# ORISSA v. TITAGHUR .PAPEII. MILLS

- **Citation:** [1985] 3 S.C.R. 26
- **Court:** Supreme Court of India
- **Decided:** 1985
- **Case number:** Civil Appeal Nos. 219220 of 1982
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/orissa-v-titaghur-papeii-mills-8921
- **Pages:** 124

## Headnote

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STATE OF ORISSA & OTHERS
v •
THE TITAGHUR PAPER MILLS COMPANY LTD.
&ANR.
March I, 1985
(V.D. TULZAPURKAR, AMARENDRA NATH SEN AND
I
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D.P. MADON, JJ.]
Ori.1sa Sale~ Tax Act 1947-Sec!ions 38 and 5 (!)-Scope of-Notifications
levying purchase tax on hainboos agreed to be served and standing trees agreed to
be sevred-Whether ultra vires the Act-Whether create new class of goods no(
known to /aw-U'hether atnount lo tax on itnmovable 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.
Ba1nboo contract-Nature of-Whether an ea},·enienl.
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lnterpretation-Natu1·e and 1n1.11i•1g ;Jj .1 docunient-·Whether can be
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detcrn1ined by th.e end·result-Court-1/ co11J,J go inrO policy 1natters.
Constitution of India-Article 141-Co11/lirti11g views of the Supretnc Court
nn same point-View of larger Bench to be ft/lowed in pr<'ference to view of
smaller Bench.
Scctio:1 3B of the Orissa Sales Tax Act 1947 empowers the State Govern·
ment to declare from time to time any goods or class of goods to be liable to tax
on turnov~r of purchases. The proviso provides that no ta.'!; shall be payable
on the sales ?f such g)Jds or class of g.Jods declared under this section. Section
5(1) prior to its amendrnent by the Orissa Sales Tax (Amendtnent) Ordinance,
1977 provides that the tax payable by a d~aler under the Orissa Act should be
levied on his taxable turnover at such rate not ex:ceeding thirteen percent and
subj~ct to such conditions as the State Government might from time to time by
notific:ttion specify.
On May 23, 1977 the State Government issued two notifications. Notifica·
tion No. SRO 372/77 was made under section 3B amending the earlier notifica·
tion dated April 23, 1976. This notification made standing trees and bamboos
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agreed to be severed Jiabli; to tax on the turnover of purchase with effect from
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ORISSA v. TITAGHUR .PAPEI!. MILLS
27
June 1, 1977. Notification SRO No. 373/77 issued under the first proviso ... to.
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sec,ion 5(1) of the Orissa Act amende~ with effect fron1.June 1, 1977 the second.
of the two notificatioo.s of April 23, 1976 and direc.ted that. th~ 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 wOuid be at the rate'o~ 10~,- .·
On December 29, 1977 the Orissa Sales Tax (Am~ndm~nt) ()rdlriance,
1977 was promulgated amending the Orissa Act ·with effeCt from Ja,rtuarY, 1978.:
With effect from the sar'ne date two notifications SRO .~o- 900{77 ,and SRb Nq:.~
901/77 were issued; the first notification which was issued under the provision·s
of section 3B ana in supersession of all previous· notificUtions on 'the subject: -
declared that the goods mentioned in ColumO. (2) ·of th~ sch_edule to the·n.~tifi~
cation were liable to be taxCd on the turnover' of Pu'rchase with ~ffec~ frO~ ~
January 1, 1978. Entries 2 and 17 in the schedule of this notification spc9ified
"bamb:-os agreed to be severed" and "standing trees agreed tO be severed" ,
respectively. Notification No. 901/77 issued under section 5 (1) wls in superses~ion of all previous notifications in that regard. The State GOvcrnm~nt, by
this notification, directed that with effect fronl January 1, 19?8 the tax pay'ab!e
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 sPeciti'ed ·
against it in colu1nn (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 ~as repealed and replaced by Orissa Sales Tax ·(AmendmeOt)
Act of 1978.
A large: number of writ petitions were filed before the High Cou_rt impugn~
ing the notifica1ions dated May 23, 1977 and December 29, · 1977. One. grotip
of petitioners consisl

## Text

_Characters 0–39,922 of 308,202. This is a partial read: ask again with offset=39922 for what follows._

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STATE OF ORISSA & OTHERS
v •
THE TITAGHUR PAPER MILLS COMPANY LTD.
&ANR.
March I, 1985
(V.D. TULZAPURKAR, AMARENDRA NATH SEN AND
I
•
-
-
D.P. MADON, JJ.]
Ori.1sa Sale~ Tax Act 1947-Sec!ions 38 and 5 (!)-Scope of-Notifications
levying purchase tax on hainboos agreed to be served and standing trees agreed to
be sevred-Whether ultra vires the Act-Whether create new class of goods no(
known to /aw-U'hether atnount lo tax on itnmovable 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.
Ba1nboo contract-Nature of-Whether an ea},·enienl.
E
lnterpretation-Natu1·e and 1n1.11i•1g ;Jj .1 docunient-·Whether can be
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G
detcrn1ined by th.e end·result-Court-1/ co11J,J go inrO policy 1natters.
Constitution of India-Article 141-Co11/lirti11g views of the Supretnc Court
nn same point-View of larger Bench to be ft/lowed in pr<'ference to view of
smaller Bench.
Scctio:1 3B of the Orissa Sales Tax Act 1947 empowers the State Govern·
ment to declare from time to time any goods or class of goods to be liable to tax
on turnov~r of purchases. The proviso provides that no ta.'!; shall be payable
on the sales ?f such g)Jds or class of g.Jods declared under this section. Section
5(1) prior to its amendrnent by the Orissa Sales Tax (Amendtnent) Ordinance,
1977 provides that the tax payable by a d~aler under the Orissa Act should be
levied on his taxable turnover at such rate not ex:ceeding thirteen percent and
subj~ct to such conditions as the State Government might from time to time by
notific:ttion specify.
On May 23, 1977 the State Government issued two notifications. Notifica·
tion No. SRO 372/77 was made under section 3B amending the earlier notifica·
tion dated April 23, 1976. This notification made standing trees and bamboos
H
agreed to be severed Jiabli; to tax on the turnover of purchase with effect from
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ORISSA v. TITAGHUR .PAPEI!. MILLS
27
June 1, 1977. Notification SRO No. 373/77 issued under the first proviso ... to.
A
sec,ion 5(1) of the Orissa Act amende~ with effect fron1.June 1, 1977 the second.
of the two notificatioo.s of April 23, 1976 and direc.ted that. th~ 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 wOuid be at the rate'o~ 10~,- .·
On December 29, 1977 the Orissa Sales Tax (Am~ndm~nt) ()rdlriance,
1977 was promulgated amending the Orissa Act ·with effeCt from Ja,rtuarY, 1978.:
With effect from the sar'ne date two notifications SRO .~o- 900{77 ,and SRb Nq:.~
901/77 were issued; the first notification which was issued under the provision·s
of section 3B ana in supersession of all previous· notificUtions on 'the subject: -
declared that the goods mentioned in ColumO. (2) ·of th~ sch_edule to the·n.~tifi~
cation were liable to be taxCd on the turnover' of Pu'rchase with ~ffec~ frO~ ~
January 1, 1978. Entries 2 and 17 in the schedule of this notification spc9ified
"bamb:-os agreed to be severed" and "standing trees agreed tO be severed" ,
respectively. Notification No. 901/77 issued under section 5 (1) wls in superses~ion of all previous notifications in that regard. The State GOvcrnm~nt, by
this notification, directed that with effect fronl January 1, 19?8 the tax pay'ab!e
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 sPeciti'ed ·
against it in colu1nn (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 ~as repealed and replaced by Orissa Sales Tax ·(AmendmeOt)
Act of 1978.
A large: number of writ petitions were filed before the High Cou_rt impugn~
ing the notifica1ions dated May 23, 1977 and December 29, · 1977. One. grotip
of petitioners consisled of those who had entered into agreements with the
State for the felling, cutting, obtaining and re1noving bamboos from forest areas
for the manufacture of paper· (blmboo contracts), and thci other' group -consisted
of those who had entered into agreements for the purchase of 'standiOg trees
(Timber Co'ntracts).
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The bamboo conlracts were a grant of exclusive right and licence to fell, -
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 ·calICd ·the "grantof~· ! ·.
·of the licence. The bamboo contracts were in respect of different areas for: ·
"periods ranging from 11to14 years with an option to renew the agree'ments for· t
further periods.
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The respondent in-CA No. 219/82 contended before· the High CoUtf that ,
the subject matter of the .Bamboo· contract was not a sale or poi-chase of ioods ·
but was a lease of immovable property or in any event was a creation of an inte·
rest in i-omovable property by Way of-grant profit a jJrendre which amou~tcd to
an cas~ment under the Indian Basements Act 1882 and that for that reason· the
royalty payable under the bamboo contracts could not be made exigib!e·to either·
sales tax or purchase tax and that the impugned provisions Or the n-otfric~tions
were ultra vire-s t-he Act. It was also contended that the bamboo contract was 1 :
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stiPREJ.IE COuRt REPORT~
(19S5] ~ S.C.k
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~ 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
s~bject, the liability to sales tax under the said notifications of May 23, 1977 was
"'Ped out.
B
In Civil Appeal No. 220/82 the bids of the respondent firm at auctions
Reid by the Government in respect of trees standing in forest areas were accepted aod on confirmation of the ·bids by the competent authority it antered into
aareements with the Government for felling and removing such trees. The
f~5pondent, in turn,, sold the trees felled by it in the form of Jog5 to others. At
th.e relevant time the respondent was successful at five auction sales and on
ratification or the bids entered into five separate agreements (timber contracts)
for fellina and removing the trees standing in the forest areas.
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After the issue of the notifications of May 23, 1977 the respondent filed
a writ petiti'?n in the High Court against the State and the Sales Tax and Forest
Authorities contending (l) that the levy of purchase tax on standing timber
agreed to be severed was beyond the legislative competence of the Stat~ 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
tat.
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The High Court a11ow~d 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 n1eaning of the tenn in
the Sale£of Goods Acfaod the Orissa Act, and that what was made exigible to
tax under the impugned provisions notifications, was a completed purchase of
ll<>ods.
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. 900/77 and
(3) entries Nos. 2 and 17 in the schedule to notification No. 901/77 dated
December 29, 1971 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
aml >ah<l. [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
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0Ri~SA v. TITAGHUR PAPER MiLLS
29
purchase of goods." The addition of the word "purchase" in Entry 54 permits
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the State Legislature t.o levy a purchase tax and does not confine its taxing
power merely to levying sales.tax. [62F ·;HJ '
(b) A cantena of decisions of this Court had held that the expression
.. sale of goods" had been used in the Goverqment of India Act; 193~ 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 th,: c0n5titution interpretation was adopted and
any attempt by th~ State Leghlature to give that expression an artificial
meaning or an enlarged meaning or to bring within its scope what would not
be comprehended within that expression would be unconstitutional and ultra
vires. [631' ; 64G-H ; 63G)
State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. [1959] SCR
379; The Sales Tax Officer, Pilibhit v. Messrs Budh Prakash Jai Prakash [1955]
I SCR 243, 247.
Bhopal Sug~r Industries Ltd., M.P. & A11r. 11. D P. Dube, Sales Tax Officer,
Bhopal Region, Bhopal & Anr., AIR 1964 SC 1037; KL. Johar & Co, v. Deputy
Co1nmercial Tax Officer [1965] 2 SCR 112; Joi11t Co1nnierciOl -Tax Officer,
Harbour Div. II Madras v. Young Men's Indian Associall'on (Reg.) Madras &
Anr. [1970] 3 SCR 680; State of Maharashtra .& Anr. v. Champa/al 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 B 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
o( 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 !!Ilother point in th;same series. (65C-EJ.
(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 notifica.
tion issued thereunder cannot travel beyond the scope of such Act, rule or
notification." Thus, the sales 'ta11: authoritie~ under the Orissa Act cannot assess·
to sales tax or purchase tax, a transaction which is not a sale or purchase of
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uSUPREME COURT RE~PORTS
[1985] :i s.c.R.
goods or assess to sales tax any goods or class of goods which are liable to
purchase tax or a~sess to tax, whether sales tax or purchase tax, goods at
another point in the same series o.f 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) Thfre is no substance in the argun1ent 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 inunov~
able 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 "attached to earth" means "rooted in the earth as in the
case of trees and shrubs." Thus, while tre::s rooted in the earth arc irnmovable
property as being things attached to the earth,by reason of the definition of the
term "imovable property" in variolls statutes namely- the General Clauses Act
and the Orissa General Clau.;;cs Act and the RegistratiJn 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 th~ tern1 "movable property" given in the
Registration Act. [67E ; 68F ; 68G-H ; 69A]
(b) Theiterm "standing timber .. · ha'i been judicially recognised as "a
tr(.!e which h 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'',
thal is, a tre~ m~ant 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 stand·
ing. 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 1novable 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. Shantabal ·v. State of Bombay & Ors. [1959] SCR, 265, 275-6,
followed.
(c) The distinction which existed in English Jaw between /ructus naturales
(natural growth of soil regarded as part of the soil until severance) and fructus
industriales (which are chattels considered as representing the Jabour 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 conside·
ration in Indian law is whether a transaction relates to "goods" or "movable
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ORISSA V. TITACHUR PAPER MILLS
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PL'Operty".
If it is sa1e of immovable property, a document of the kind
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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 II 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
purcha~e tax on immovable property and not on goods and that the State
Government has t'ravelle_d 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, th1t staading tr~es being unascerrained goods continued to be the
property of the State Government until felled and therefore the title to such
tree~ or b1mboo3 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
tligh Court read merely th:! descriptio1 of th(! goo.ds given in the impugned
provision~ by itself and n1t 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 38.and 5(1) ~s a whole makes it clear that
the taxable ev.!nt is not an agreement to sever standing trees or bamboos but
the purchase of bamboos or standing trees agreed to be severed. [72C-DJ
(c) The use of the terms "agreed" in- the description of goods showed
that there mnst be an agreement between the buyer and the seller and under
this agreement standing trees as also bamboos mu5t 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 nre 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 fulfiled. In the first case the
coptract is "executed contract" while in the second it is "executory."
[72E ; 7JC-DJB
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(d)
A conspectus of the relevant sections o, the Sale of Goods Act shows
that a purchase would be con:iplete 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 ihe case, the property in
such goods would pa<;s from the seller to the buyer when the contract is made
an<.l it is immaterial whether the time of payment of the price or the time of
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SUPREME COURT REPORTS
[1985] 3 S.C.R.
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 "be_fore sale
or under the contract of sale" thus made no
di~erence. The subject matter of
the impugned provisions was ·goods and the - tax levied thereunder was on the
completed 'purchase of goods. 76F-H ; 77 A-CJ
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 thereunaer contrary to the terms of that notifica~
tion 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 ta,.ed under the impugned provisions and any attempt
or action by the State to do so w )uld be illegal but 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 unconstitu·
tiona!ity. [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
a~d that this was contrary to the provisions of the Orisaa Act. [78CJ
(b) Not only does the Orissa Act· expressly forbid double taxation but
it aJ<;o 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
tions 3B and 8. Under the proviso to section 3B no tax is payable sales
s~c oods or class of goods declared under that section to be liable to tax on
~egturnover 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 De~ember 29, 1977 were issued as a result
of the Orissa Sales Tax (Amendment) Ordinance 1977 which later became lbe
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ORJSSA v. TITAGHUR PAPER MiLLS
33
Orissa Sales Tax (~mendment) Act, 1978, while the two notifications of
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May 23, 1977 were issued prior to the amendment. [79A]
(d) Prior to January I, 1978 under section 5(1) tax was payable by a
dealer on his taxable turnover o"f sales as also purchases at a certain fixed percentage. This rate applied both to sales tax and purchase tax. But the pur·
chase tax was payable only on the turnover of purchases of goods declared·
under section 38. 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 a notification only
when it wanted to fix a rate of tax hia:her or lower than that specified in this·
section. If no .such notification.was is'3ued then the tax payable, be it sales tax
or purchase tax. was to be at the rate mentioned in section S(l).
Wher~. how·
ever, 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 Jower than that specified in section 5(.1).
Where no such notific1tion was issued, the rate of purchase tax would be the
on.e 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 powef 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 ba1nboos 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 b~ liable to sales tax
at the rate of Seven percent. If 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 aoy necessity to delete that particular
entry or to amend the residuary entry by excluding those goods thereform. It
would be necessary for the State Government to issue a notification sPecifying
the ra"te of purchase tax on those goods because unlike what the position was
prior to January 1, 1978, on and after that date toe 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 rro substance in the contention that the two notifications
of December 29, 1977 having been made in supcrsession of all previous notifications issued on the subject their effect was to wipe out all tax liability which
fJCcrued under the earlier notifications of May 23, 1977. (800-HJ
B
c
D
E
F
G
H
A
B
c
D
E
F
34
SUPREME COURT REPORTS
[1985] 3 S.C.R.
(b) The word "supersession" in the notifications of December. 29, 1977
was used in the same sense as the words "repeal a!ld raplacement" and, therefore, d_oes not have the effect of wiping out the tax liability under the previous
notifications.
AU that was done by using the words "in supersession of all
previous notifications" 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 notificaiions from time to time. . Under these provisions the State Government can issue a notification and repeal and replace it
by another not.ification. [SIC]
(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
Jtinuary 1. 1978 unless a notification was issued specifying the rate of tax no
dealer would be liable to pay any tax under the O~issa Act. Under the amen,ded
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 tax 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; DJ
7. (a) Timber contracts were not works contracts but were agreements to
sell standing timber. [146D]
(b) Timber contracts were not transsactions of sale or purchase of stanO·
ing trees agreed to be severed. They were mc1ely 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 exa1nined and checl-.ed 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 Condilions
of Contract, the General Conditions of Contracr and the various statuto1 y
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 con·
G
tracts for the sale of goods in a deliverable state and the property in the trees
specified in Schedule I of the Contract did not pas<; 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 conditiona·I upon the
State Government ratifying the acceptance of the bid, the ratification order did
not becon1e 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
H
away before complying with the other conditions of the contract, namely, furni·
~··.
ORISSA V. TITAGHUR PAPER MiLLS
35
shing a Coupe Declaration Certificate within the prescribed time, registering the
A
property mark or trade mark, making the security deposit and so on. Tois
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, fi~m was not entitled to any compensation
for loss ~ustained by reason of fire, tempe!lt, 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 1ection 26 of the
.Sale of Goods Act when the property is transferred to the buyer, the goods are
nt the buyer's risk whether delivery had been made or ~not; but this section is
qualified by the phrase uunless otherwise agreed."
The limber Contr&cts in
this case were subject to contract to the contrary. This is made clear by rule
44 which states that "al! 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 samething in commercial ipartance the no material had been
produced by the partie!. Where a term has not been statutorily defined or
judicially interpreted and there is insufficient material on record as to the meaning of the words1 the Court must seek to ascertain its meaning in common
par la ·1ce 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 dontext in which it has to interpret that word. [104E; lOSB~C; 146G~HJ
'
(b) The Orissa Act does not define the term ''timber" or "Jogs.'' 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." T.he
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 definilioni is that the word "timber" is not confined merely
to felled trees in the forests.
In subsequent Act like the Orissa Forest Produce
(Control of Trade) Act, 1981 the concept that timber is not merely felled trees
has been emphasised. Therefore1 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 tre,es 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 lo¥s will be nothing more than wood cut up or
B
c
D
E
F
G
ff
A
B
c
D
\ .
E
F
G
H
36
SUPREME COURT REPORTS
(1985] 3 s.C.R·
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
parlaiice a plauk would be flattened and smoothed timber.
[105C; F; l06C; 107A-D; Fl
Mohanlal Vishram v. Commissioner of Sales Tax, Madhya Pradesh,
Indore [1969] 24 STC JO] ; 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 fro,11 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. [1470-E]
JO. (a) The Bamboo Contract is not a lease of the contract area to the
respondent company in CA 219/82.
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 Indjan 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) T.here are countervailing factors which go to show that a Bamboo
contract is hot a contract of sale of goods. It is a grant of exclusive right and
licence to fell, cut, obtain and remove ban1boos. The person giving the grant
the Governor of the State, is referred to as "granter"; 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
th~: contract area with
the accessary licence to enter upon such area for the purpose of felling and
removing bamboos nor is it for a particular felling se.ason 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 uron the respondent-company a
j
1---
"'
-->-.::-
·-
"
.....
ORiSSA v. TITAGHUR PAPER MiLLS
. benefit to arise out of land, na~ely, 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 ~nly be ultra vires the Orissa Act
but also unconstitutional as being beyond the State's taxio~ power under Entry
54 in List II in the Seventh Schedule to the Constitution of.India.
[119C; E; 120B-D; 121<;)-H]
11. The decision of Firm Chhotabhai Jethahhai Patel & Co. v. The State
of Madhya Pradesh [1963] SCR 476 on which the appellant relied is not good
law and hlls been overruled by decisions of larger Benches of this Court. (State
of Madhya Pradesh v. Yakinuddin [1963] 3 SCR 13) [148Al
Mis Mohan/al flargovind of Jubbulpore v. CommiS.rioner pf Income Tqx
C.P. & Berar Nagpur L.R. [1949] 76 !,A. 235; !LR 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
c
' i
Board of Revenue Etc. v. A.M. Ansari Etc.[1916] 3 SCR 661, held
D
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 1aw as that decision was
given per incurium and had laid down principles of interpretatiOn Which arc
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 Bonibay and the Court was not justified in not adverting to that case arid the
other cases referred to on the ground that these cases dealt with the general Jaw
of real property. [142 H ; 143A]
·
(b} The enunciation of law made by the Court in·the Orient· Paper Mills
case that a document should be so construed as t0 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 ]ook at only such of the ·clius'es of the
do, ument as also to just one or more ~of the consequences flowing from he
document which would fit in with the interpretation which the court want"d
to.put on the document to make that. stalute applicable, is fraught with. considerable danger and mischief as it may expose documents to the personal .Prcdilic ..
tions and philosophies of individual judges depending upon wheiher aCco~ciin'g
to them it would be desirable that documents of the type.they have to construe
should be ma, e subject to a particular statute or not. [t39E-G].
.
,
.
.. J /
(c) Secondly, in observing that the St.:>te Government, for reasons best
known to it had "left the exploitation of the forest resources ·in part to the
private sector" the court h d overlooked that it wa; a matter of policy for the
State to decide whether such tran~actions should be entered ·into or not, whether
the transactio11s entered iiltO by th'! State was for the industrial developmen'f-df
E
·-
F •
G
A
B
c
D
E
F
G
. suPl!.BMB "ciouu REPORTS
[1985] 3 s.c.tl. .
the State' and whether the transaction ensured employment for the people of the
area and so on.
(d) Thirdly, the n ture and meaning of a document cannot be determined by its end-result or one of the consequences which flow from it. In lookin merely at the end-result of the agreem:~nt 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 r<gards another. [141C-D]
(e) .In coming to the conclusion that the term ''royalty" used in the
document before it was merely a '·feudalistic cuphimism" for the ''price of
timber", the court ov rlooked 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 ; 142AJ
13. Where there are two or more conflicting views of this court on the
sa1ne point the proper course for the High Court or even for s1naller Benches of
this court is to find out and follow the views expressed by larger Beaches of this
court in preference to those expressed by smaller benches. This practice has
crystallise.d into a rule of law declared by this Court. [142E .. F]
U.O.I. v. K.S. Subramanian [1977] I 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 incidenlal. lo 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 bas not undertaken to do any
\VOrk or labour. It was the contractor who had to enter upon the land to fell
the trees and remove them.