# M/s. ANW ARKHAN MAHBOOB CO v. THE STATE OF BOMBAY

- **Citation:** [1961] 1 S.C.R. 709
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Bench:** S. K. Das, M: Hidayatullah, K. c. DAS GUPTA, J. c .. SHAH, N. Rajagopala Ayyangar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-anw-arkhan-mahboob-co-v-the-state-of-bombay-2214
- **Pages:** 10

## Headnote

Purchase Tax-If leviable on goods not specifically mentioned as
taxable but come under the general description "all goods other than
those specified "-Conversion of one commodity into another commercially different article-If amounts to consumption-Place of
purchase for the purpose of taxation-Constitution of India, Art. z9
({) & (g), 286-Bombay Sales Tax Act, z953 (Bom. Act III of
z953), s. IO, Schedule B, Entry 80.
The petitioner Company carrying on the business of manufacturing bidis and having its head office at Jabalpur in the
State of Madhya Pradesh made certain purchases of tobacco in
the State of Bombay. The Sales Tax Officer assessed the petitioner to a purchase tax under the provisions of the Bombay
Sales Tax Act, 1953. The petitioner contested the assessment of
September ao.
ftlfs. Anwarkha11
Mahboob Co
v.
The State of
Bombay (1Vow
Alahara.~htra)
0-- Othe1·s
710
SUPREME COURT REPORTS
[1961]
purchase tax on the grounds that those tran>actions and purchases were" Outside the State of Bombay" within the meaning
of Art. 286(1)(a) of the Constitution read with the Explanation,
that the provisions of the Bombay Sales TaJ< Act, 1953, did not
authorise the imposition, levy or collection of any purchase tax
on the transactions in question and that the transactions took
place in the course of inter State trade and couimerce. The
petitioner's appeal to the Assistant Collector of Sales Tax was
dismissed and then the present petition for writs of mandamus
and artiorari was filed in the Supreme Court. The petitioner1
contended that the Bombay Sales Tax Act, 1953, did not authorise the imposition of a tax on the purchase of bidi-tobacco
which was not one of the goods specified in column 4 of Schedule
B of the said Act.
The petitioner further wntended that the
purchased tobacco was delivered to it within the State of
Bombay as a direct result of the purchase but it was intended to
be sent to the State of ~fadhya Pradesh to be manufactured into
bidis at that place. The only thing which was done in the
Bombay State was to remove the stem and dust from the
tobacco which process did neither amount to "consumption " of
tobacco as contemplated under the Explanation to Art. 286 of
the Constitution nor did it convert the tobacco which was sent to
the Head Office into an article" commercially different" from
the tobacco purchased from the cultivators. Jn their counteraffidavit the respondents averred that the raw tobacco was converted into bidi pattis before it was sent outside Bombay State
both of which were commercially different articles and the
market value of which was also different. These averments
were not controverted by the petitioner.
Held, that the words" all goods other than those; specified
from time to time in Schedule A and in the preceding entries" in
entry Bo of Schedule B of the Bombay Sales Tax Act, 1953,
amounted to a specification of goods for the purposes of s. 10 of
the Act and as bidi tobacco purchased by the petitioner was not
within Schedule A or any of the earlier entries in Schedule B
purchase tax at the rate mentioned against entry So was leviable
under s. "lo of the Act.
Whenever a commodity was so dealt with as to change it
into another commercial commodity there was consumption of
the first commodity within the meaning ol the r:xplanation to
Art. 286 of the Constitution.
State of Travancore-Cochin v, Sha11nmgha Vilas Casl1e11" Nut
Factory, [1954) S.C.R. 53, followed.
The delivery of tobacco in Bombay State for changing it
into bidi patti which is a commercially different article amounted to deli very for the purpose of consumption and the purchase
fell within the meaning of Art. 286(1)(a) of the Constitution
and took place inside the Bombay State.
•
1 S.C.R. SUPREME COURT REPORTS
711
ORIGINAL JURISDICTION: Petition No. 125 of 1958.
i96o
Petition under Article 32 of the Constitution of M/s. Anwarkhan
India for enforcement of Fundamental Rights.
Mahboob co.
G. s .. Pathak, A. P. Sen and J. B. Dadachanji, for

## Text

1 S.C.R. SUPREME COURT REPORTS
709
" The Crown cannot deprive a legislature of its
r960
legislative authority by the mere fact that in the
n k
exercise of its prerogative it makes a grant of land Manmo~a:' Deo
within tho territory over which such legislative authov:
rity exists and no court can annul the enactment of a
State of Bihar
legislative 'Body acting within the legitimate scope of
its sovereign competence. If, therefore, it be found s. g, Das f.
that the subject of a Crown grant is within the competence of a provincial legislature, nothing can prevent
that legislature from legislating about it, unless the
Constitution Act itself expressly prohibits legislation
on the subject either absolutely or conditionally."
For the reasons given above, we hold that none of the
three points urged on behalf of the appellants has any
substance. The appeals fail and are dismissed with
costs ; there will be only one hearing fee.
Appeals dismissed.
M/s. ANW ARKHAN MAHBOOB CO.
v.
THE STATE OF BOMBAY
(NOW MAHARASHTRA) AND OTHERS
(S. K. DAS, M: HIDAYATULLAH, K. c. DAS GUPTA, J. c ..
SHAH and N. RAJAGOPALA AYYANGAR JJ.)
Purchase Tax-If leviable on goods not specifically mentioned as
taxable but come under the general description "all goods other than
those specified "-Conversion of one commodity into another commercially different article-If amounts to consumption-Place of
purchase for the purpose of taxation-Constitution of India, Art. z9
({) & (g), 286-Bombay Sales Tax Act, z953 (Bom. Act III of
z953), s. IO, Schedule B, Entry 80.
The petitioner Company carrying on the business of manufacturing bidis and having its head office at Jabalpur in the
State of Madhya Pradesh made certain purchases of tobacco in
the State of Bombay. The Sales Tax Officer assessed the petitioner to a purchase tax under the provisions of the Bombay
Sales Tax Act, 1953. The petitioner contested the assessment of
September ao.
ftlfs. Anwarkha11
Mahboob Co
v.
The State of
Bombay (1Vow
Alahara.~htra)
0-- Othe1·s
710
SUPREME COURT REPORTS
[1961]
purchase tax on the grounds that those tran>actions and purchases were" Outside the State of Bombay" within the meaning
of Art. 286(1)(a) of the Constitution read with the Explanation,
that the provisions of the Bombay Sales TaJ< Act, 1953, did not
authorise the imposition, levy or collection of any purchase tax
on the transactions in question and that the transactions took
place in the course of inter State trade and couimerce. The
petitioner's appeal to the Assistant Collector of Sales Tax was
dismissed and then the present petition for writs of mandamus
and artiorari was filed in the Supreme Court. The petitioner1
contended that the Bombay Sales Tax Act, 1953, did not authorise the imposition of a tax on the purchase of bidi-tobacco
which was not one of the goods specified in column 4 of Schedule
B of the said Act.
The petitioner further wntended that the
purchased tobacco was delivered to it within the State of
Bombay as a direct result of the purchase but it was intended to
be sent to the State of ~fadhya Pradesh to be manufactured into
bidis at that place. The only thing which was done in the
Bombay State was to remove the stem and dust from the
tobacco which process did neither amount to "consumption " of
tobacco as contemplated under the Explanation to Art. 286 of
the Constitution nor did it convert the tobacco which was sent to
the Head Office into an article" commercially different" from
the tobacco purchased from the cultivators. Jn their counteraffidavit the respondents averred that the raw tobacco was converted into bidi pattis before it was sent outside Bombay State
both of which were commercially different articles and the
market value of which was also different. These averments
were not controverted by the petitioner.
Held, that the words" all goods other than those; specified
from time to time in Schedule A and in the preceding entries" in
entry Bo of Schedule B of the Bombay Sales Tax Act, 1953,
amounted to a specification of goods for the purposes of s. 10 of
the Act and as bidi tobacco purchased by the petitioner was not
within Schedule A or any of the earlier entries in Schedule B
purchase tax at the rate mentioned against entry So was leviable
under s. "lo of the Act.
Whenever a commodity was so dealt with as to change it
into another commercial commodity there was consumption of
the first commodity within the meaning ol the r:xplanation to
Art. 286 of the Constitution.
State of Travancore-Cochin v, Sha11nmgha Vilas Casl1e11" Nut
Factory, [1954) S.C.R. 53, followed.
The delivery of tobacco in Bombay State for changing it
into bidi patti which is a commercially different article amounted to deli very for the purpose of consumption and the purchase
fell within the meaning of Art. 286(1)(a) of the Constitution
and took place inside the Bombay State.
•
1 S.C.R. SUPREME COURT REPORTS
711
ORIGINAL JURISDICTION: Petition No. 125 of 1958.
i96o
Petition under Article 32 of the Constitution of M/s. Anwarkhan
India for enforcement of Fundamental Rights.
Mahboob co.
G. s .. Pathak, A. P. Sen and J. B. Dadachanji, for
v.
The State of
the Petitioners.
Bombay (Now
H. J. Umrigar and T. ·M. Sen, for the Respondents.
Maharashtra)
& Others
1960. September 20.
The Judgment of the Court
was delivered by
Das Gupta ].
DAS GUPTA J.-In this petition under Art. 32 of'
the Constitution the petitioner, a partnership firm
carrying on the business of manufacture of bidis and
having its head office at Jabalpur within the State of
Madhya Pradesh complain that its. fundamental
rights under Art. 19(l)(f) and (g) of the Constitution
have been violated by the illegal imposition of a purchase tax on certain purchases of tobacco made by it
in the State of Bombay. It appears that the Sales
Tax Officer, Baroda, made an order assessing the
petitioner. to a purchase tax under s. 14, sub-s. (6), of
the Bombay Sales Tax Act, 1953 (Born . .Act III of
1953) for the period April 1, 1954 to September 29,
1955. The peti~ioner contends that this assessment
was illegal inasmuch as these transactions are purchases " outside the State of Bombay " within the
meaning of Art. 286(l)(a) of the Constitution read with
the Explanation and also because these transactions
took place in the course of inter-State trade and commerce within the meaning of Art. 286(2) of the Constitution. It was also urged that the provisions of the
Bombay Sales Tax Act, 1953, do not authorise the
imposition, levy or collection of any purchase tax on
the transactions in.question.
In appears that against this assessment order made
by the Sales Tax Officer on October 18, 1955, the petitioner preferred an appeal to the Assistant Collector
of Sales Tax. This officer set aside the order of the
Sales Tax Officer imposing a penalty under s. 16(4)
but dismissed the !tppeal against the order of assessment to tax. The order in appeal was made on
91
712
SUPREME COURT REPORTS
[1961]
196°
November 26, 1957. The present petition was filed
M
A-. •
on August 4, 1958, praying for a writ in the nature of
/s.
nwar.!1an
d
h
· t d'
t'
d
Mahboob co
man am us or any ot er appropr1a e 1rec 10n or or er
v.
·
against the respondents-The State of Bombay, The
n, State of
Collector of Sales Tax, State of Bombay, The Sales
Bombay (Now Tax Officer, Baroda and the Assistant Collector of
Mohorash1'a) Sales Tax, Northern Divisio'n, Range III, Barodac:S- Olhers
•
h
preventing t em from enforcing the provisions of the
D•s Gupta 1. Bombay Sales Tax Act against the petitioner on the
transactions in question, for a writ in the nature of
certiorari for quashing the proceedings taken against
the petitioner and the orders of assessment made
by the Sales Tax Officer and the order in appeal by
the Assistant Collector of Sales Tax and for a declaration that the Act does not authorise the imposition,
levy or collection of tax on the transactions in question.
It will be convenient to consider first the petitioner's contention that the Bombay Sales Tax Act,
1953, does not authorise the imposition of a tax on
the purchase of bidi-tobacco. The i·elevant portion of
s. 10(1) which provides for the levy of a purchase tax
is in these words :-
"there shall be levied a. purclia.se ta.x on the
turnover of purchase of goods specified in column 1
9f Schedule B at the rates, if any, specified against
such goods in column 4 of the sa.id schedule ......... ".
The petitioner's contention is that
bidi-tobacco
which was purchased by it is not one of the goods
specified in Column 4 of the said schedule. Turing to
Schedule B we find there a.re 80 entries in the first
column. .Against each of these entries the second
column of the schedule mentions the rates of sales tax
levia.ble under s. 8 of the Act: .the third column mentions the rate of general sales tax leviable under s. 9,
while the fourth column which is the last column mentions the rate of purchase tax. While the entries
from l to 79 mention specific articles, entry 80 as it
stood before its amendment in 1957 was in these
words:-" All goods other than those specified from
time to time in Schedule A and in the preceding
entries." (An amendment by the Bombay Act, 71 of
1 S.C.R. SUPREME COURT REPOR'l'S
713
1958, added the words "and sec. 7 Au after the words
1960
"Schedule A"). The question is whether these words M/ A
k'
h
h
h
'fi d f
t'
t
s.
nwa' nan
"all goods ot er t an t ose spe01 e
rom 1me o
Mahboob co.
time in Schedule A and in the preceding entries "
v.
amount to a specification of goods for the purpose of
The State of
s. 10. On behalf of the petitioner Mr. Pathak conBombay (Now
tends that only the mention of specific goods can
M:'.'';;;;htra)
amount to specification and mention of goods in such
"'
general language as "all goods other than those speDas Gupta J.
cified from time to time in Schedule A and in the
preceding entries" cannot .be said to be a specification
of goods. We are unable to accept this argument.
While it is true that mention of specific goods is specification for the purpose of s. 10 as also for the purpose of ss. 8 and 9 of the Act, we see no reason to
think that mention of goods in a general way as "all
goods other than those specified from time to time in
Schedule A and in the preceding entries" of Schedule
B itself is not a specification. We are of opinion that
the entry 80 in Schedule B is a speciiication of goods
within the meaning of s .. 10 and as bidi.tobacco
which the petitioner purchased is not within either
Schedule A or any of the earlier entries in Schedule B,
purchase tax under s. 10 is leviable on these purchases, at the rate mentioned against Entry 80.
This brings us to the petitioner's main contention
that the purchases took place outside the State of
Bombay. The contention as· stated in para. 11 of the
petition is that the purchases would be deemed to
have taken place. in the State of Madhya Pradesh,
where the tobacco was deli"'.ered for consumption. At
the hearing, however, it was not disputed that the
tobacco was delivered to the Company's Ranoli
Branch within the State of Bombay which made the
purchase. The despatch by the R.anoli Branch to
the company's head office at Jabalpur is not a delivery as a direct result of the sale.
It has been urged however that even though there
was delivery in Bombay State, that delivery was not
for the purpose of consumption within Bombay State;
and so, the Explanation to Art. 286 (l)(a) ·does not
come into operation.
,\f is. A JJWafkhau
ft-JahfioofJ Co.
v.
Tire Stale <>f
Hnmliay (iVou:
Malia'a-•h/f<l)
&- Olhcrs
714
SUP!tE:\IE COt.:RT REPORTS
ll961]
The sales tax authoriticH have proceeded on the
basis that as a direct result (If the purchase goods
were delivered in thr State of Bombay for the purpo~e
of consumption in the State of Bombay.
Unless that
view is shown to be wrong, the purchase must- be held
to have ta.ken place within the State of Bombay an~
it will be umwceHsary to consider the larger question
whether even if the Explanation be not applicable,
Bombav Statl' is entitled to tax.
The definite case of the petitioner i' that the purchased tobac:co is delivered to it within the State of
Bombay as a direct result of the purchase. Tho
further question that has been raised is whether such
delivery wa~ for the purpose of consumption iu the
State of Bombay. On behalf of the petitioner it was
contended that' after its delivery, the tobacco was
intended to be sent to the State of :IJadbya Pradesh
lo be manufactured into bidis at that place.
All that
used to be <lone to the purchased tobacco in the State
of Bombay was to have the stems :ind <lu~t rnmoved
from the tobacco.
Such removal of the waste material, like stems and earth, it is urged, docs not amount
to consumption of tob<J.cco. It is further staled that
the tobacco which is despatched to the head office
after n•mo\•al of the waste material is not an article
"com mrrcially different " from the tobacco purchased
from the cultivators. In the respondents' counter
a.flida.vit it is Htated that "the petit.ioners after purchasing raw tobacco from the cultivators in the 1:itate
of Bombay, 8ubject the raw tobaccu so purchased to
process lea.ding to its coJ)VerHion into hidi pattis for
immediate use in the manufacture of uidis .............. .
that market:.hlu value of raw tobaceo and bidi pattis
diffen; and that both these are cornmcrciallv different
articles ............ ". Tho re was no further. a.ftida.vit
tiled ou behalf of the pe.titioner to traverse the a.vermcnts of the respondents that the raw tobacco is converted into bidi pa.tti before it is <lt·spatehe<l outside
Bombay State and that the market value of raw
tobacco and bi di pa.tti differs. Mr. Pathak also conceded at the hearing the correl,tncss of the statement
that anybody could go to the m11.rkct to purcha.so the
1 S.C.R. SUPREME COURT REPORTS
715
article known as raw tobacco or Akho Bhuko and
that he could also go and purchase from the market
the article known as " bidi patti ". That itself is
sufficient proof that raw tobacco and bidi patti are
distinct and different commercial articles.·
.M:/s. Anwarkhan
!VI ahboob Co.
0
It is in the background of these facts that we have
to consider the questi'on whether tobacco was delivered in the State of Bombay for consumption in that
State. In answering that question it is unnecessary
and indeed inexpedient to attempt an exhaustive definition of the word " consumption " as used in the
explanation to Art. 286 of t.he Constitution. The act
of consumption with which people are most familiar
occurs when they eat, or drink or smoke. Thus, we
speak of veople consuming bread, or fish or meat or
vegetables, when they cat these articles of food; we
speak of people consuming tea or coffee or water or
wine; when they drink these articles; we speak of
people consuming cigars or cigarettes or bidis, when
they smoke these. The production of wealth, as eco.
nomists put it, consists in the creation of" utilities".
Consumption consists in the act of taking such advantage of the commodities and services produced as constitutes the " utilization" thereof. For each· commodity, there is ordinarily what is generally considered
to be the final act of consumption. For some commodities, there may be even more than one kind of
final consumption. Thus grapes may be "finally
consumed " by eating them as fruits; they may also
be consumed by .drinking the wine prepared from
'.'grapes''. Agaiu, the final act of consumption may
Ill some cases be spread. over a considerable period of
time.. Books, articles of furniture, paintings may be
ment10ncd as examples. It may even happen in snch
cases, that after one consumer has performed part of
the fina.! act of consumption, another portion of the
final act of con~m!lption may be performed by his
. heir or successor-rn.mterest,·a transferee, or even one
who has obtained possession by wrongful means. But
•he fact that there is for each commodity what may
be considered ordinarily to be the final act of consumption, should uot make us forget that in reaching
v.
The State of
Bonibay (Now
111aharashtra)
6- Others
Das Gupta.].
Mis A,1warkhatt
Mahboob Co.
'"
Thi Stal~ of
Bombay
(~Vou..
Maharashtra)
6- Others
Das Gupta ].
716
SUPREME COURT REPORTS
[1961]
the stage at which this final act of consumption takes
place the commodity may pass through different
stages of production and for such different stages,
there would exist one or more intermediate acts of
consumption. Thus, the final act of consumption of
cotton may be considered to be the use as wee.ring
apparel of the cloth produced from it. But before
cotton ba.s become a wearing apparel, it passes,
through the hands of different producers, ea.ch of
whom a.dds some utility to the commodity received
by him. There is first the a.ct of ginning ; ginned
cotton is spun into yarn by the spinner; the spun
yarn is woven into cloth by the weaver; tho woven
cloth is ma.de into wearing apparel by the tailor. At
each of these stages distinct 'utilities a.re produced and
wha.t is produced is at the next stage consumed. It is
usual, and correct to speak of raw cotton beirig con.
sumed in ginning; of ginned cotton being consumed
in spinning; of spun ya.rn being consumed in weaving;
of woven cloth being consumed in the ma.king of
wearing apparel. The final product-the wearing
a.ppa.rel-is ultimately consumed by men, women and
children in using it as dress.
In the absence of any
words to limit the connotation of the word "consumption" to the final a0t of consumption, it will be proper to think that the Constitution-makers used the
word to connote any kind of user which i8 ordinarily
spoken of as consumption of the particular commodity.
Heverting to the instance of cotton, mentioned
above, it will be proper to hold that when ra.w cotton
is delivered in State A for being ginned in that State,
it is delivered for consumption in State A; when ginned
cotton is delivered in State B for being spun into
yarn, it is delivered for consumption in State B;
when yam is delivered in State C for being woven
into cloth in that State, it is delivered for consumption in State C; when \\·oven cloth iH delivered in
State D for being made by tailor in that State into
wearing apparel, there is delivery of cloth for e?nsumption in State D; and finally when, wearwg
apparel is delivered in State E for being sold as dress
1 S.C.R. SUPREME COURT REPORTS
717
in that State, it is delivery of wearing apparel for con1960
sumption in State E. Except at the final stage of Ml A- k
consumption which consists in using the finished com.
rJ~hb~~:'c han
modity as an article of clothing, there will be noticed
v.
o.
at each stage of production the bringing into existence
The State of
of a commercial commodity different from what was Bombay (Now
received by the producer.a: This conversion of a com.
Maharashtra)
cS- Others
modity into a different commercial commodity by
subjecting it to some processing, is consumption with•
Das Gupta J.
in the meaning of the Explanation to Art. 286 no less
than the final act of user when no distinct commodity
is being brougl;i.t into existence but what was brought
into existence is being used up.
At one stage of the
argument what Mr. Pathak appeared to insist was
that there must be destruction of the substance of the
thing before the thing can be said to be consumed.
That takes us nowhere, because we have still to find
out what is meant by destruction of the substance. It
may well be said that when a commodity is converted
into a commercially different commodity its former
identity is destroyed and so there is destruction of the
substance, to satisfy the test suggested by the learned
counsel. We think it unnecessary however to enter into
a discussion of what amounts to "destruction" as
even without deciding, whether there was destruction
or not, we think it proper and reasonable to say that
whenever a commodity is so dealt with - as to change
it into another commercial commodity there is con.
sumption of the .first commodity within the meaning
of the Explanation to· Art. 286. This aspect of con.
sumption was pointed out by Das, J. (as he then was),
in Sta!e of Travancore-Cochin v. Shanmugha Vilaa
Caahew Nut Factory(') at p. 113 of the Report. The
purchase there was of raw cashew nuts. Discussing
the question whether the delivery of these nuts in
Travancore was for the purpose of consumption in
that State, Das, J., observed :-
"The raw cashew-nuts, after they reach the res.
pondents, are put through a process and new articles
of commerce, namely, cashew:nut oil and edible
cashew-nut
kernels, are obtained.
It follows,
(1) [1954) S.C.R. 53·
.11!.c_ Ana,arklian
1lfaldJoob Co.
v.
Tht State of
801nlJay (.\'ow
.'i1aliarashfra)
& Others
Das Gupta ].
718
SUPRE:.\lE COURT REPORTS
[1961]
therefore, that the raw cashew-nut is consumed by the
respondents in tho sense I have mentioned" •
Da8, ,J., here proceeded on the view that using a commodity so as to turn it into a different commercial
article amounts to consumption, wit.bin the meaning
of tha Explanation to Art.. 286(l)(a)-a view which
he had earlier indicated at p. 110 of the Report.
We
are not aware of. any case where such use of a commodity has been held not to amount to consumption.
It must therefore be held on the facts of this case
that when tobacco was delivered in the State of Bombay for the purpose of changing it into a commercially different article, viz., bidi patti the delivery was
for the purpose of consumption. The purchases in
this case therefore fall within the meaning of Explanation to Art. 286(l)(a) and must be held to have
taken place inside the State of Bombay.
There remains for consideration the objection that
the transactions t-0ok place in tho course of inter.State
trade or commerce within the meaning of Art. 286(2)
of tho Constitution and the levy of tax was therefore
prohibited by the provisions thereof.
Even if these
transactions were in the course of inter-State trade,
the bar of Art. 286(2) of the Constitution stands
removed by the Sales Tax Laws Validation Act, for
the entire period upto September 6, 1955. The levy
of tax for the period September 7, 1955, to September
29, 1955, would be illegal if these transactions are in
the course of inter-State trade.
The petitioner's
counsel however informed us thll.t he did not want a
decision on his question and would not, in this case,
press his objection under Art. 286(2). It is unnecessary for us therefore to decide whether the transactions in question took place in the course of inter.
State trade or commerce within the meaning of
Art. 286(2) of the Constitution. As tho petitioner has
foiled w establish any violation of its fundamental
right, the petition is dismissed with costs.
Petition dismissed.