected with the said agreement  as also  a right  to make dams across reams, cut canals,  make water-course,  irrigation works, construct roads, railways and tramways and do any other work useful or necessary for  the purposes  of its  business connected with the said  agreement in  or upon  "the leased  area" in terms very similar  to those  in the  Bamboo Contract.  After  the States  Reorganization  Act,  1956,  came  into  force,  the territories comprised in the State of Vindhya Pradesh became part of  the new  State of  Madhya Pradesh. At the date when the said agreement was entered into the . P. and Berar Sales Tax Act,  1947, was in force in the State of Vindhya Pradesh and the  definition of  "goods" contained  in clause  (g) of section 2 of that Act as modified and in force in that State excluded from  the purview  of the said Act foresr contracts that gave  a right  to collect  timber  or  wood  to  forest produce. The  C. P.  and Berar Sales Tax Act was repealed by the Madhya  Pradesh General 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 recovery of the amount of sales tax from the respondent, and that neither  the State Government nor the Forest Department of that Government was a "dealer" and that even if the sales tax was payable, it was not recoverable as arrears of land 137 revenue. The High Court held that the transaction was one of sale of  goods and that if sales tax was payable it would be recoverable under  section 64A  of the  Sale of  Goods  Act, 1939, but  the State  Government or  the  Forest  Department could not  merely by selling the forest produce grown on its own land  be regarded as carrying on any business of buying, selling, supplying  or distributing goods and, therefore, in respect of  mere sales  of forest  produce neither the State Government nor  the Forest  Department was a "dealer" within the meaning  of that  term as  defined in  the 1958  Act. In coming to  the conclusion  that the  said  agreement  was  a contract of sale of goods, the High Court proceeded upon the basis that  what it  had to  consider was  "the  stage  when bamboo  and   salai  wood   have  already  been  felled  and appropriated’’. By reason of the judgment of the High Court, the  definition  of  the  term  "dealer"  was  amended  with retrospective effect by the Madhya Pradesh General Sales Tax

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(Amendment and  Validation) Act,  1971, so as to nullify the finding of  the High Court that neither the State Government nor its  Forest department  was a  "dealer".  The  State  of Madhya Pradesh  as also the respondent came in appeal to the Supreme Court.  The appeals  were heard  in the  Court by  a Division Bench  of two learned Judges. At the hearing of the appeals, the  respondent desired  to challenge  the vires of the  amending   Act,  but   in  view   of  the  Presidential Proclamation suspending  the operation  of  Article  14,  it could  not   do  so  and  the  court  held  that  after  the proclamation lapsed,  it was  open to the respondent to take up the  point but  so far  E the appeals were concerned that challenge was  not available and the appeals must be decided on  the   basis   that   the   amendment   was   valid   and constitutional. The main point before this Court, therefore, was whether  the said agreement was a lease as it was styled or a  simple sale  of standing timber coupled with a licence to enter  and do certain things on another’s land. The Court held that  the label  given to a document was not conclusive of its  real nature  and  that  under  the  said  agreement, possession of the land was not given to the respondent 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 G  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". 138      We are  unable to  agree with the interpretation placed by the  Court on  the document  in the  Orient Paper  Mill*’ Case. 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      meaning of  its several  clauses, and the words of each      clause must  be so  interpreted as  to bring  them into      harmony with the other provisions of the instrument, if      that interpretation does no violence to the cleaning of      which  they   are  naturally   susceptible.  The   best      construction of  deeds is  to make one part of the deed      expound the  other, and so to make all the parts agree.      Effect must  as far as possible, be given to every word      and every clause".      In Mahadeo   v.  State of  Bombay a five-Judge Bench of this Court  categorically held  (at page  349) that "Whether the right  to the  leaves can  be regarded  as a  right to a growing crop  has, however, to be examined with reference to all the  terms of  the documents and all the right. conveyed thereunder".  In   spite  of   this  clear  and  unequivocal pronouncement by  a five-Judge  Bench  of  this  Court,  the learned Judges  of the  High Court  who decided  the  Orient Paper Mills’  Case held  (at page  538)  that  "we  have  to consider the  stage when bamboos and salai wood have already been felled  and appropriated",  while a  two-Judge Bench of this Court  evolved for  itself  in  the  appeal  from  that judgment a  rule of interpretation which was thus stated (at

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page 152) by Krishna Iyer, J., who spoke for the Court:           "The  meat   of  the   matter  is   the   judicial      determination of  the true character of the transaction      of ’lease’ from the angle of the MPGST Act and the Sale      of Goods  Act whose  combined operation is pressed into      service for  making the  tax exigible  from the  Forest      Department and,  in turn, from the respondent mills. It      is the part of judicial prudence to 139 decide an  issue  arising  under  the  specific  statute  by confining the  focus to  that statuary  compass  as  far  as possible. Diffusion  into  wider  jurisprudential  areas  is fraught with unwitting conflict or confusion. We, therefore, warn ourselves  against venturing  into the  general law  of real property  except for  minimal  illumination  thrown  by rulings cited.  In a  large sense, there are no absolutes in legal propositions  and human  problems and so, in the jural cosmos of  relativity, our observations here may not be good currency beyond  the factual-legal  boundaries of  sales-tax situations under a specific statute."      A little  later the  learned Judge stated (at page 157) as follows: -           "We may  also observe  that the 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, (I)  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  document  can  be  construed  as amounting to  a grant of a benefit to arise out of land when the question  before the Court is whether proprietary rights and interests  in estates  have been  abolished and the same document or  a document  having  the  same  tenor  could  be construed as  a contract  of sale of goods when the question Is whether  the amounts  payable thereunder  are exigible to sales tax  or purchase tax, making the interpretation of the document dependent  upon the  personal views  of the  judges with respect to the 140 legislation in  question. In  the very  case  which  we  are considering, namely,  the Orient  Paper Mill’s Case as shown by the  very first  sentence in  the  judgment,  this  Court obliquely expressed  its disapproval  of the transactions of the type  represent by the document before it. That sentence is as follows (at page 150) .           "The  State   of  Madhya   Pradesh,  blessed  with      abundant forest wealth, whose exploitation, for reasons      best known  to that government, was left in part to the      private sector.  viz.,  the  respondent,  Orient  Paper

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    Mills-"        We may point out here that in making this observation the Court  overlooked three important aspects of the matter, namely, (I)  it was  a matter  of policy  for the  State  to decide whether  such transactions  should be entered into or not, (2)  the transaction  was entered  into by the State so that a  paper mill could be started in the State as shown by the various  terms of  the said  agreement and  thus was  an encouragement to  setting up of industries in the State, and (3) the transaction ensured employment for the people of the area because  the said agreement expressly provided that the respondent was  to engage  minim m 50 per cent of the labour for the  working of  the contract area from the local source if available.          Just as a document cannot be interpreted by picking out only  a few clauses ignoring the other relevant ones, in the same  way the nature and meaning of a document cannot be determined by  its end  result or  one  of  the  results  or consequences which  flow from  it. If the second part of the above rule  were correct,  the result  would  be  startling. There would  be almost  no agreement  relating to  immovable property which  cannot be construed as a contract of sale of goods. Two  instances would  suffice to  show this. If a man were to  sell his  building to  another 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 accommodation in the new  building, according  to this rule of interpretation adopted by the Court in the Orient Paper Mills Case 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 141 the fruits which would come into existence in the future and equally in  the case  of a  field the same would be the case wlth 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  the   Orient  Paper   Mills’   Case,   the   document, indisputably a  lease of  immovable property,  would for the purposes of  sales tax  law be  a sale  of goods. In looking merely at the end-result of the agreement before it, namely, that the bamboos would be cut and then would be goods in the hands of  the respondent  and  holding  therefrom  that  the transaction was  exigible to sales tax, the Court overlooked what had  been firmly  established by  the decision  of  the five-Judge Bench  of this Court in State of Madras v. Gannon Dunkerly Co.  (Madras) Ltd.  that both the agreement and the sale must  relate to the same subject-matter and, therefore, there cannot  be  an  agreement  relating  to  one  kind  of property and  a sale  as regards another. This principle has been consistently  followed and  applied by this Court (see, for instance. Commissioner of Sales Tax. M. P. v. Purshottam Premji).(1) Incidentally,  we may also point out that in the Orient Paper  Mills Case  this Court itself had reservations as regards  what  it  was  deciding  as  is  shown  ’by  its statement that  "in the  journal cosmos  of relativity,  our observations here  may  not  be  good  currency  beyond  the factual legal  boundaries of  sales-tax situations  under  a

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specific statute."  We are  constrained to observe that they are not  "good currency" so far as even those situations are concerned.       It is true that the nomenclature and description given to a contract is not determinative of the real nature of the document or  of the  transaction thereunder. These, however, have to  be determined from all the terms and clauses of the document and  all the  rights and  results flowing therefrom and not  by picking  and choosing  certain clauses  and  the ultimate effect  or result  as the  Court did  in the Orient Paper Mills’ Case.        Thus,  in coming  to the  conclusion  that  the  term "royalty" used  in the  document before  it  was  merely  "a feudalistic euphemism  for the  ’price’ of  the timber", the Court overlooked the fact that the amount of royalty payable by the  respondent was  consideration  for  all  the  rights conferred upon  the respondent  under the contract though it was to be calculated according to the quantity (1) [1970] 26 S.T.C. 38, 41 S.C. 142 of the  bamboos felled,  and the  Court also  overlooked the fact that  this was  made further clear by the provision 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 document 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  Orient  Paper Mils’ case  did not  advert to the earlier decisions of this Court relating  to documents  with similar tenor even though those cases  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 Mill ’s Case was decided by this Court  per   in  curium   because  it   did  not  take  into consideration decisions  of larger Benches of this Court. In Union of  India and  another v.  K. S.)  Subramanian(1) 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.  The proper course for a High Court, in such      a case,  is to  try to find out and follow the opinions      expressed by larger benches of this Court in preference      to those  expressed by  smaller benches  of the  Court.      That is the practice followed by this Court itself. The      practice  has  now  crystallized  in  to  rule  of  law      declared by this Court."        Had  the Court  looked at  these decisions  of larger Benches, it  would have  appreciated that  the only question before it could not be whether the document was a lease or a contract of  sale of goods and that even though the document was not  a lease  it could  be a grant of a profit a prendre and that  where there  is a grant of a profit a prendre that is, a benefit to arise out of land, it is immaterial whether the possession  of the  land is  given  to  the  grantee  or whether the  grantee is  given only  a licence to enter upon the land  to receive  the benefit.  The  bacic  and  salient features of  the agreement  before the  Court in  the Orient Paper Mills.’  Case were  the same as in the case of Mahadeo state of Bombay and this Court was not (1) (1977) I S.C.R. 87, 92, 143 justified in  not adverting to that case and the other cases

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referred to  by us  earlier on  the ground  that these cases dealt with the general law of real property.      A chameleon may change its surroundings but document is not a  chameleon to  change its  meaning  according  to  the purpose of  the statute  with reference to which it falls to be interpreted  and if  documents having  the same tenor are not to be construed by courts in the same way, it would make for great uncertainty and would introduce confusion, leaving people bewildered as to how they should manage their affairs so as  to make  their transactions valid and legal in eye of the law.        The authorities discussed above show that the case of Firm Chhotabhai  Jethabai Patel & Co. v. The State of Madhya Pradesh is  not good law and has been overruled by decisions of larger  Benches of this Court. They equally show that the case of  State of Madhya Pradesh v. Orient Paper Mills Ltd., is also  not good  law and  that this decision was given per incurium and  laid down  principles of  interpretation which are wrong  in law  and cannot be assented to. The discussion of the above authorities also confirm us in our opinion that the Bamboo  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 dose  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 it which we have already summarized earlier and  which  make  in  clear  that  what  the  Bamboo Contract granted was a benefit to arise out of land which is an interest in immovable property. The attemp on the part of the State  Government and  the  officer  of  its  Sales  Tax Department to  bring to  tax the  amounts payable  under the Bmboo 144 Contract was, therefore, not only unconstitutional but ultra vires the Orissa Act. Works Contract        The  only point which now remains to be considered is the one canvassed by the contesting Respondents namely, that the Bamboo  Contract as  also the Timber Contracts arc works contracts  and   the  amounts   payable  thereunder  cannot, therefore, be  made exigible  to any  tax under  the  Orissa Act.A works  contract is  a  compendious  term  to  describe conveniently a  contract for  the  performance  of  work  or services in  which the  supply of  materials or  some  other goods is  incidental. The  simplest example  of this type of contract would  be where  an order  is given  to a tailor to make a  suit from  suiting supplied  by the  customer.  This would be  a contract  of work or servies in which the suyply of materials,  namely, thread,  lining, and  buttons used in making the suit, would be mrely incidental. Similarly, if an artist is  commissioned to  paint a  portrait, it would be a contract of  work and services in which the canvass on which the portrait  is painted  and the paint used in painting the portrait would be merely incidental. In Commissioner of Sale

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Tax, M.P.  v. Pershottam  Premji, this Court pointed out the distinction between  a works contract and a contract for the sale of goods as follows (at page 41):           "The primary  difference between  a  contract  for      work or  service and  a contract  for sale  of goods is      that in  the former  there is  in the person performing      work or  rendering service  no property  in  the  thing      produced as a whole notwithstanding that a part or even      the whole  of the  materials used  by him may have been      his property.  In the  case of a contract for sale, the      thing produced  as a  whole has individual existence as      the sole property of the party who produced it, at some      time before  delivery, and  the property therein passes      only under  the contract  relating thereto to the other      party for price "         As  pointed  out  above  the  Timber  Contracts  are agreements relating to movables while the Bamboo Contract is a grant  of an interest in immovable property. The question, therefore, whether  there is  a works contract or a contract of sale  of goods  can arise only with respect to the Timber Contracts. but the very meaning 145 of a  works contract  would show  that the  Timber Contracts cannot be   works 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.  372177 dated May 23,      1977, (2) Notification S.R.O. No. 373177_ dated May 23,      1977, (3)  Entries Nos.  2 and  17 in  the Schedule  to      Notification No.  67178  -  C.T.A.  135177  (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  vires either  Entry 54  in List  II  in  the      Seventh Schedule  to the  Constitution of  India or the      ’Orissa Sales Tax Act, 1947, but are constitutional and      valid.           (2) Under  the  impugned  provisions  the  taxable      event is  not an  agreement to  sever standing trees or      bamboos but  the purchase  of standing trees or bamboos      agreed to be severed.           (3) The  absence in the impugned provisions of the      words "before  sale or  under the  contract of sale" is      immaterial for  the impugned provisions read as a whole      clearly show  that the  severance of  standing trees or      bamboos has to be under the contract of sale and before      the purchase  thereof has been completed and not before      sale of such trees or bamboos. 146           (4) The  subject-matter of the impugned provisions      is  goods and the tax that is levied thereunder is on a

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    completed purchase of goods.           (5) When under section 3-B of the Orissa Sales Tax      Act, 1947,  any goods  are declared to be liable to tax      on the  turnover of purchases, such goods automatically      cease to  be liable  to sales  tax  by  reason  of  the      proviso to that section.           (6) The  word "supersession"  in the Notifications      dated December  29, 1977,  is used in the same sense as      the words "repeal and replacement" and, therefore, does      not have  the effect  of wiping  out the  tax liability      under the  previous notifications. All that was done by      using  the  words  "in  supersession  of  all  previous      notifications" in  the Notifications dated December 29,      1977, was  to repeal and replace previous notifications      and not to wipe out any I) liability incurred under the      previous notifications.           The Timber  Contracts are  not works contracts but      are agreements to sell standing timber.           Under the  Timber Contracts  the property  in  the      trees which  were the  subject-matter of  the contracts      passed to  the Respondent Firm, Messrs M.M. Khara, only      in the  trees which  were felled,  that is,  in timber,      after all  the Conditions  of  the  contract  had  been      complied with  and after  such timber  was examined and      checked  and   removed  from  the  contract  area.  The      impugned provisions,  therefore, did  not apply  to the      transactions covered by the Timber Contracts.           (9) The  dictionary meaning  of a  word cannot  be      looked at  where that word has been statutorily defined      or judicially  interpreted but  where there  is no such      definition or  interpretation, the  court may  take the      aid of  dictionaries to ascertain the meaning of a word      in common 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  particular  meaning      which is  relevant to  the content  in which  it has to      interpret that word 147           (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 sale s have been assessed to tax at      the rate  of ten  per cent,  by reason of the period of      limitation prescribed  by section  12(8) of  the Orissa      Sales Tax  Act, 1947,  the Respondent Firm’s assessment      for the  relevant period  cannot  now  be  reopened  to      reassess such sales at ten Per cent.           (13) The  Bamboo Contract  is not  a lease  of the      contract  ’   areas  to  the  Respondent  Company,  The      Titaghur Paper Mills (Company Limited.           (14) The Bamboo Contract is also not a grant of an

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    easement to the Respondent Company.           (15) The  Bamboo contract is a grant of a profit a      prendre which  in Indian  law is a benefit to arise out      of land  and thus  creates  an  interest  in  immovable      property.           (16) Being  a benefit  to arise  out of  land, any      attempt on  the Part of the State Government to tax the      amounts payable  under the Bamboo Contract would be not      only   ultra    vires   the   Orissa   Act   but   also      unconstitutional as  being beyond  the  State’s  taxing      power under Entry 54 in List II in the seventh Schedule      to the Constitution of India. 148           (17) The  case of Firm Chhotabhai Jethabai Patel &      Co. v.  The State of Madhya Pradesh is not good law and      has been  overruled by  decisions of  larger Benches of      this Court  as pointed  out by  this Court  in State of      Madhya Pradesh v. Yakinuddin.           (18) The  case of State of Madhya Pradesh & Ors v.      Orient Paper  Mills Ltd.  is also  not good law as that      decision  was   given  per   incurium  and   laid  down      principles of interpretation which are wrong in law.           (19)  The  real  nature  of  a  document  and  the      transaction  thereunder  have  to  be  determined  with      reference to all the terms and clauses of that document      and all the rights and results flowing therefrom.       On the above conclusions reached by us the judgment of the High  Court in so far as it hold the impugned provisions to be  unconstitutional and ultra vires the Orissa Sales Tax Act 1947,  requires to  be reversed. This, however, does not mean that the writ petitions filed by the Respondent Company and  the  Respondent  Firm  in  the  High  Court  should  be dismissed because  in  its  writ  petitions  the  Respondent Company had  played for quashing the notice dated August 18, 1977, issued  against it  under Rules  22 and  28(2) of  the Orissa Sales Tax Rules, 1947, and the Respondent Firm in its writ petition  had prayed  for setting  aside the assessment order dated  November 28, 1978, for the priod April 1, 1977, to March  31, 1978.  On the  findings given  by us  the said notice must  be quashed. 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 so far as it  imposed purchase  tax on  the  amounts  paid  by  the Respondent Firm  under the  Timber Contract. 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 for  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, 149 (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  Sale 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  the  said section 3-B and (4) Enteries No. 2 and 17 in the Schedule to Notification No. 67181 - C.T.A. 135/77-F (S.R.O. No. 901/77)

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dated December 29, 1977, issued under sub-section (1) of the said section  S after  its amendment by the Orissa Sales Tax (Amendment) Act, 1978, to be unconstitutional as being ultra vires Entry  54 in  List II  in the  Seventh Schedule to the Constitution of  India and  as being  ultra vires the Orissa Sales Tax  Act, 1947,  and we declare these provisions to be constitutional and  valid. In  Civil Appeal No. 219 of 1982, we further  quash and  set aside the notice dated August 18, 1977, under Rules 22 and 28(2) of the Orissa Sales Tax Rules 1947, issued  against the  Respondent Company,  The Titaghur Paper Mills  Company Limited,  and the  assessment order, if any, made  in pursuance  thereof. In Civil Appeal No. 220 of 1982, we  further modify the assessment order dated November 28, 1978,  for the  period April 1, 1977, to March 31, 1978, made against Respondent Firm; Messrs M.M. Khara, by deleting therefrom the  item of  purchase tax  on the amounts paid by the Respondent  Firm under the Timber Contracts entered into by it  with the  State of  Orissa and  direct  consequential modifications to be made therein.        As  the real object of the State Government in making the mpugned  provisions was to make exigible to purchase tax the amounts  payable under  the  Bamboo  Contracts  and  the Timber Contracts  in which  object it  has  failed,  in  our opinion, a  fair order  for costs  would be that the parties should bear  and pay their own costs of these Appeals and we direct accordingly.      P.B.R. 150