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PETITIONER: THE UNION OF INDIA

       Vs.

RESPONDENT: THE COMMERCIAL TAX OFFICER, WESTBENGAL AND OTHERS(WITH CONNE

DATE OF JUDGMENT: 19/12/1955

BENCH: DAS, SUDHI RANJAN BENCH: DAS, SUDHI RANJAN BOSE, VIVIAN BHAGWATI, NATWARLAL H. JAGANNADHADAS, B. SINHA, BHUVNESHWAR P.

CITATION:  1956 AIR  202            1955 SCR  (2)1076

ACT: Sales  Tax-Sale of hessian to the Ministry of  Industry  and Supplies  of the Government of India-If exempt from  payment of  sales tax-Bengal Finance (Sales Tax) Act,  1941  (Bengal Act VI of 1941), s. 5(2)(a)(iii).

HEADNOTE: Per  S.  R.  DAS, ACTING C.j.,  VIVIAN  BOSE,  BHAGWATI  AND JAGANNADHADAS   JJ.,  SINHA  J.  dissenting.-The   exemption created  by the provisions of s. 5(2)(a)(iii) of the  Bengal Finance  (Sales Tax) Act of 1941 must be construed  strictly and  cannot be extended to sales to  Government  departments other than those mentioned therein. The Department of Industries and Supplies, which was  subse- quently  redesignated  as  the Ministry  of  Industries  and Supplies,  was not the same as the Indian Stores  Department or  the  Supply Department of the Government of  India  and, consequently,  sales made to the Ministry of Industries  and Supplies are not exempt from payment of sales tax under that section. In  a  welfare  State  with  ever  expanding  activities  in different  fields including trade and  commerce,  Government departments  are  often entrusted with  the  performance  of well-defined activities and are authorised to deal with  the outside world and enter into transactions in the same way as an  ordinary  person  or a Company may do and  may  well  be regarded  as distinct units or quasi-legal entities for  the purpose for which they are created. Consequently,  the sales of hessian made to the Ministry  of Industries  and Supplies of the Government of India  by  the appellant  Mills were not exempt from payment of  sales  tax under  the Act and the State of West Bengal was entitled  to levy the same. 1077 Per  SINHA J.-The language of a statute has sometimes to  be construed in a modified form in order to give effect to  the real intentions of the legislature where, as in the  present case, the language is only of a descriptive nature and not a definitive one.

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Miller v. Salomons ([1852] 7 Exchequer 475), referred to. Commissioners of Inland Revenue v. Forrest ([1890] 15 A.  C. 334), held inapplicable. The  terms  of s. 5(2)(a)(iii) indicate that  the  exemption created attaches to a particular function of the  Government of India described by a certain name. The change of nomenclature was, therefore, of no consequence so  long as a particular department continued  to  discharge that function, namely, that of purchasing articles including hessian for the Government of India. History  of  the  department  shows  that  the  Ministry  of Industry  and  Supply is a lineal descendant of  the  Indian Stores  Department  and  was at the  time  of  the  contract discharging  its  function on behalf of  the  Government  of India  and, consequently, the sales made to it must be  held to be exempt from payment of sales tax. A  department of the Government is neither a natural  nor  a legal  person  but  is  one  of  the  many  functions  of  a Government placed in charge of a hierarchy of officials with the head of the department at the apex.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 9 and 10 of 1954. On  appeal from the Judgment and Order dated the 9th day  of June  1952  of the Calcutta High Court in Appeal No.  26  of 1952 arising out of the Order dated the 6th day of  December 1951 of the said High Court exercising its Ordinary Original Civil Jurisdiction in Matter No. 110 of 1950. C.K.  Daphtary,  Solicitor-General of India,  (R.  Ganapathy Iyer and R. H. Dhebar, with him) for the appellant in C.  A. No. 9 of 1954 and respondent No. 3 in No. 10 of 1954. S.   Chowdhury, (S.  N. Mukherji, B. N. Ghosh and A.   K. Bose, with him) for the appellant in C. A. No. 10 of 1954. S. M. Bose, Advocate-General of West Bengal, (B. Sen and  P. K.  Bose,  with him) for respondents Nos.  I and 2  in  both appeals. 1078 1955.  December 19. DAS  ACTING C. J.-The only question canvassed before  us  in the  above  appeals,  which have  been  beard  together,  is whether  certain  sales of goods made by  Shri  Ganesh  Jute Mills,  Ltd. (hereinafter referred to as the Mills)  to  the Government  of India, Ministry of Industry and Supplies  are to be deducted from the taxable turnover of the Mills so  as to  be exempt from sales tax demanded by the Commercial  Tax Officer of the State of West Bengal.  The relevant facts are stated-below. On  the  first of September 1948 the  Government  of  India, Ministry of Industry and Supplies, in Calcutta, placed  with the Mills a confirmatory order in writing bearing No. Cal/J- 1/2001/103  for the supply to the Government of India  of  a large quantity of hessian cloth of different descriptions at different prices ,therein mentioned.  It was stipulated that the contract would be governed by the conditions of contract specified  in  Form WSB 133 as amended up-to-date.   It  was specifically mentioned that the goods ordered were  required to  meet  an international obligation of the  Government  of India  and  as  such  the  execution  of  the  contract   in accordance with the programme of deliveries as given in  the schedule attached thereto was essential.  The agreed  prices were  stated to be exclusive of the Bengal Sales Tax and  it was  stipulated that the Government of India  would  arrange

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direct payment of sales tax to the Government of West Bengal if  it  was ultimately found that Sales Tax was  payable  in respect  of  that  contract.   Pursuant  to  the   aforesaid contract,  the  Mills supplied goods to  the  Government  of India  of the aggregate value of Rs. 2,10,040 calculated  at the prices agreed upon. The  Commercial   Tax Officer, Beadon  Street,  District  If Charge, claimed that the aforesaid sales should be  included in  the taxable turnover of the Mills and assessed to  sales tax.  The Mills, on the ,other hand, claimed exemption under section  5  of  the Bengal Finance (Sales  Tax)  Act,  1941. (Bengal Act VI of 1941).  The relevant portion of section  5 ran as follows;- 1079 "5. (1) The tax payable by a dealer under this Act shalL  be levied at the rate of one quarter of an anna in the rupee on his taxable turnover; (2)  In  this  Act the expression "taxable  turnover"  means that  part  of a dealer’s gross turnover during  any  period which remains, after deducting therefrom- (a)  his turnover during that period on-- (i)............. (ii)............ (iii)     sales to the Indian Stores Department, the  Supply Department  of the Government of India, and any  railway  or water transport administration; (iv)........... (v)............ (vi)............ (b)............" The Mills further contended that if any sales tax was at all payable the same was payable by the Government of India  and not  by  them.  The Commercial Tax  Officer  overruled  both these  objections and on the 8th November 1950  he  assessed the  Mills to sales tax in respect of the supplies  made  by the  Mills  to the Government of India under  the  aforesaid contract and demanded a sum of Rs. 9,401-10-6. On  the 6th December 1950 the Mills filed a  petition  under article  226  of the Constitution of India before  the  High Court  at Calcutta.  In the petition the Mills impleaded  as respondents  the Commercial Tax Officer, the State  of  West Bengal and the Union of India.  The Mills prayed for a  writ of  mandamus  on  the respondents to  cancel  and/or  recall and/or  forbear from acting or giving effect to  the  demand dated  the 8th November 1950 and from realising the  sum  of Rs.  9,401-10-6 and for a writ of certiorari for  production of  the  records and proceedings before the  Commercial  Tax Officer  and for quashing the same and for other  incidental reliefs.   On  the  same  day  a  rule  was  issued  on  the respondents  to show cause why the orders prayed for  should not be made. The Commercial Tax Officer filed an affidavit in  opposition disputing the contentions put forward by 1080 the  Mills  in  support of their  claim  for  exemption  and maintaining that sales tax was due and had been legitimately assessed and demanded.  On behalf of the Union of India  was filed  an  affidavit affirmed by one M. -P.  Pai,  the  then Joint  Secretary  in  the Ministry of  Works,  Production  & Supply.   It  was therein stated that a  department  of  the Government of India named the Department of Supply came into existence in the month of September 1939 immediately on  the commencement of World War II and before the enactment of the Bengal  Finance  (Sales  Tax) Act, 1941 (Bengal  Act  VI  of 1941).  It was averred that before the 7th January 1946  the

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said  Department of Supply was charged with the  procurement of Stores from all places in India including Bengal and that it also directed the work of Indian Stores Department in the United Kingdom and of the India Supply Mission in the United States  of  America.  It was added that  by  Resolution  No. 227/45-Pub(c)  dated  the 31st December 1945  the  Governor- General  in Council announced the creation with effect  from the  7th  January  1946 of the Department  of  Industries  & Supply in place of the existing Department of Supply and  of Industries  and  Civil Supplies.  It was  claimed  that  the powers  and  functions of the Department of  Industries  and Supplies were the same as those of the Department of  Supply and  that there was no variation in the nature of  the  said functions whatsoever. The  rule came up for hearing before Bose, J., who took  the view  that  the  newly created Department  of  Industries  & Supplies  was charged with the same work of  procurement  of stores   for  Government  as  had  been  entrusted  to   the Department  of Supply and certain additional works and  that later on the name was again changed to Ministry of  Industry and  Supply.   The learned Judge pointed out  that  although there  was a change in the designation of the Indian  Stores Department  and the Supply Department of the  Government  of India,  section 5 (2) (a) (iii) was not amended in  any  way until  1949  when by an amending Act (West Bengal Act  X  of 1949) the exemption 1081 granted  under  section  5(2)(a)(iii)  was  withdrawn.   The learned  Judge appears to have regarded this con-,  tinuance of section 5(2) (a) (iii) in the Bengal Finance (Sales  Tax) Act,  1941  as indicative of the fact that in  view  of  the State  of West Bengal the Ministry of Industry & Supply  was the  same  as the Indian Stores Department  and  the  Supply Department  of  the Government of India referred to  in  the section.  The learned Judge accordingly held that the  Mills were  entitled to the benefit of the exemption and were  not liable  to  pay  sales tax in respect  of  the  supplies  in question.  He accordingly, on the 3rd January 1952, made the rule absolute. The  Commercial  Tax Officer and the State of  West  ’Bengal went up on appeal from the said judgment and order of  Bose, J. The appeal came up for hearing before & Bench  consisting of  K.C. Das Gupta, J. and P. N. Mookerjee, J.  In  separate but  concurring judgments both the learned  Judges  rejected the  preliminary objection taken by the Mills and the  Union of  India as to the maintainability of the appeal.   On  the merits both of them held that the Department of Industries & Supplies was not the same as the Indian Stores Department or the  Supply Department of the Government of India.  The  old departments  ceased to exist and a new department  combining some  of  the functions of these departments  and  some  new functions  was  created and that, therefore,  sales  to  the newly  created  department could not be  deducted  from  the taxable  turnover  under  section 5(2) (a)  (iii).   In  the result, the Appeal Court allowed the appeal with costs,  set aside the order of Bose, J. and dismissed the application of the Mills under Article 226.  The Mills as well as the Union of  India  have  now  come up on appeal  before  us  with  a certificate of fitness granted by the High Court. In  view  of the decision of this Court in  National  Sewing Thread  Co.  Ltd. v. James Chadwick &  Bros.   Ltd.(1),  the question  of maintainability of the appeal before  the  High Court has not been raised before us.  The appeals have  been fought out on the merits only.  (1) [1953] S.C.R. 1028.

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1082 The  appeals  came up before this Court for bearing  on  the 22nd  and  23rd  September 1955.  After  going  through  the records  it was felt that the materials on record  were  not sufficient  to enable the Court to determine the real  point of  controversy  between  the  parties.   The  appeals  were accordingly  adjourned  and directions were  given  for  the filing  of  supplementary affidavits setting out  the  facts relied  on  by the parties respectively.   Fresh  affidavits have since been filed. It  appears  from the affidavit of one A.  R.  Iyer,  Deputy Director,  Directorate  General of Supplies  and  Disposals, under the Ministry of Works, Housing & Supply, that in  1918 a  department  called  the Contracts  Directorate  had  been constituted  as a purchasing Organisation for the  needs  of the Army.  With effect from the 1st January 1922 the  Indian Stores Department was constituted as a result of the  recom- mendations of the Stores Purchase Committee.  The  functions of  this  department  were  to  act  as  a  purchasing   and inspection   agency  in  respect  of   certain   commodities including  textile  goods for all  Central  departments  and minor Local Governments and such other authorities as  might desire   to  avail  themselves  of  the  services  of   this department.  Annexure III to the affidavit of Iyer indicates that it was not obligatory on the other departments to  make purchases through the Indian Stores Department.   Originally this  department was constituted for a period of  two  years but  by  Resolution No. S. 217 of the Government  of  India, dated  the 6th May 1924, it was placed on a permanent  basis and continued to discharge the same functions.  Rules 5  and 6 attached to this Resolution show that purchases could also be made locally by other departments in case of emergency or for convenience. In  1939 when the outbreak of World War 11 was imminent  the necessity for creating a new department was keenly felt  and the Governor-General in Council by a Resolution of the  Home Department dated the 26th August 1939 (Annexure V to  Iyer’s affidavit)  announced  the  creation from  that  date  of  a department of Supply "to deal directly with ques- 1083 tions  concerning  supplies of all kinds  required  for  the prosecution  of  war".  Annexure VIII  to  Iyer’s  affidavit shows  that the control of the Indian Stores Department  and all  other  matters relating to the purchase  of  stores  in India which were being then dealt with in the Department  of Commerce  were to be dealt with in the department of  Supply as  a temporary measure for the duration of the  war.   That the  Indian Stores Department and the Contracts  Directorate did  not  lose  their  identity  is  shown  by  the   Office Memorandum dated the 3rd August 1940 (Annexure X, Clause  4) and Office Memorandum dated the 2nd December 1941  (Annexure XI, Clause I (a) and Clause 4).  It is thus clear that up to the  end of the year 1940 purchases used to be made for  and on  account  of  the Government of India  by  the  Contracts Directorate, the Indian Stores Department and the Department of Supply and that purchases were also made locally by other departments.   It  was then that on the 1st  July  1941  the Bengal  Legislature  passed the Bengal Finance  (Sales  Tax) Act, 1941 which by section 5(2) (a) (iii) exempted sales  to the  Indian Stores Department, the Supply Department of  the Government  of  India  and any railway  or  water  transport administration  from sales tax.  Sales to other  departments of the Government of India were not so exempted. By  a Press Note dated the 2nd September 1941 issued by  the Government of India in the Supply Department (Annexure  XIII

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to  Iyer’s  affidavit)  a  purchase  branch  of  the  Supply Department  for  the duration of the war  was  created  with effect  from  the  1st August 1941 and  it  shows  that  the Contracts  Directorate and the Indian Stores Department  bad then "ceased to exist as separate entities" for the duration of  the  war and a new branch was being organised  in  their place. Then came the Office Memorandum dated the 23rd December 1941 issued  by  the  Government of India in  the  Department  of Supply  (Annexure XIV) which superseded the previous  office memorandum dated the 13th December 1940 (Annexure XII).  The 137 1084 authorities under the Central Government concerned with  the production, manufacture and purchase of supplies were  shown in  Statement  I annexed thereto.  It is  clearly  mentioned therein  that  departments other than the ones  referred  to therein were and, in the absence of orders to the  contrary, would remain independent of the department though working in close  touch with it (Clause 3).  Powers of  local  purchase were also not disturbed in any way (Clause 4).  Statement  I indicates that purchases of various supplies, e.g.,  medical and veterinary supplies, coal and coke for Railway and other civil and military authorities in India, etc., and  Printing and  Stationery  stores,  were  independent  of  the  Supply Department.   It  is  thus  clear  that  the  Indian  Stores Department  and the Supply Department of the  Government  of India  were not the only departments which bad authority  to make purchases for and on behalf of the Government of  India in its various departments. On the 21st April 1943 came Notification No. 209No.  107/43- Pub(c) whereby the Governor-General in Council announced the creation,  from  the  22nd April 1943, of  a  Department  of Industries  and Civil Supplies to deal with  (i)  Statistics and Research, (ii) Development and (iii) Controls.   Shortly thereafter Office Memorandum No. E4(179) dated the 14th  May 1943  issued by the Department of Supply intimated that  the Governor-General in Council bad decided that the  Department of Industries and Civil Supplies would, with effect from the 15th May 1943, take over responsibility for the  procurement of  cotton textiles and cotton textile stores (Annexure  XVI to Iyer’s affidavit).  So this Department of Industries  and Civil Supplies became another purchasing organisation of the Government of India apart from the Department of Supply. The  Government of India Resolution dated the 31st  December 1945  announced  the  creation, with  effect  from  the  7th January  1946, of the Department of Industries and  Supplies in  place  of  the existing Department  of  Supply  and  the Department  of  Industries  and  Civil  Supplies.   By  this Resolution the Indian 1085 Stores Department and the Contracts Directorate which during the  war had been brought under the Supply Department,  were incorporated  in the newly created department.  It  will  be noticed  that this newly created department had assigned  to it the work of the procurement of stores for the  Government of  India which was formerly assigned to the  Department  of Supply and the Department of Industries and Civil  Supplies. In  addition to these duties this department was  authorised also  to  deal  with other things,  namely,  development  of industries,  administration  of  Government  factories   not allocated  to specialised departments, Disposals of  Surplus and Civil Supplies.  The nature and volume of the  purchases made  by  this  newly created  department  became  obviously different from and larger than those of the two  departments

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it  replaced.  It is also noteworthy that the Department  of Supply  which  was created for the prosecution  of  war  was abolished as soon as the war was over (Annexure XVII to  the affidavit of Iyer). The  Resolution  of the Government of India  dated  the  2nd September  1947 published in the Gazette of India dated  the 6th September 1947 (Annexure XVIII) announced, amongst other things,  that  with  effect from the 29th  August  1947  the Department of Industries and Supplies would be re-designated as the Ministry of Industries and Supply. From  the summary of the annexures to the affidavit of  Iyer filed in these proceedings it is quite clear that while  the Ministry  of Industries and Supply was a new designation  of the Department of Industries and Supplies, the Department of Industries  and Supplies cannot be regarded merely as a  new designation  of the Department of Supply and the  Department of  Industries and Civil Supplies.  Indeed,  the  Resolution announced the "creation" of the Department of Industries and Supplies in place of the two existing departments  mentioned above.   This newly created department had wider powers  and was  a new department altogether.  The exemption granted  by the  Bengal Finance (Sales-Tax) Act, 1941 was given  to  two departments by name.  It was not given to the 1086 sales to the Government of India in all its departments.  It is  true  that the Indian Stores Department and  the  Supply Department  of  the Government of India were  not  corporate bodies  but  they evidently were sufficiently  well  defined organisations to be referred to as "entities" in some of the Press Notes and Resolutions mentioned above and even in  the affidavits filed in these proceedings.  Further, the  Bengal Finance  (Sales  Tax) Act, 1941 by section 5 (2)  (a)  (iii) certainly  dealt with these two departments as if they  were distinct entities.  The Act, in a manner, conferred on these two departments the status, as it were, of well defined  and distinct  entities  at least for the purposes of  that  Act, namely for making sales to them exempt from the tax.  If  it were the object of the Bengal Legislature to give  exemption to  all sales to all departments of the Government of  India it  would  have been quite easy for it to  frame  sub-clause (iii)  in a general way as sub-clause (iv) had been  flamed. Further,  if  sales  to these two  departments  were  to  be regarded  as  covering  sales  to  all  departments  of  the Government of India then the sales to the railways which  at that time mostly, if not wholly, belonged to the  Government of India need not have been separately mentioned in the  way it  has been in sub-clause (iii).  As already stated,  there were,  at  the date when the Act was passed,  various  other departments of the Government of India which were  concerned with  purchase  of stores but quite  clearly  the  exemption conferred  by the section was not intended to extend to  the sales  to  those departments.  Therefore, the  reference  to these  two  particular  departments in  the  section  cannot possibly  be read as a reference to the Government of  India generally. It   has  been  urged  that  the  real  object  of   section 5(2)(a)(iii)  was  to give exemption not to  the  particular departments  but to the sales of such goods as, at the  date of  the  Act,  used to be made  to  those  departments  and, therefore,  sales of those goods made to any  department  of the  Government of India which came to be charged  with  the duty of purchasing those 1087 goods should also come within the purview of the section and be entitled to the benefit of the exemption conferred by it.

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We  are  unable  to accept this  line  of  reasoning.   This interpretation will unduly narrow the scope and ambit of the exemption by limiting it to sales of only those goods as, at the  date  of  the  Act,  used  to  be  sold  to  those  two departments  and  sales  of other goods even  to  those  two departments,  however necessary for the prosecution  of  the war, would not get the benefit of the exemption.  Such could not  possibly  be  the  intention  of  the  legislature   as expressed by the language used by it in framing the section. According to the section the exemption is given to all sales made  to those two departments, no matter whether the  sales were only of the kind of goods which used to be sold to them at  the  date of the Act or of other kinds  of  goods.   The suggested interpretation involves the addition of qualifying words to the section which ordinarily it is Dot  permissible for  the  court  to do.  Further, the press  notes  and  the resolutions  of  the Government of  India  summarised  above clearly   indicate   that  there   were   other   purchasing departments  which  were independent of  the  Indian  Stores Department  or  the Supply Department of the  Government  of India and that the authority of other departments of  making local  purchases was not interfered with by the creation  of these  two  departments.  Therefore it may  well  have  been that, at the date of the passing of the Act, same or similar kinds  of goods used to be sold to these two departments  as well  as  to  other  departments but  surely  it  cannot  be contended, in view of the language of the section, that  the exemption was intended to extend to the sales of the same or similar kinds of goods to those other departments also.   It is  not necessary for us to pronounce any opinion as to  the validity  or soundness of the extreme position taken  up  by the  learned Advocate-General of West Bengal namely that  as the  exemption  is given by a statute to sales made  to  two departments  eo nomine it will not extend to sales  made  to the  same  department  redesignated by a new  name.   It  is enough for our present 1088 purpose  to  say  that  the  Department  of  Industries  and Supplies   which  was  subsequently  re-designated  as   the Ministry  of Industries and Supply was not the same  as  the Indian  Stores  Department or the Supply Department  of  the Government  of India under a different name.  The scope  and volume of the work entrusted to the Department of Industries and Supplies was much wider and larger than that with  which the  two  departments which it replaced  bad  been  charged. Unlike those of the two departments, its purchases were  not confined to goods necessary for the prosecution of the  war. To  extend  the benefit of the statutory  exemption  to  the sales made to the newly created department of Industries and Supplies,  of goods not required for war purposes but,  say, for  meeting  international obligations as  in  the  present case, will necessarily widen the scope of the exemption  and impose  greater loss of revenue on the State of West  Bengal than what the Act by its language intends to do.  In view of the  ever expanding activities of the modern  welfare  State indifferent fields including that of trade and commerce, the Government   departments  are  often  entrusted   with   the performance of well defined activities and are authorised to deal  with the outside world and to enter into contracts  of sale and purchase and other transactions in the same way  as an  ordinary  person  or company may  do.   Such  Government departments,  therefore,  may well be regarded  as  distinct units  or quasi legal entities, at least for the  particular purposes  for  which  they are created.  At  any  rate,  the Bengal  Finance (Sales Tax) Act, 1941 by providing  for  the

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deduction of the sales to the two named departments from the taxable turnover certainly treated those two departments  as distinct  entities.  This exemption is the creation  of  the statute  and  must be construed strictly and cannot  be  ex- tended  to  sales to other departments.  The fact  that  the section was not amended until 1949 does not at all  indicate that  the Bengal Legislature intended to extend the  benefit of  the  section  to any but  the  departments  specifically mentioned  in  the section.  In our opinion  the  conclusion arrived at by the Appeal 1089 Court,  namely that the sales tax is payable on the sale  in question is correct and these appeals must be dismissed with costs. SINHA J.-I regret to have to differ from my learned brethren in the determination of the only question involved in  these appeals, namely, whether the sales by the appellant in Civil Appeal No. 10 of 1954 (Messrs Shree Ganesh Jute Mills  Ltd.) to the appellant in Civil Appeal No. 9 of 1954, the Union of India   (the  Government  of  India  at  the  time  of   the transactions  in question) were liable to payment  of  sales tax  under the Bengal Finance (Sales Tax) Act, 1941  (Bengal Act VI of 1941), to be referred to hereinafter as "The Act". The facts leading up to these appeals may shortly be  stated as  follows:  The  Government of India in  the  Ministry  of Industry  and Supply (which for the sake of brevity  may  be called  "The Government" entered into a contract on the  1st September  1948  with Messrs Shree Ganesh Jute  Mills  Ltd., which  may  be  designated "The Mills", for  the  supply  of hessian   at  certain  rates  and  of  certain   description appearing  in Exhibit A to the affidavit filed on behalf  of the Mills.  With reference to the question of sales tax  the contract contains the following stipulation:- "The  prices shown above are exclusive of the  Bengal  Sales Tax.  The Government of India will arrange direct payment of sales  tax  to  the  Government of  West  Bengal  if  it  is ultimately  found  that sales tax is payable in  respect  of this contract". It is also provided that "This contract will be governed  by the  conditions  of contract specified in Form WSB.  133  as amended  up  to date".  This contract was entered  into  and signed  by "A Huq, Deputy Director of Supplies, for  and  on behalf  of the Governor-General of India".  In pursuance  of the  aforesaid contract the Mills supplied hessian goods  to the Government of India of a certain valuation on which  the Commercial  Tax  Officer  of  Bengal,  the  main  contesting respondent,  made  a demand of Rs. 9,401-10-6 as  sales  tax from the Mills.  The Mills demurred to the 1090 payment and contended that the sales in question were exempt from  payment  of  the sales tax demanded  in  view  of  the provisions   of  section  5  (2)  (a)  (iii)  of  the   Act. Eventually the Mills moved the High Court of Calcutta for an appropriate  writ  under  article 226  of  the  Constitution against the contesting respondents.  The matter was heard by a  Single Judge of that Court who by his judgment dated  the 6th December 1951 held that the Mills were not liable to pay the  sales tax demanded and cancelled the notice  of  demand and  directed  the  respondents  1 and  2  to  forbear  from enforcing the demand.  Respondents I and 2 went up in appeal under  the  Letters  Patent.   The appeal  was  heard  by  a Division  Bench which came to the contrary conclusion.   The major  portion of the judgment of the Letters  Patent  Bench was  devoted to the discussion of the question  whether  the judgment of the learned Single Judge in the writ matter  was

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amendable  to the appellate jurisdiction under  the  Letters Patent.   That  question  has not been  pressed  during  the arguments and is therefore no more in controversy.  The only question that was canvassed before us was the  applicability of  section  5 (2) (a) (iii) of the Act which  contains  the exemption,  the  benefit  of which is being  sought  by  the appellants in each case.  The exemption is in these terms:- "Sales   to  the  Indian  Stores  Department’,  the   Supply Department  of the Government of India, and any  railway  or water transport administration". It  has been contended on behalf of the appellants that  the sale  of hessian by the Mills to the Government of India  in the  Ministry of Industry and Supply is within the terms  of the  exemption  quoted  above.  On the  other  hand,  it  is contended  on  behalf  of the Sales Tax  Department  of  the Government  of West -Bengal that the sales in question  were not  covered  by  the aforesaid  exemption  clause.   It  is therefore necessary to go into some detail of the  formation and development of the Department in question. The   supplementary  affidavit  filed  on  behalf   of   the Government and sworn to by Shri A. R. Iyer, Deputy  Director of Directorate General of Supplies & 1091 Disposals, discloses the following facts.  The Indian Stores Department was constituted with effect from the 1st  January 1922  as  a  result of the  recommendations  of  the  Stores Purchase  Committee  which  had  been  constituted  by   the Government  of  India to examine the whole question  of  the constitution  of  an expert agency to carry out on  a  large scale purchase of supplies required for the public services, as recommended by the Indian Industrial Commission, with the object of encouraging the purchase of articles made in India for Government requirements.  The scope and functions of the Department,  inter  alia, were to act as  a  purchasing  and inspection  agency,  and  in an  advisory  capacity  in  all matters connected with the purchase of stores for the public services,  on  behalf  of all  Central  Departments  of  the Government  and of the minor local Governments and  also  on behalf  of  such  major local  Governments,  Company  worked Railways,  Corporations,  Port  Trusts,  Municipalities  and quasi  public  bodies and Indian States as might  desire  to avail  themselves  of  the  Department’s  assistance.    The activities  of the Department consisted in the purchase  and inspection in India of a large variety of goods and articles including  "textile goods", so that the purchase of  hessian which  is  the particular commodity involved in  this  case, would be included in the activities of the Department.   The Department had been constituted in the first instance for  a period of two years.  But by a Resolution. of the Government of India dated the 6th May 1924 it was placed on a permanent basis.   It  continued to discharge the  same  functions  as before.   It  made purchases not only for the needs  of  the civilian departments of the Government of India but also  of all  the requirements of the Army.  Hessian which  had  been purchased  from  the  Mills  in this case  was  one  of  the products which the Government of India used to purchase only through  the  Indian Stores Department whenever  needed  for Government  purposes.   A Department called  the  "Contracts Directorate"  had been constituted in 1918 as a,  purchasing organization  for  the  needs of the Army.   But  after  the constitution of the Indian 138 1092 Stores Department in 1922 the Army authorities also began to utilize  the  services of the Indian Stores  Department  for

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procurement  of  several categories of  stores  required  by them.  By a Resolution of the Home Department dated the 26th August 1939, apparently to meet the demands of the  imminent second  world war, the Contracts Directorate and the  Indian Stores   Department  were  in  1940  amalgamated  with   the Department  of  Supply  so that in 1941, when  the  Act  was passed,  the position was that the Department of  Supply  as reorganized  on  the 3rd August 1940  included  amongst  its activities  and  functions the purchase of  stores  for  the needs  of the Government.  This branch of its  activity  was administered  by  the Directorate  General,  Supply  Branch, located at New Delhi.  Jute products and textiles  including hessian  had to be purchased only by placing indents by  the department concerned with the Directorate General of Supply, New  Delhi.  Thus this Department absorbed for the  duration of  the  war the purchasing sections of  the  Indian  Stores Department  and the Contracts Directorate which were  placed under  completely self-contained organizations empowered  to procure all supplies, whether for war purposes or otherwise. All  authorities requiring supplies to be procured in  India had  to  place their indents or demands on  the  Directorate General concerned.  With effect from the 1st August 1941 the Contracts  Directorate  and  the  Indian  Stores  Department ceased   to  exist  as  separate  entities  in  the   Supply Department  and  became one purchasing organization  in  the said  Department.  This Organisation arranged for supply  of all  classes of stores for purposes of Government,  such  as textiles, leather goods, etc.  Thus hessian which came under the  bead  of "textiles" which was being  purchased  in  the first   instance  only  by  the  Indian  Stores   Department continued to be purchased by the Supply Department when  the Indian  Stores  Department  came under the  control  of  the Supply  Department.  By a notification dated the 21st  April 1943  issued  by  the  Government  of  India  in  the   Home Department, another Department called the Industries and 1093 Civil Supplies Department was created.  This Department  was primarily  concerned  with  statistics  and.  research   and development  of  industries,  as  also’  controls  on  civil supplies (other than foodstuffs).  When this Department  was first  created,  it had no purchasing  activity.   But  with effect from the, 15th May 1943 the Government directed  that the  new department should take over responsibility for  the procurement  of  cotton textiles and cotton  textile  stores which  till then were being dealt with by the Indian  Stores Department  which later came under the Supply Department  as aforesaid.  Purchase of jute and woollen textiles  continued to  be  the responsibility of the Supply Department.   By  a Resolution  of  the  Government  of  India  dated  the  31st December  1945 the Department of Industries and Supplies  in place   of  the  existing  Departments  of  Supply  and   of Industries  and Civil Supplies was created with effect  from the  7th  January 1946.  From that date  the  Department  of Industries   and   Supplies  became  responsible   for   the procurement  of stores from all places in India in the  same manner as the Department of Supply had been doing previously to its amalgamation with the new Department.  The powers and functions  of the Department of Industries and  Supplies  in the  matter  of procurement of stores continued  as  before. The  Department continued to procure and purchase  only  the same kinds of articles as the Department of Supply had  been doing before the coming into existence of the Department  of Industries  and  Supplies  so  that  the  creation  of   the Department  of  Industries  and Supplies did  not  make  any difference in its activities relating to purchase of stores.

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There  was no addition to or subtraction from its  functions in the matter of purchase of stores. From  what  has  been stated above, it  is  clear  that  the purchasing functions of the Government of India with special reference  to the procurement of textiles including  hessian with  which we are immediately concerned were discharged  by the  Indian Stores Department from 1st January 1922.   Those functions  were  taken over by the Department of  Supply  in 1940, 1094 The Department of Supply itself merged in the Department  of Industries  and  Supplies with effect from the  7th  January 1946.   By  a  notification of the 2nd  September  1947  the Department  of Industries and Supplies was  redesignated  as the  Ministry  of Industry and Supply with effect  from  the 29th August 1947 as a result of the emergence of India as an Independent State.  Thus the Ministry of Industry and Supply is  a lineal descendant of the Indian Stores Department,  of course, with an added volume of work and functions, but  the original  activity of purchase of stores remaining the  same in bulk and in character.  It has already been noticed  that the   Indian  Stores  Department  was  concerned  with   the function,  amongst others, of purchasing stores of  a  large variety  of  articles  and goods on behalf  of  all  Central Departments  of  the  Government of  India  and  Local  Gov- ernments,  Railway  Companies,  Corporations,  Port  Trusts, Municipalities and other quasi public bodies, as also Indian States  if they availed of the services of  the  department. Thus  the  infant  Indian Stores  Department  has  grown  in stature and volume in the course of the last about 25 years. The  same  sapling  has  grown into a  shady  tree  but  its function as the sole purchasing agency of the Government  of India and other Governments for a large variety of goods and commodities has ’Continued.  The nomenclature has  undergone successive changes, but the function of purchasing agency on behalf  of  the  Central and other  Governments  and  public bodies as aforesaid has remained the same.  Furthermore, the purchase  of  hessian, which is the  subject-matter  of  the demand  in question has continued in the same  organization, though under a different name. It is well settled that the provisions of a statute have  to be construed with reference to the state of affairs as  they existed  at  the time the statute was passed.  In  the  year 1941  there  was in existence the Supply Department  of  the Government of India which had incorporated the Indian Stores Department.   According to the affidavit referred to  above, the main activities of purchase of goods and commodities 1095 required by the Government of India ’and other  governments, local  bodies, etc., except for purchases of  small  values, that  is to say, not exceeding Rs. 100 in each case  and  of certain  specified  commodities,  like  foodstuffs,  forage, lethal stores, etc. referred to in para. 7 of the  affidavit (at  p. 18 of the supplementary paper book) were carried  on by  the  Supply  Department.  That is  the  reason  why  the exemption to the Government of India was worded as it stands in section 5(2) (a) (iii).  As stated above, the Supply  De- partment  existed  as a separate department up  to  the  6th January  1946.   With  effect  from  the  7th  January   the Department  of  Industries & Supplies  came  into  existence which later was re-designated as the Ministry of Industry  & Supply.   The judgment under appeal is based chiefly on  the consideration that the exemption clause in question does not in  terms  refer to the newly created department  which  now goes by the name of the Ministry of Industry & Supply.   But

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this department in so far as it deals with industry, is  not concerned  with  the  main  purchasing  activities  of   the Government  of India.  The exemption was granted in  respect of  the purchasing activity of the Government of  India  and that  function  continues  to  be  assigned  to  the  Supply Department which has now become a wing of the newly  created department  -of  the  Government.   The  question  therefore arises  whether  in those circumstances  the  Government  of India  could claim the benefit of the exemption.   The  High Court  in answering that question in the negative  has  gone upon mere nomenclature.  It has emphasized the change in the name and overlooked the substance of the matter. After all, what is a Department of a Government?  It is  not a  mere name, whatever else it may be.  It is not a  person, either natural or artificial.  A Department of Government is a particular function.  The Government has so many functions and each of its functions or a group of functions is  placed in charge of a particular Department which may be made up of a  number  of  clerks organized in a group,  whose  work  is supervised by a hierarchy of officials with 1096 the  head of the department at the apex.  A  department  may therefore  consist  of  a single function out  of  the  many functions  of  the Government, or it  may  comprise  several functions  placed in charge of a single  departmental  head. The  Indian Stores Department which came to be  incorporated in  the  Supply Department of the Government  of  India  and later  merged  in the larger Department of the  Ministry  of Industry  &  Supply,  could  have  continued  its   separate existence as it did until 1939 or could have become part  of a larger department as it did after the 3rd August 1940,  or the  7th  January  1946,  or  the  29th  August  1947;   and conversely,  its activities could be split up into a  number of   sub-departments   under  different   heads   classified according to the nature of the commodities to be  purchased. But, in my opinion, the change in the nomenclature in either direction should not matter so long as the function, namely, of  purchasing  articles  and commodities  required  by  the Government  of India and other Governments continued  to  be the same.  It is a matter of substance and not of form. The  Department concerned cannot be equated with  a  natural person.   Nor  can  it be raised to the  level  of  a  legal person.   I am not aware of any principle  of  jurisprudence which  would justify placing a department of  Government  on the  pedestal of a legal person.  There is no  tertium  quid between  the two positions.  Though the High Court  has  not said  so  in so many words, it has  treated  the  department either as a legal person or as something in between a  legal person  and a natural person.  That, in my opinion,  is  not sound  logic.  Nor is there any legal basis for  treating  a department  of Government either as a legal person or  as  a natural person.  In my view, the terms of s. 5(2) (a)  (iii) show  that  it  was an exemption  granted  to  a  particular function  of the Government of India described by a  certain name.  And one might feel inclined to exclaim with the great poet  Shakespeare  "What  is  in  a  name!"  It  is  but   a description   of  the  main  purchasing  activity   of   the Government of India, as the history of the department  above set out shows, 1097 Sometimes the language of a statute has to be construed in a modified form in order to give effect to the real intentions of  the  legislature  where, as in the  present  case,,  the language  is  only  of  a  descriptive  nature  and  not   a definitive  one.   An instance of this is furnished  by  the

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case  of Miller v. Salomons(1).  In that case  the  question arose whether a person of Jewish persuasion who was returned to  Parliament  as  a Member of the  House  of  Commons  was entitled  to  sit without taking the prescribed  oath.   The form of the oath as given by 6 Geo. 3, c. 53, mentioned  the name of "King George" only.  It was argued on behalf of that member that the oath was confined to the name of a sovereign who  bore that name.  But it was held by the Court  that  it was a mere description and that the intention of the statute was  to  include all sovereigns who came after  King  George 111.  The relevant portion of the observations of the  Court are in these terms: "The second question arising on the construction of the  Act is, whether, as the form of the oath given by the 6 Geo.  3, c. 53, mentions the name of King George only, the obligation to  administer it ceased with the reign of  that  Sovereign, because it was applicable to no other than to him.  I  think this  argument  cannot  prevail.   It  is  clear  that   the legislature  meant the oath to be taken  always  thereafter, for the enactment is general-that it shall be taken  without limit  of time-and the oath is not confined to the  existing monarch, but mentions ’the successors’; and as it could  not be taken in those words during the reign of a Sovereign  not of  the name of George, it follows that the name  George  is merely  used by way of designating the  existing  Sovereign; and  the oath must be altered from time to time in the  name of  the  Sovereign,  in  the manner  it  was  when  actually administered  in  this case, in order to carry  the  obvious meaning  of the enactment into effect.  This is an  instance in  which the language of the legislature must be  modified, in  order  to  avoid absurdity and  inconsistency  with  its manifest intentions". (1)  [1852] 7 Exchequer 475; 155 E.R. 1036, 1068. 1098 The High Court referred to the observation of Lord  Halsbury in the case Of Commissioners of Inland Revenue v. Forrest(1) to  the  effect  that exemptions  from  taxation  should  be strictly construed because otherwise the burden of  taxation will  fall  on  other  members  of  the  community.    Those observations, in my opinion, have no relevance to the  facts and  circumstances  of the present controversy,  because  we know  that  the exemption was granted to the  Government  of India  in  the department dealing with purchase  of  certain commodities and articles without reference to quantity.   As already  pointed  out,  the  Indian  Stores  Department  was concerned  with  purchase of stores for public  services  on behalf  of all Central Departments of Government  and  local Governments,  etc.,  and the Government of  Bengal  as  then constituted  was  one of the Provinces of India  which  have been  receiving  subsidies and subventions to  make  up  the deficit in their budgets.  As a matter of fact, as stated on behalf  of the Bengal Government the concession was  granted in order to enable business communities within the  Province of Bengal to compete on favourable terms with others outside Bengal  in  the  matter  of  supplying  the  needs  of   the Government.    Hence  there  is  no  question   of   liberal construction  of  the  exemption  resulting  in  throwing  a greater  burden on other citizens.  On the other  hand,  the larger the sales in the Province of Bengal as it used to be, the  greater  the benefit to the  business  community  doing business  within that Province.  It was therefore stated  at the  Bar  that  though  the  present  case  involved   taxes amounting to less than Rs. 10,000, the question arising  for determination  in  this case affected  much  larger  amounts because  such sales within the Province amounted to  several

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crores.   I should have thought that the business  community in  the Province of Bengal having had the advantage  of  the transactions  of  sale,  the Government  of  Bengal  in  all fairness  should have allowed the purchasing agency  of  the Government of India the benefit of the exemption until  that benefit was in (1)  [1890] 15 A.C. 334. 1099 terms withdrawn some time in the beginning of 1949. The matter can be looked at from another point of view also. We are concerned here with the sale of hessian.  As  pointed out  in the affidavit filed on behalf of the- Government  of India,  the  purchase  of hessian has  all  along  been  the concern  of the Supply Department, now incorporated  in  the Ministry  of Industry & Supply.  Sales tax is a tax on  sale of goods and tax on hessians falls within the  contemplation of the law granting the exemption if the sales were effected through  the purchasing agency of the Government  of  India. The  beneficiary certainly was not an amorphous body like  a department  but the Government of India, because it  is  the Government  of India which could be a unit for  purposes  of the Act. In  this  connection our attention was invited to  the  last clause  of  the  exemption covered by  the  words  "and  any Railway  or water transport administration".   The  argument was  that if the Government of India as such was to  be  the beneficiary, then there was no necessity for the words  just quoted.  But this argument overlooks the fact that a railway or a water transport administration need not necessarily  be a  department  of Government because there were,  and  still are,  railway systems or water transport systems  which  are owned  and administered by corporate bodies other  than  the Government  of India.  Sales even to those public  or  semi- public bodies were within the terms of the exemption.  Those words therefore are not words of limitation but words  which widen  the scope of the exemption in so far as the same  may be available to railways and water transport administrations not owned and carried on by the Government of India. Another  reason  which  may  be adduced  in  answer  to  the contention that there was nothing to prevent the Legislature from  stating that the exemption was granted in  respect  of all purchases by the Government of India is that the  Indian Stores  Department  and its later substitutes  had  to  make purchases Dot only for the Government of India but also  for local  governments  and  other  public  bodies.   Hence  the exemption 1100 in  the terms in which it occurs in section 5  (2)  (a)(iii) was  not an exemption in favour of the Government  of  India only  but also to other Governments and public bodies  which could avail themselves of the facility of purchase  -through that department. Another argument was urged to meet the appellant’s case that really  the exemption was meant for the Government of  India in  its  function  of purchase of  stores  and  commodities, discharged  through the Indian Stores Department  and  later through  the Supply Department.  It was argued that  if  the legislature  meant to grant the exemption to the  Government of  India, then the easiest thing to do would have  been  to say  that sales to the Government of India were exempt  from the  tax.   But  it  has not  been  the  contention  of  the appellant  that  all sales to the Government  of  India  are within   the  terms  of  the  exemption.   Only  the   sales transacted   through  the  purchasing  department   of   the Government  of  India  were so exempt.  In para.  7  of  the

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affidavit referred to above it has been stated on behalf  of the Government that the different departments were  entitled to make local purchases of small values, that is to say, not exceeding Rs. 100 and of certain specified commodities  like foodstuffs which were not within the purchasing activity  of the  departments  aforesaid  of  the  Government  of  India. Hence, in my opinion, there is no validity in this  argument either.  It  was  also  suggested during the argument  that  if  the exemption  were to be related to only such  commodities  and articles as were within the purview of the Stores Department and   later   of  the  Supply  Department,  then   such   an interpretation would involve addition of qualifying words to the  section which is not ordinarily within the function  of the courts.  But, in my opinion, this argument also  suffers from the infirmity that,it equates the departments mentioned in the exemption clause quoted above with a legal person,-an argument which has already been dealt with.  In my  opinion, there  is no escape from the conclusion that those are  mere words  of  description  and  are  not  words  with   defined connotation, because 1101 neither the Act nor the rules framed thereunder define those departments.  If the nomenclature only mattered, then  there is no escape from the conclusion that whatever articles  and commodities  were purchased by the Indian Stores  Department or  its later substitutes, of whatever magnitude and  value, would  be  within the mischief of the  exemption  clause  in question.  But that, in my opinion, was not the intention of the  framers of the Act.  They knew what the  activities  of the  Government  through  those  departments  were  and  the exemption was granted only in respect of those functions  of the Government, as already indicated. For  the aforesaid reasons I would allow these appeals,  set aside the orders of the Letters Patent Bench and restore the orders  passed  by  the Single Judge of  the  Calcutta  High Court, with costs throughout. BY THE COURT. In accordance with the Judgment of the majority the  appeals are dismissed with costs.