Civil Appeal Nos
219 220 of 1982
From the Judgment and Order dated 1991979 of the High Court of Orissa in DJ C Nos 811  104877
Anil B Divan and R K Mehta for the Appellants ST
Desai SR Banerjee and Vinoo Bhagat BR Aggarwal Miss Vijaylakshmi Menon Vinod Bobde for the Respondents
39 The Judgment of the Court was delivered by MADON J
These two Appeals by Special Leave granted by this Court are against the judgment and order of the Orissa High Court allowing 209 writ petitions under Article 226 of the Constitution of India filed before it
Genesis of the Appeals On May 23 1977 the Government of Orissa in the Finance Department issued two Notifications under the Orissa Sales Tax Act 1947 Orissa Act XIV of 1947
We will hereinafter for the sake of brevity refer to this Act as the Orissa Act
These Notifications were Notification SRO 37277 and Notification SRO No 373 77
Notification SRO No 37277 was made in exercise of the powers conferred by section 3 B of the Orissa Act and Notification SRO No 37377 was made in exercise of the powers conferred by the first proviso to sub section 1 of section 5 of the Orissa Act
We will refer to these Notifications in detail in the course of this judgment but for the present suffice it to say that notification SRONo
37277 amended notification No 20209 CTA 1476 F dated April 23 1976 and made bamboos agreed to be severed and standing trees agreed to be severed liable to tax on the turnover of purchase with effect from June 1 1977 while notification SRO No 37377 amended with effect from June 1 1977 Notification No 20212 CTA 1476 F dated April 23 1979 and directed that the tax payable by a dealer under the Orissa Act on account of the purchase of bamboos agreed to be severed and standing trees agreed to be severed would be at the rate of ten per cent
After the promulgation on December 29 1977 of the Orissa Sales Tax Amendment Ordinance 1977 Orissa Ordinance No 10 of 1977  which amended the Orissa Act two other notifications were issued on December 29 1977 by the Government of Orissa in the Finance Department namely Notification No 67178 CTA13577Pt FSRO No90077 and Notification No 67181 CTA 13577 F SRO No 90177
The first Notification was expressed to be made in exercise of the powers conferred by section 3 B of the Orissa Act and in supersession of all previous notifications issued on that subject
By the said notification the State Government declared that the goods set out in the Schedule to the said Notification were liable to be taxed on the turnover of purchase with effect from January 1 1978
Entries Nos 2 40 and 17 in the Schedule to the said Notification specified bamboos agreed to be severed and standing trees agreed to be severed respectively
The second Notification was expressed to be made in exercise of the powers conferred by sub section 1 of section 5 of the Orissa Act and in supersession of all previous notifications in that regard
By the said notification the State Government directed that with effect from January 1 1978 the tax payable by a dealer under the Orissa Act on account of the purchase of goods specified in column 3 of the Schedule to the said Notification would be at the rate specified against it in column 3 thereof
In the said Schedule the rate of purchase tax for bamboos agreed to be severed and standing trees agreed to be severed was prescribed as ten per cent
The relevant entries in the Schedule in that behalf are Entries Nos 2 and 17
The Orissa Tax Amendment Ordinance 1977 was repealed and placed by the Orissa Sales Tax Amendment Act 1978 Orissa Act No 4 of 1978
As many as 209 writ petitions under Article 226 of the Constitution of India were filed in the High Court of Orissa challenging the validity of the aforesaid two Notifications dated May 23 1977 and the said Entries Nos 9 and 17 in each of the said two notifications dated December 29 1977 hereinafter collectively referred to as the impugned provisions
The petitioners before the High Court fell into two categories
The first category consisted of those who has entered into agreements with the State of Orissa for the purpose of felling cutting obtaining and removing bamboos from forest areas for the purpose of converting the bamboo into paper pulp or for purposes connected with the manufacture of paper or in any connection incidental therewith
This agreement will be hereinafter referred to as the Bamboo Contract
The other group consisted of those who had entered into agreements for the purchase of standing trees
We will hereinafter refer to this agreement as The Timber Contract
All the Bamboo Contracts before the High Court were in the same terms except with respect to the contract area the period of the agreement and the amount of royalty payable and the same was the case with the Timber contracts
By a common judgment delivered on September 19 1979 reported as The Titaghur Paper Mills Company Ltd and another vs State of Orissa and other and other cases1 the High Court allowed all the 1 1980 45 STC 170
41 said writ petitions and qauashed the impugned provisions
The High Court made no order as to the costs of these petitions
Each of the present two Appeals has been filed by the State of Orissa the Commissioner of Sales Tax Orissa and the Sales Tax Officer concerned ill the matter challenging the correctness of the said judgment of the High Court
The Respondents in Civil Appeal No 219 of 1982 are the Titaghur Paper Mills Company Limited hereinafter referred to as the Respondent Company and one Kanak Ghose a shareholder and director of the Respondent Company
The Respondents in Civil Appeal No 220 of 1982 are Mangalji Mulji Khara a partner of the firm of Messrs MM Khara and the said firm
The Chief Conservator of Forests Orissa the Divisional Forest Officer Rairkhol Division
and the Divisional Forest Officer Deogarh Division have also been joined as proforma Respondents to the said Appeal
Facts of C A No 219 of 1985 D The Respondent Company is a public limited company
Its registered office is situated at Calcutta in the state of West Bengal
The Respondent Company carries on inter alia the business of manufacturing paper
For this purpose it owned at the relevant time three paper mills one at Titaghur in the State of West Bengal the second at Kankinara also in the State of west Bengal and the third at P O Choudwar Cuttack District in the State of Orissa
For the purpose of obtaining raw materials for its business of manufacturing paper the Respondent Company entered into a Bamboo Contract dated January 20 1974 with the State of Orissa
This agreement was effective for a period of fourteen years from October 1 1966 in respect of Bonai Main Areas of Bonai Division for a period of thirteen years of with effect from October 1 1967 in respect of Kusumdih P section Of Bonai Division and for a period of eleven years with effect from October 1 1969 in respect of Gurundia Rusinath P section Of Bonai Division with an option to the Respondent Company to renew the agreement for a further period of twelve years from October 1 1980
For the present it is not necessary to refer to the other terms and conditions of this Bamboo Contract
After the said two Notification dated May 23 1977 were issued the Sales Tax Officer Dhenkanal Circle Angul Ward the Third Appellant in Civil Appeal No 219 of 1982 issused to 42 the manager of the Respondent Company s mill at P O Choudwar a notice dated August 18 1977 under Rules 22 and 282 of the Orissa Sales Tax Rules 1947 stating that though the Respondent Company s gross turnover during the year immediately preceding June 1 1977 had exceeded Rs 25000 it had without sufficient cause failed to apply for registration as a dealer under section 9 of the Orissa Act and calling upon him to submit within one month a return in Form IV of the forms appended to the said Rules showing the particulars of turnover for the quarter ending 76 77  677
By the said notice the said manager was required to attend in person or by agent at the Sales Tax Office at Angul on October 30 1977 and to produce or cause to be produced the accounts and documents specified in the said notice and to show cause why in addition to the amount of tax that might be assessed a penalty not exceeding one and half times that amount should not be imposed under section 125 of the Orissa Act that is for carrying on business without being registered as a dealer
By its letter dated August 25 1977 the Respondent Company asked for time to seek legal advice
Thereafter by its letter dated September 27 1977 addressed to the said Sales Tax Officer the Respondent Company contended that the said notice was invalid and called upon him to cancel the said notice
A copy of the said letter was also sent to the Commissioner of Sales Tax Orissa who is Second Appellant in Civil Appeal No 219 of 1982 as also to the Chief Secretary to the Government of the State of Orissa
As no reply was received to the said letter the Respondent company and the said Kanak Ghosh filed writ petition in the High Court of Orissa being OJC No 811 of 1977 challenging the validity of the said two Notifications dated May 23 1977 and the said notice
While the said writ petition was part heard the said two Notifications were replaced by the said two Notifications dated December 29 1977
Accordingly the Respondent Company applied for amendment of the said writ petition
It also filed along with Kanak Ghosh another writ petition being OJC No 740 of 1978 challenging the validity not only of the said two Notifications dated May 23 1977 but also of Entries Nos 2 and 17 of the said two Notifications dated December 29 1977 and the said notice dated August 18 1977 on the same grounds as those in the earlier writ petition
The principal contentions raised in the said writ petitions were that the subject matter of the Bamboo Contract was not a sale or 43 purchase of goods but was lease of immovable property or in any event was the creation of an interest in immovable property by way of grant of profit a prendre which according to the Respondent Company amounted in Indian law to an easement under the Act V of 1882 and that for the said reason the amounts of royalty payable under the Bamboo Contract could not be made exigible to either sales tax or purchase tax in the exercise of the legislative competence of the State and therefore the impugned provisions were unconstitutional and ultra vires the Orissa Act
It was further contended that the Bamboo Contract was a works contract and for the said reason also the transaction covered by it was not exigible to sales tax or purchase tax
It was also contended that as the said Notifications dated December 29 1977 were expressed to be made in supersession of all earlier notifications on the subject the liability if any under the said Notifications dated May 23 1977 was wiped out
The said writ petitions prayed for quashing the impugned provisions and for writ of mandamus against the respondents to the said petitions namely the State of Orissa the Commissioner of Sales Tax Orissa and the said Sales Tax Officer restraining them from giving any effect or taking any further steps or proceedings against the Respondent Company on the asis Or the impugned provisions or the said notice
In addition to the said two writ petitions filed by the Respondent Company and the said Kanak Ghosh three other writ Petitions were also filed by other parties Who had entered into Bamboo Contracts with the State of Orissa in which similar contention were raised and reliefs claimed
The record is not clear whether any assessment order was made against the Respondent Company in pursuance of the said notice or whether further proceedings in pursuance of the said notice were stayed by the High Court by an interim order
As mentioned earlier by the said common judgment delivered by the High Court the said writ petitions were allowed
As a natural corollary of the High Court quashing the impugned provisions it ought to have also quashed the said notice dated August 18 1977 and the assessment order if any made in pursuance thereof
The High Court however did not do so perhaps because as it heard and decided all the said 209 writ petitions together it did not ascertain the facts of each individual petition or the exact consequential reliefs to be given to the petitioner therein
44 Facts of C A No 220 of 1982 Messrs MM Khara Second Respondent to Civil Appeal No 220 of 1982 hereinafter referred to as the Respondent Firm is a partnership firm of which the first Respondent to the said Appeal Mangalgi Mulji Khara is a partner
The Respondent Firm carried on business at P O Sambalpur in the District of Sambalpur in the State of Orissa and was registered as a dealer both under the Orissa Act and the Act LXXIV of 1956 with the Sales Tax Officer Sambalpur I Circle
The business of the Respondent Firm so far as concerns this Appeal consisted of bidding at auction held by the Government of Orissa in respect of trees standing in forest areas and if it was the highest bidder entering into an agreement with the Government for felling and removing such trees and in its turn selling the trees felled by it in the shape of logs to other
The procedure followed by the State of Orissa in giving forest areas was to publish notices of proposed auction sales of timber and other forest products in particular forest areas
After the auctions were held ratification orders would be issued by the State Government to the forest contractors who were the highest bidders as also an agreement would be entered into between the State of Orissa through its Governor and the forest contractor in respect of the forest produce governed by the agreement
During the relevant period the Respondent Firm was successful at five auction sales held by the State of Orissa
Its bids were ratified by the State Government
The Respondent Firm also entered into five separate agreements hereinafter referred to as Timber Contractors for felling and removing trees standing in such forest areas
Three of the said five Timber Contracts were for the period October 31 1977 to January 31 1979 the fourth was for the period October 1 1977 to December 31 1978 and the fifth was for the period October 28 1977 to July 31 1979
After the said Notifications dated May 23 1977 were issued the Respondent Firm along with its said partner Mangalji Mulji Khara filed a writ petition in the Orissa High Court being OJC No 1048 of 1977 against the State of Orissa Commissioner of Commercial Taxes Orissa Sales Tax Officer Sambalpur Circle Divisional Forest Officer Roirkhol Division and Divisional Forest Officer Deogarth Division
Two main grounds were taken in the 45 said writ petition namely l the levy of a purchase tax on standing timber agreed to be severed was beyond the legislative competence of the State Legislature and 2 the said Notifications imposed a tax both at the point of sale and point of purchase and were therefore invalid and ultra vires the Orissa Act
It was also contended that the power conferred upon the State Government under section 3 B of the Orissa Act to declare any goods or class of goods to be liable to tax on the turnover of purchase as also the power conferred upon the State Government to specify the rate of tax subject to the conditions that it should not exceed thirteen per cent amounted to excessive delegation of legislative power to the State Government and that too without prescribing any guidelines in respect thereof
It was further contended that the Timber Contracts were works contracts and the amounts payable under them were therefore not exigible either to purchase tax or sales tax
The reliefs sought in the said writ petition were for quashing the said two Notifications dated May 23 1977 D While the said writ petition was pending the Sales Tax Officer Sambalpur I Circle by his assessment order dated November 28 1978 assessed the Respondent Firm to tax under the Orissa Act for the period April 1 1977 to March 31 1978
He held that the Respondent Firm had paid royalty to the Forest Department in the aggregate sum of Rs 1152175 on which purchase tax at the rate of ten per cent was payable by it
It was further stated in the said assessment order that the Respondent Firm had not shown this amount in its gross turnover
Accordingly the Sales Tax Officer enhanced the gross turnover to include this amount
The amount of purchase tax assessed on the Respondent Firm amounted to Rs 11621750p
Thereupon the Respondent Firm and its partner amended the said writ petition No OJC 1048 of 1977 and challenged the validity of the said assessment order and prayed for quashing the same
On an application made by the Respondent Firm and its said partner by an interim order the High Court stayed the recovery of the amount of purchase tax pending the hearing and final disposal of the said writ 
Apart from the Respondent Firm 203 other forest contractors who had entered into similar agreements with the State Government also filed writ petitions in the High Court challenging the validity of the impugned provisions
By its judgment under appeal 46 the High Court allowed the said petition filed by the Respondent Firm
As in the case of the writ petition filed by the Respondent Company and very probably for the same reason the High Court did not pass any order quashing the said assessment order consequent upon it holding that the impugned provisions were ultra vires the Act
Judgment of the High Court All the said 209 writ petitions were heard by a Division Bench of the Orissa High Court consisting of SKRay CJ and NK Das J
The main judgment was delivered by Das
J while Ray CJ delivered a short concurring judgment
Das J rejected the contention that the effect of the word supersession  used in the Notifications dated December 29 1977 was to wipe out the liability under the earlier Notifications dated May 23 1977
He held that the Notifications dated May 231977 remained in force until the Notifications dated December 29 1977 came into operation
So far as the other points raised before the High Court were concerned Das J summarized the conclusions reached by the court in paragraphs 19 and 2 of his judgment as follows 19
For the reasons stated above we hold as follows 1 That the bamboos all i trees agreed to be severed are nothing but bamboos and timber after those are felled
When admittedly timber and bamboos are liable for taxation at the sale point taxation of those goods at the purchase point amounts to double taxation and as such the notifications arc ultra vires the provisions of the the Act
2 The impugned notifications amount to taxation on agreements of sale but not on sale and purchase of goods and 3 In the case of bamboo exploitation contracts the impugned notifications amount also to impost of tax on profit a prendre and as such arc against the provisions of the Orissa Sales Tax Act
In view of the aforesaid findings we do not consider it necessary to go into the other questions raised 47 by the petitioners namely whether it is a works contract and whether the notifications amount to excessive delegation or whether there has been business of purchase by the petitioners or whether there has been restriction on trade and business In his concurring judgment Ray C J agreed with Das J and further held that in the series of sales in question the first sale that is the taxable event started from the Divisional Forest Officer and that the Divisional Forest Officer was the taxable person who had sold taxable goods namely timber and that as what was sold by the Divisional Forest Officer was purchased by the petitioners before the High Court the identity of goods sold and purchased was the same and that where such a sale was taxed the purchase thereof was excluded from the levy of tax by virtue of sections 3 B and 8 of the Orissa Act and consequently the levy of purchase tax by the impugned provisions was bad in law
In view of its above findings the High Court allowed all the writ petitions and quashed the impugned provisions
The High Court made no order as to the costs of the writ petitions
We will set out the submissions advanced at the Bar at the hearing of these Appeals when we deal with the various points which fall to be decided by us
In order however to test the correctness of the judgment of the High Court as also of the rival contentions of the parties it is necessary to see first the relevant provisions of the constitution of India as also of the Orissa Act and of the various notifications issued thereunder
Constitutional provisions The Orissa Act received the assent of the Governor General of India on April 26 1947 and was published in the Orissa Gazette on May 14 1947
Under section 113 of the Orissa Act section 1 was to come into force at once and the rest of the Orissa Act on such date as the Provincial Government may by notification in the Orissa Gazette appoint
The rest of the Orissa Act was brought into force on August l 1947
The Orissa Act is thus a pre constitution Act
At the date when it was enacted as also when it came into force the constitutional law of India was the Government of 48 India Act 1935 prior to its amendment by the Indian Independence Act 1947
Under section 1003 of the Government of India Act 1935 the Legislature of a Province alone had the power to make laws for a province or any part thereof in respect any of the matters enumerated in List 11 in the Seventh Schedule to that Act namely the Provincial Legislative List
Entry 48 in the provincial Legislative List provided for Taxes on the sale of goods and on advertisements
Thus under the Government of India Act 1935 Sales tax was an exclusively provincial subject and the legislative competence of the Orissa Provincial Legislature to enact the Orissa Act was derived from section 1003 of the Government of India Act 1935 read with Entry 48 in the Provincial Legislative List
Under the Constitution of India as originally enacted the legislative topic Taxes on the sale or purchase of newspapers and on advertisements published therein was exclusively a Union subject in respect of which under Article 2451 read with Article 2461 parliament alone could make laws for the whole or any part of the territory of India this topic being the subject matter of Entry 92 in List I in the Seventh Schedule to the Constitution namely the Union List while Taxes on the sale or purchase of goods other than news papers and Taxes on advertisements other than advertisements published in newspapers were exclusively State subjects in respect of which under Article 2451 read with Article 2463 of the Constitution of India the Legislature of a State alone could make laws  for such State or any part thereof these topics being the subject matter of Entries 54 and 55 in  List ll in the Seventh schedule to the Constitution namely the State List  By the constitution Sixth Amendment  Act 1956 a new Entry namely Entry 92A was inserted in the Union List and Entry 54 in the State List was substituted by a new Entry
Entry 92A in the Union List reads as follows 92A Taxes on the sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of inter State trade or commerce
 The amended Entry 54 in List ll reads as follows 54
Taxes on the sale or purchase of goods other than newspapers subject to the provisions of Entry 92A of List I 49 We are not concerned in these Appeals with the amendment made in Entry 55 in the State List by the Constitution Forty second Amendment  Act 1976
We are not concerned with Entry 92 B inserted in the Union List or with the extended meaning given to the expression tax on the sale or purchase of goods by the new clause 29A inserted in Article 366 of the Constitution whereby that expression inter alia includes a tax on the transfer of property in goods whether as goods or in some other form involved in the execution of a works contract by the Constitution Forty sixth Amendment Act 1982
We are equally not concerned in these Appeals with the restrictions imposed by Article 286 of the Constitution on a State s power to levy a tax on certain classes of sales and purchases of goods
The Orissa Act In keeping with the legislative history of fiscal measures in general the Orissa Act has been amended several times
Thus by the middle of July 1981 it had been amended twenty eight times
It is needless to refer to all the provisions of the Orissa Act or of the various amendments made therein except such of them as are relevant for the purpose of these Appeals
The Orissa Act when enacted levied a tax only on the sales of goods taking place in the province of Orissa
By the Orissa Sales tax Amendment Act 1958 Orissa Act No28 of 1958 a purchase tax was for the first time introduced in the State of Orissa with effect from December 1 1958
The tax under the Orissa Act is levied not on goods but on sales and purchases of goods or rather on the turnover of sales and turnover of purchases of goods of a dealer
Under section 42 of the Orissa Act a dealer becomes liable to pay tax on sales and purchases with effect from the month immediately following a period not exceeding twelve months during which his gross turnover exceed the limit specified in that sub section which during the relevant period was Rs 25000
Under section 43 a dealer who has become liable to pay tax under the Orissa Act continues to be so liable until the expiry of three consecutive years during each of which his gross turnover has failed to exceed the prescribed limit and such further period after the date of The said expiry as may be 50 prescribed by the Orissa Sales Tax Rules and his liability to pay tax ceases only on the expiry of the further period so prescribed
A special liability is created by section 4 A on a casual dealer as defined in clause bb of section 2
We are not concerned in these Appeals with any question relating to a casual dealer
Section 2 is the definition section
Clause c of that section defines the term dealer
The definition as it stood during the relevant period and at the date when the judgment of the High Court was delivered omitting what is not relevant read as follows c Dealer  means any person who carries on the business of purchasing or selling or supplying goods directly or otherwise whether for commission remuneration or other valuable consideration and includes i  a company  firm or association which carries on such business Explanation The manager or agent of a dealer who resides outside Orissa and who carries on the business of purchasing or selling or supplying goods in Orissa shall in respect of such business be deemedl to l c a dealer for the purposes of this Act
It was on the basis of the above Explanation to section 2c that the notice impugned in Civil Appeal No 219 of 1982 was issued to the manager of the Respondent Company and he was sought to be made liable to purchase tax under the said Notifications dated May 23 1977
Under the aforesaid definition of the term dealer before a person can be a dealer he must be carrying on the business of purchasing or selling or supplying goods
There was no definition of the word business in the Orissa Act and the orissa High Court had interpreted it as connoting an activity carried on with the object of making profit
By the Orissa Sales Tax Amendment Act 1974 Orissa Act No 18 of 1974 a definition of business was for he first time inserted as clause b in section 2 the original clause b which defined the term contract having been omitted by the Orissa Sales Tax Amendment Act 1959
after the decision of this Court in The State of Madras vs Gannon Dunkerley  Co Madras 51 Ltd1
The effect of this definition of the term business was to do away with the requirement of profit motive
As a consequence of the decision of the Orissa High Court in Straw Products Limited vs State of Orissa and others2 the above definition of the term dealer in clause c was substituted with retrospective effect by the Orissa Sales Tax Amendment Ordinance 1979 Orissa Ordinance No 11 of 1979 which was replaced by the Orissa Sales Tax Amendment Act 1979 Orissa Act No 24 of 1979
In the Straw Product s Case the petitioner company had entered into two agreements with the State of Orissa
From the facts set out in the judgment of the High Court in that case it would appear that these two agreements were similar to the Bamboo Agreement before us
The Divisional Forest Officer Balliguda Division called upon the petitioner company to reimburse to him the amount of sales tax to which he had been assessed stating that he was a registered dealer and had been assessed to tax on the sale of all standing trees including bamboos
The petitioner company thereupon filed two writ petitions in the Orissa High Court challenging this demand
The contention that the transactions covered by the said two agreements were not sales of goods and therefore not exigible to sales tax does not appear to have been raised in those writ petitions
The High Court held that the State of Orissa and not the Divisional Forest Officer could be the dealer qua the transactions covered by the said agreements in case they were exigible to sales tax and that the liability under the Orissa Act being a statutory one it was not open to the State in the discharge of its administrative business or at its volition to name an employee under it as the person to pay sales tax under the Orissa Act and
therefore the Divisional Forest Officer could not have been assessed to sales tax on the transactions in question
The High Court further held that though the requirement of profit motive did not exist any more as an ingredient of the term business as defined by the said clause b of section 2 whether a person carried on business in a particular commodity depended upon the volume frequency continuity and regularity of transactions of purchase and sales in a class of goods and as these ingredients were not satisfied in the cases before it the transactions were not exigible to sales tax
The judgment in that case was delivered on May 3 1977
The State as also the Commissioner of Sales Tax 1 2 1978 42 STC 302 19771 CWR 455
52 Orissa have come in appeal by Special Leave in this Court against the said judgment and these appeals are still pending being Civil Appeals Nos
1237 1238 of 1979 State of Orissa and others vs Straw Products Limited and others and Civil Appeals Nos
1420 1421 of 979 Commissioner of Sales Tax Orissa and another vs Straw Product Limited and others
However to get over the judgment of the High Court the State Government issued the two impugned Notifications dated May 23 1977 which were replaced along with others by the said two Notifications dated December 29 1977
Further the Governor of Orissa promulgated the Orissa Sales Tax Amendment and Validation Ordinance 1979 Orissa Ordinance No I l of 1979 substituting with retrospective effect from the date of the Orissa Act the definition of dealer given in clause c of section 2
The said Ordinance was repealed and replaced by the Orissa Sales Tax Amendment and Validation Act 1979 Orissa Act No 24 of 1979
This amending and validating Act came into force with effect from July 19 1979 being the date of the promulgation of the said Ordinance
Section 3 of the said amending Act validated assessments or re assessments levy or collection of any tax or imposition of any penalty made or purporting to have been made under the Orissa Act before July 19 1979 as if all such acts had been done under the Orissa Act as so amended notwithstanding anything contained in any judgment decree or order of any court or other authority to the contrary
The substituted definition of dealer omitting the portion thereof not relevant for our purpose reads as follows c Dealer  means any person who carries on the business of purchasing selling supplying or distributing goods directly or otherwise whether for cash or for deferred payment or for commission remuneration or other valuable consideration and includes i  a company  firm or association which carries on such business X X X X Explanation I y and every local branch of a firm registered outside the State or of a company the principal office or headquarters whereof is outside the State shall be 
deemed to be a dealer for the purposes of this Act
53 Explanation II The Central Government or a State Government or any of their employees acting in official capacity on behalf of such Government who whether or not in the course of business purchases sells supplies or distributes goods directly or otherwise for cash or for deferred payment or for commission remuneration or for other valuable consideration shall except in relation to any sale supply or distribution of surplus unserviceable or old stores or materials or waste products or obsolete or discarded machinery or parts or accessories thereof be deemed to be a dealer for the purposes of this Act
What is pertinent to note about the new definition of dealer is that in the case of the Central Government a State Government or any of their employees acting in official capacity on behalf of such Government it is not necessary that the purchase sale supply or distribution of goods should be in the course of business while in all other cases for a person to be a dealer he must be carrying on the business of purchasing selling supplying or distributing goods
Writ petitions challenging the validity of this amending and validating Ordinance and Act have been filed in this Court under Article 32 of the Constitution of India and are still pending
These writ petitions are Writ Petition Nos 958 of 1979 Orient Paper Mills and another vs State of Orissa and others and Writ Petition No 966 of 1979 Straw Products Limited and another vs State of Orissa and others
We are concerned in these Appeals only with purchases and sales of goods and not with their supply or distribution
The terms sale and purchase are defined in clause g of section 2
Clause g omitting the Explanation which is not relevant for our purpose reads as follows g Sale  means with all its grammatical variations and cognate expressions any transfer of property in goods for cash or deferred payment or other valuable consideration but does not include a mortgage hypothecation charge or pledge and the words buy and purchase shall be construed accordingly X X X X X 54 The expressions goods
purchase price and sale price are defined in clause d ee and h of section 2 as follows  d Goods  means all kinds of movable property other than actionable claims stocks shares or securities and includes all growing crops grass and things attached to or forming part of the land which are agreed before sale or under the contract of sale to be severed  ee Purchase Price  means the amount payable by a person as valuable consideration for the purchase or supply of any goods less any sum allowed by the seller as cash discount according to ordinary trade practice but it shall include any sum charged towards anything done by the seller in respect of the goods at the time of or before deli very of such goods other than the cost of freight or delivery or the cost of installation when such cost is separately charged h Sale Price  means the amount payable to a dealer as consideration for the sale or supply of any goods less any sum allowed as cash discount according to ordinary trade practice but including any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery thereof
As the liability of a dealer to pay tax under the Orissa Act depends upon his gross turnover exceeding the limit prescribed by  section 42 it is necessary to see the definition of the expression gross turnover
Gross turnover is defined by clause dd of section 2 as follows dd Gross Turnover  means the total of turnover of sales  and turnover of purchases
G The expression turnover of sales and turnover of purchases are defined in clauses i and j of section 2 as follows i Turnover of sales  means the aggregate of the amounts of sale prices and tax if any received and receivable by a dealer in respect of sale or supply of goods other 55 than those declared under section 3 B effected or made during a given period X X X X j Turnover of purchases  means the aggregate of the amounts of purchase prices paid and payable by a dealer in respect of the purchase or supply of goods or classes of goods declared under section 3 B So far as is material for our purpose section 51 provides for the rates at which the tax under the Orissa Act is payable
Sub section I of section 5 and the first proviso thereto as they stood prior to the Orissa Sales Tax Amendment Ordinance 1977 read as follows 5
Rate of Tax 1 The tax payable by a dealer under this Act shall be levied at the rate of six per cent on his taxable turnover Provided that the State Government may from time to time by notification and subject to such conditions as they may impose fix a higher rate of tax not exceeding thirteen per cent or any lower tax payable under this Act on account of the sale or purchase of any goods or class of goods specified in such notification The words at the rate of six per cent in the main subsection I were substituted for the words at the rate of five per cent and the words not exceeding thirteen per cent were substituted for the words not exceeding ten per cent in the first proviso thereto by the Orissa Sales Tax Amendment Act 1967 Orissa Act No 7 of 1976 with effect from May 1 1976
Amongst the amendments made by the Orissa Sales Tax Amendment Ordinance 1977 which were re enacted by the Orissa Sales Tax Amendment Act 1978 was the substitution of sub section I of section 5 and the first proviso thereto by a new sub section 1
Thus with effect from January 1 1978 sub section 1 reads as follows 56 5
Rate of Tax 1 The tax payable by a dealer under this Act shall be levied on his taxable turnover at such rate not exceeding thirteen percent and subject to such conditions as the State Government may from time to time by notification specify X X X X The other proviso to the said sub section 1 are not relevant for our purpose
Sub section 2 A of section S defines the expression taxable turnover as meaning that part of a dealer s gross turnover during any period which remains after deducting therefrom the turnover of sales and purchases specified in that subsection
Section 3 B confers upon the State Government the power to declare what goods or classes of goods would be liable to tax on the turnover of purchases
Section 3 B reads as follow 3 B Goods liable to purchase tax The State Government may from time to time by notification declare any goods or class of goods to be liable to tax on turnover of purchases Provided that no tax shall be payable on the sales of such goods or class of goods declared under this section  This section was inserted in the Orissa Act with effect from December 1 1958 by the Orissa Sales Tax Amendment Act 1958
As the tax under the Orissa Act is intended to be a single point levy section 8 confers upon the State Government the power to prescribe points at which goods may be taxed or exempted Section 8 provides as follows 8
Power of the State Government to prescribe points at which goods may be taxed or exempted Notwithstanding anything to the contrary in this Act the State Government may prescribe the points in the series 57 of sales or purchases by successive dealers at which any goods or classes or descriptions of goods may be taxed or exempted from taxation and in doing so may direct that sales to or purchases by a person other than a registered dealer shall be exempted from taxation Provided that the same goods shall not be taxed at more than one point in the same series of sales or purchases by successive dealers
Explanation Where in a series of sales tax is prescribed to be levied at the first point such point in respect of goods despatched from outside the State of Orissa shall mean and shall always be deemed to have meant the first of such sales effected by a dealer liable under the Act after the goods are actually taken delivery of by him inside the State of Orissa
 Rules 93 A to 93 G of the Orissa Sales Tax Rules 1947 prescribe the goods on which tax is payable at the first point in a series of sales
The goods so prescribed have no relevance to these Appeals
Notifications under the Act In exercise of the powers conferred by section 3 B of the Orissa Act the State Government from time to time issued notifications declaring what goods or classes of goods were liable to tax on the turnover of purchases
As a result of the amendments made in the rates specified in sub section 1 of section 5 and the first proviso to that sub section by the Orissa Sales Tax Amendment Act 1976 with effect from May 11976 all these notification were superseded and a fresh list of goods declared under section 3 B by Notification No 20209CTAL 1476 F dated April 231916
All the notifications issued from time to time under the first proviso to sub section 1 of section 5 specifying the rates of purchase tax on goods declared under section 3 B were also superseded and new rates of purchase tax in respect of the goods declared in the said new list were specified with effect from May 11976 by Notification No 20212 CTA 1476 F dated April 231976
But is these two Notifications which were amended by the impugned Notifica 58 tions dated May 23 1977
The said two impugned Notifications are as follows Notification SR ONo
37277 dated the 23rd May 1977 In exercise of the powers conferred by section 3 B Of the Orissa Sales Tax Act 1947 Orissa Act 14 of 1947 the State Government do hereby declare that standing trees and bamboos agreed to be severed shall be liable to tax on turnover of purchase with effect from the first day of June 1977 and direct that the following amendment shall be made in the notification of Government of Orissa Finance Department No 20209 CTA 1476 F dated 23rd April 1976
AMENDMENT In the schedule to the said notification after serial numbers 2 and 16 the following new serial and entry shall be inserted under appropriate heading namely Serial No Description of goods 1 2 2 A Bamboos agreed to be severed
16 A Standing trees agreed to be Severed Notification SRO No 37377 dated the 23rd May 1977 In exercise of the powers conferred by the first proviso to sub section 1 of section 5 of the Orissa Sales Tax Act 1947 Orissa Act 14 of 1947 the State Government do hereby direct that the following amendment shall be made in the notification of the Government of Orissa Finance Department No 20212 CTA 1476 F dated the 23rd April 1976 and that the said amendment shall take effect from the first day of June 1977
AMENDMENT In the schedule to the said notification after serial 59 numbers 2 and 16 the following new serial and entry shall be inserted under appropriate heading namely Serial No Description of goods Rate of Tax 1 2 3 16 A Bamboos agreed to Ten per cent served to be 2 A Standing trees agreed Ten per cent to be severed The above two Notifications were struck down by the High Court by its judgment under appeal
The State Government had also issued from time to time Notifications in exercise of the powers conferred by the first proviso to sub section 1 of section 5 prescribing a rate of tax different from the rate specified in section 51 so far as sales of certain goods were concerned
As a result of the amendments made by the Orissa Sales Tax Amendment Act 1916 all these notifications were superseded and new rates specified with effect from May 1 1976 by Notification No 20215 C TA 1476 F dated April 23 1976
By Notification No SRA 37477 dated May 23 1977 made in exercise of the powers conferred by the first proviso to sub section 1 of section 5 the State Government directed that with effect from June 1 1977 the said Notification No 20215 CTA 1476 F dated April 23 1976 should inter alia be amended by inserting a new entry therein as Entry No 86 A By this entry the rate of sales tax on timber was enhanced to ten per cent Tn view of the amendment made in sub section 1 of section 5 by the Orissa Sales Tax Amendment Ordinances 1977 replaced by the Orissa Sales Tax Amendment Act 1978 the State Government issued three Notifications 1 declaring the goods liable to purchase tax 2 specifying the rates of purchase tax on such goods
and 3 specifying the rates of sales tax
The relevant portions of the notification declaring the goods liable to purchase tax read as follows Notification No 67178 CTA 13577 Pt  Fdated the 29th December 1977
60 SRONo90077 In exercise of powers conferred by section 3 B of the Orissa Sales Tax Act 1947 Orissa Act 14 of 1947 and in supersession of all previous notifications issued on the subject the State Government do hereby declare that the goods mentioned in column 2 of the schedule given below shall be liable to tax on turnover of purchase with effect from the first day of January 1978
SCHEDULE Serial No Description of goods 1 2 X X X X 2
Bamboos agreed to be severed X X X X 17
Standing trees agreed to be severed X X X X   The relevant portions of the Notification specifying the rates of purchase tax read as follows Notification No67181 CTA 13577 F dated the 29th December 1977 SRO NO
90177 In exercise of the powers conferred by sub section 1 of section 5 of the Orissa Sales Tax Act 1947Orissa Act 14 of 1947 as amended by the Orissa Sales Tax Amendment Ordinance 1977 Orissa Ordinance No 10 of 1971 and in supersession of all previous notifications in this regard State Government do hereby direct that with effect from the first day of January 1978 the tax payable by a dealer under the said Act on account of the purchase of the goods specified in column 2 of the schedule given below shall be at the rate specified against each in column 3 thereof 61 SCHEDULE Serial No Description of goods1 Rate of Tax 1 2 3 X X X X 2
Bamboos agreed to be Ten per cent severed X X X X 17
Standing trees agreed to Ten per cent be served X X X X The relevant portions of the Notification specifying the rates of sales tax read as follows Notification No 67184 CTA 13577 F dated the 29th December 1977
SRO No 90277 In exercise of the powers conferred by sub section I of section 5 of the Orissa Sales Tax Act 1947 Orissa Act 14 of 1947 as amended by the Orissa Sales Tax Amendment Ordinance 1977 Orissa Ordinance No 10 of 1977 and in supersession or all previous Notifications on the subject the State Government do hereby direct that with effect from the first day of January 1978 the rate of tax payable by a dealer under the said Act on account of the sale of goods specified in column 2 of the Schedule given below shall be at the rate specified against each in column 3 thereof
SCHEDULE Sl
Description of goods Rate of Tax 1 2 3 X X X X 101 All other articles Seven percent
Entries Nos 2 and 17 in the schedule to each of the said 62 Notifications Nos 67178 CTA 13517 Pt F and 67181 CTA13577 F were also struck down by the High Court by its judgment under appeal
The ambit of the Orissa State s taxing power The validity of the impugned provisions is challenged on two grounds 1 they levy a tax on what is not a sale or purchase of goods and are therefore unconstitutional and 2 assuming the subject matter of the impugned provisions is a sale or purchase of goods they levy a tax on the same goods both at the sale point and purchase point and are therefore ultra vires the Orissa Act
In order to test the correctness of these challenges it is necessary to bear in mind the ambit of the Orissa State  s power to levy a tax on the sale or purchase of goods This power is subject to a two fold restriction one Constitutional and the other statutory
The Constitutional restriction on the legislative competence of the Orissa State in this behalf is shared by it in common with all other States while the statutory restriction is self imposed and flows from the provisions of the Orissa Act
We have already set out earlier the relevant provisions of the Government of India Act
 1935 the Constitution of India and the Orissa Act
To recapitulate the Orissa Act is a pre Constitution Act and the legislative competence of the Orissa Provincial Legislature to enact the Orissa Act was derived from section 1003 of the Government of India act 1935 read with Entry 48 in List II in the Seventh Schedule to that Act
After the coming into force of the Constitution of India the power of the Orissa State Legislature to enact law imposing a tax on the sale or purchase of goods other than newspapers is to be found in Articles 2451 and 2463 of the Constitution of India read with Entry 54 of the Constitution of India
Thus Entry 54 in the State List in the Constitution of India is with certain modifications the successor entry to Entry 48 in the Provincial Legislative List in the Government of India Act 1935
While Entry 48 spoke of taxes on the sale of goods Entry 54 speaks of taxes on the sale or purchase of goods
The addition of the word purchase permits the State Legislature to levy a II purchase tax and does not confine its taxing power merely to levying 63 a sales tax
Sale and purchase are merely two ways of looking at the same transaction
Looked at from the point of view of the seller a transaction is a sale while looked at from the point of view of the buyer the same transaction is a purchase
Entry 48 in List II of the Seventh Schedule of the Government of India Act 1935 came up for interpretation by this Court in The Sales Tax officer Pilibhit vs Messrs Budh Prakash Jai Prakash
This Court held in that case that there having existed at that time of the enactment of the Government of India Act 1935 a well defined and well established distinction between a sale and an agreement to sell it would be proper to interpret the expression sale of goods in Entry 48 in the sense in which it was used in legislation both in England and India and to hold that it authorized the imposition of a tax only when there was a completed sale involving transfer of title
In that case the Uttar Pradesh Sales Tax Act 1948 had been amended so as to include forward contracts in the definition of sale  and to provide that forward contracts should be deemed to have been completed on the date originally agreed upon for delivery
These amendments were held by this Court to be ultra vires
In State of Madras vs Gannon Dunkerly  Co Madras Ltd another Constitution Bench of this Court held that at the time when the Government Or India Act 1935 was enacted the expression sale of goods was a term of well recognized import in the general law relating to sale of goods and the legislative practice relating to that topic and therefore that expression must be interpreted when used in the said Entry 48 as having the same meaning as in the sale of goods Act 1930
The Court further held that any attempt therefore to give to the expressions sale  goods or sale of goods an artificial meaning or an enlarged meaning or to bring within their scope what would not be comprehended within it would be ultra vires and unconstitutional
The court further observed at page 413 4   both under the common law and the statute law relating to sale of goods in England and in India to constitute a transaction of sale there should be an agreement express or implied relating to goods to be complete 1 1955 I SCR 243 246 64 by passing of title in those goods
It is of the essence of this concept that both the agreement and the sale should relate to the same subject matter
Where the goods delivered under the contract are not the goods contracted for the purchaser has got a right to reject them or to accept them and claim damages for breach of warranty
Under the law therefore there cannot be an agreement relating to one kind of property and a sale as regards another
We are accordingly of opinion that on the true interpretation of the expression sale of goods  there must be an agreement between the parties for the sale of the very goods in which eventually property passes  In that case the definition of term sale in the Madras General Sales Tax Act 1939 was enlarged by an amendment so as to include a transfer of property in goods involved in the execution of a works contract and the definition of turnover was expanded to include within it the amount payable for carrying out a works contract less such portion as may be prescribed
A new definition of works contract inserted in the said amendments included within its meaning inter alia the construction fitting but improvement or repair of any building road bridge or other immovable property
The Court held these amendments to be void and beyond the legislative competence of the Madras Provincial Legislature on the ground that in the case of a building contract which was one and indivisible the agreement between the parties was that the contractor should construct the building according to the specification contained in the agreement and in consideration therefore receive payment as provided therein and that in such an agreement there was neither a contract to sell the materials used in the construction nor any property passed in such materials as movables
The same interpretation as was placed on Entry 48 in the Provincial Legislative List in State of Madras vs Gannon Dunkerley  Co Madras Ltd was adopted by this Court while construing Entry 54 in the State List and attempts by the State Legislatures to enlarge the meaning of the expressions sale  sale of goods  or goods  have been held to be beyond their legislative competence sec for instance Bhopal Sugar Industries Ltd MP and another v
DP Dube Sales Tax Officer Bhopal Region Bhopal and another 1 AIR 1964 SC 1037
65 KL Johar and Company vs Deputy Commercial Tax Officer Joint Commercial Tax Officer
Harbour Div II
Madras vs Young Men s Indian Association Reg Madras and others  and State of Maharashtra and another vs Champalal Kishanlal Mohta2
In Addition to the above Constitutional limitations on the Orissa State s power to tax sales or purchases of goods there are other restrictions imposed by sections 3 B and 8 of the Orissa Act
A State is free when there is a series of sales in respect of the same goods to tax each one of such sales or purchases in that series or to levy the tax at one or more points in such series of sales or purchases
Legislation of all States in this respect is not uniform
Some States have adopted a single point levy others a two point levy and yet others a multi point levy
The State of Orissa has adopted a single point levy
It has done this by enacting the provision to section 3 B and the proviso to section 8
Under the proviso to section 3 B no tax is payable on the sales of goods or class of goods declared under that section to be liable to taxes on the turnover of purchase 
The proviso to section 8 states that the same goods shall not be taxed at more than one point in the same series of sales or purchases by successive dealers
Where therefore In a series of sales by successive dealers sales tax or purchase tax is levied at a particular point neither sales tax nor purchase tax can be levied at another point in the same series  and similarly can be levied in respect of the same transaction or any other transaction of sale of the same goods
As any attempt on the part of the State to impose by legislation sales tax or purchase tax in respect of what would not be a sale or a sale of goods or goods under the  is unconstitutional any attempt by it to do so in the exercise of its power of making subordinate legislation either by way of a rule or notification would be equally unconstitutional and so would such an act on the part of the authorities under a Sales Tax Act purporting to be done in the exercise of powers conferred 1 2  3 1971 1 SCR 46 66 by that Act or any rule made or notification issued thereunder
Similarly where any rule or notification travels beyond the ambit of the parent Act it would be ultra vires the Act
Equally sales tax authorities purporting to act under an act or under any rule made or notification issued thereunder cannot travel beyond the scope of such Act rule or notification
Thus the sales tax authorities under the Orissa Act cannot assess to sales tax or purchase tax a transaction which is not a sale or purchase of goods or assess to sales tax any goods or class of goods which are liable to purchase tax or assess to tax whether sales tax or purchase tax goods at another point in the same series of sales or purchase of those goods by successive dealers when those goods are liable to be taxed at a different point in that series
Subject matter of the impugned provisions What now falls to be determined is the subject matter of the impugned provisions
Relying upon the definition of the term goods in the  and in the Orissa Act it was submitted on behalf of the Appellant State that the subject matter of the impugned provisions is goods and that what is made exigible to tax under the impugned provisions is a completed purchase of goods
On behalf of the contesting Respondents it was submitted that by impugned provisions a new class of goods not known to law sought to be created and made exigible to purchase tax and that this attempt on the part of the State Government was unconstitutional as being beyond its legislative competence
The High Court held that the impugned provisions amounted to a tax on an agreement of sale and not on a sale or purchase of goods
It further held that in the case of Bamboo Contracts the impugned provisions also amounted to levying a tax on a profit a prendre
The term goods is defined in clause 7 of section 2 of the as follows 7 goods  mean every kind of movable property other than actionable claims and money and includes stock and shares growing crops grass and things attached to or forming part of the land which are agreed to be served before sale or under the contract of sale  67 We have already reproduced earlier the definition of goods given in clause d of section 2 of the Orissa Act
However for the purposes of ready reference and comparison we are reproducing the same here again
That definition is as follows d Goods  means all kinds of movable property other than actionable claims stocks shares or securities and includes all growing crops grass and things attached to or forming part of the land which are agreed before sale or under the contract of sale to be severed  What is pertinent to note however is that under both the definitions the term goods mean all kinds of movable property except the classes of movable property specifically excluded and includes growing crops grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale
The Act IV of 1882 does not give any definition of the term movable property but clauses 36 of section 3 of the Act X of 1897 clause 27 of the Orissa General Clauses Act 1937 Orissa Act I of 1937 and clause 9 of section 2 of the Act XVI of 1908 do
Clause 36 of section 3 of the General Clauses Act provides as follows 36 movable property shall mean property of every description except immovable property
 The definition in the Orissa General Clauses Act is in identical terms
The definition in the is as follows 9 moveable property  includes standing timber growing crops and grass fruit upon and juice in trees and property of every other description except immovable property
 The does not give any exhaustive definition of immovable property
 The only definition given therein is in section 3 which states immovable property  does not include standing timber growing crops or grass
 This is strictly speaking not a definition of the term immovable property for it does not tell us what immovable property is but merely tells us what it does not include
We must therefore 68 turn to other Acts where that term is defined
Clause 26 of section 3 of the General Clauses Act defines immovable property as follows 26 immovable property  shall include land benefit to arise out of land and things attached to the earth or permanently fastened to any thing attached to the earth
 The definition of immovable property in clause 21 of section 2 of the Orissa General Clauses Act is in the same terms
A more elaborate definition is given in clause 6 of section 2 of the which states 6 immovable property  includes land buildings hereditary allowances rights to ways lights ferries fisheries or any other benefit to arise out of land and things attached to the earth or permanently fastened to anything I which is attached to the earth but not standing timber growing crops nor grass
 What is pertinent to note about these definitions is that things attached to the earth are immovable property
The expression attached to the earth is defined in section 3 of the as follows  attached to the earth means a rooted in the earth as in the case of trees and shrubs b imbedded in the earth as in the case of walls or buildings or c attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached
 Thus while trees rooted in the earth are immovable property as being things attached to the earth by reason of the definition of the term immovable property given in the General Clauses Act the Orissa General Clauses Act and the  read with the definition of the expression attached to the earth given in the  standing timber is movable property by reason of its being excluded from the definition of 69 immovable property in the and the and by being expressly included within the meaning of the term movable property given in the 
The distinction between a tree and standing timber has been pointed out by Vivian Bose J in his separate but concurring judgment in the case of Shrimati Shantabai vs State of Bombay and others 1 as follows Now what is the difference between standing timber and a tree It is clear that there must be a distinction because the draws one in the definitions of immovable property and attached to the earth  and it seems to me that the distinction must lie in the difference between a tree and timber
It is to be noted that the exclusion is only of standing timber  and not of timber trees  Timber is well enough known to be wood suitable for building houses bridges ships etc whether on the tree or cut and seasoned  Webster s Collegiate Dictionary
Therefore standing timber  must be a tree that is in a state fit for these purposes and further a tree that is meant to be converted into timber so shortly that it can already be looked upon as timber for all practical purposes even though it is still standing
If not it is still a tree because unlike timber it will continue to draw sustenance from the soil Now of course a tree will continue to draw sustenance from the soil so long as it continues to stand and live and that physical fact of life cannot be altered by giving it another name and calling it standing timber  But the amount of nourishment it takes if it is felled at a reasonably early date is so negligible that it can be ignored for all practical purposes and though theoretically there is no distinction between one class of tree and another if the drawing of nourishment from the soil is the basis of the rule as I hold it to be the law is grounded not so much on logical abstractions as on sound and practical commonsense
It grew empirically from instance to instance and decision to decision until a recognisable 1   275 6 70 and workable pattern emerged and here this is the shape it has taken Thus trees which are ready to be felled would be standing timber and therefore movable property
What is however material for our purpose is that while trees including bamboos rooted in the earth being things attached to the earth are immovable property and if they are standing timber are movable property trees including bamboos rooted in the earth which are agreed to be severed before sale or under the contract of sale are not only a movable property but also goods
In this connection it may be mentioned that in English law there exists or rather existed a difference between fructus natwriles and fructus industriales
Fructus naturales are natural growth of the soil such as grass
timber and fruit on trees which were regarded at common law as part of the soil
Fructus industriales are fruits or crops produced in the year by the labour of the year in sowing and reaping planting and gathering eg corn and potatoes
Fractus industriales are traditionally chattels being considered the representative of the labour and expense of the occupier and thing independent of the land in which they are growing and were not treated as an interest in land
Fructus naturales are regarded until severance as part of the soil and an agreement conferring any right or interest in them upon a buyer before severance was a contract or sale of an interest in land and were therefore governed by section 4 of the Statute of Frauds of 1677 29 Car
II c 3
If they were severed before sale section 17 of that Statute applied P see Benjamin s Sale of Goods Second Edition para 90 p 62 This distinction was therefore important in England for the purposes of the formalities required under the Statute of Frauds
Under the definition of goods  given in section 62 1 of the old English of 1893 goods included inter alia all industrial growing crops and things attached to or forming part of the land which were agreed to be severed before sale or under the contract of sale
The formalities required for a contract for the sale of goods of the value of L10 and upwards by section 17 of the Statute of Frauds were re enacted in section 4 of the Sale of Goods Act 1893
This section was repealed by the Law Reform Enforcement of Contracts Act 1954
The definition of goods  in section 61 1 of the new Sale of Goods Act 1979 is the same as in 71 the earlier Sale of Goods Act
Thus the position now in English law is that crops and other produce whether fructus naturales or fructus industriales except in the case of a sale without severance on a landlord incoming tenant or purchaser of the land will always be goods for the purposes of a contract of sale since the agreement between the parties must be that they shall be severed either before sale or under the contract of sale see Benjamin s Sale of Goods Second Edition para 91 p63
As pointed out in Mahadeo vs The State of Bombay the distinction which prevailed in English law between fructus naturales and fructus industriales does not exist in Indian law and the only question which would fall to be considered in India is whether a transaction concerns goods or movable property or immovable property  The importance of this question is twofold I in the case of immovable property a document of the kind specified in section 17 of the requires to be compulsorily registered and if it is not so registered the consequences mentioned in sections in sections 49 and 50 of that Act follow while a document relating to goods or movable property is not required to be registered and 2 by reason of the interpretation placed on Entry 54 in List II in the Seventh Schedule to the Constitution of India by this Court a State cannot levy a tax on the sale or purchase of any property other than goods 
The submission of the Respondent that the impugned provisions levied a purchase tax on immovable property and not on goods and hence travelled beyond the taxing power of the State Government under the said Entry 54 was based upon the omission in the impugned provisions of the words before sale or under the contract of sale
 It was urged that unless these words qualified the phrase agreed to be severed standing trees and bamboos would not be goods within the meaning of the definition of that term in the Sale of goods Act and the Orissa Act
The High Court held that the impugned provisions amounted to levying a tax on an agreement of sale and not on actual sale or purchase
According to the High Court on tax can be imposed unless the taxable event namely the transfer of property in the goods from the seller to the buyer takes place and standing trees including bamboos being 1 1959 Supp 2 SCR 339
349 72 unascertained goods under the forest contracts entered into by the State Government they continue to be the property of the State Government until felled and therefore the title to such trees or bamboos is transferred in favour of the forest contractor only when the trees or bamboos are felled and severed after complying with the conditions of the forest contract
We find that there is a fallacy under lying the above submissions of the Respondents and in the reasoning of the High Court the fallacy being to read merely the description of the goods given in the impugned provisions by itself and not in conjunctions with the governing words of the said provision
These impugned provisions declare that standing trees agreed to be severed and bamboos agreed to be severed shall be liable to tax on the turnover of purchases
The tax that is levied under section 3 B is not on goods declared under that section but on the turnover of purchases of such goods
It one reads the Notifications issued under section 3 B and 5 1 as a whole
it is clear that the taxable event is not an agreement to sever standing trees or bamboos but the purchase of bamboos or standing trees agreed to be severed
Does the absence of the words before sale or under the con tract of sale make any difference to this position  The answer in our opinion must be in the negative
The very use of the word agreed in the description of goods shows that there is to be an agreement between the buyer and the seller and under this agreement standing trees must be agreed to be severed and so also bamboos
According to the definition of goods such severance may be either before sale or under the contract of sale
At the first blush therefore it would appear that the goods which form the subject matter of the impugned provisions are either bamboos and standing P trees agreed to be severed before sale or bamboos and standing trees agreed to be severed under the contract of sale
The question is Which one is it 
The answer to this question depends upon the distinction in law between an agreement to sell and sale
Section 4 of the  deals with a sale and an agreement to sell and it provides as follows 4
Sale and agreement to sell
1 A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price
There may be a contract of sale between one part owner and another
73 2 A contract of sale may be absolute or conditional
3 Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled the contract is called an agreement to sell
4 An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred
 Thus where there is a transfer from the buyer to the seller of property in the goods which are the subject matter of the agreement to sell the contract of sale is a sale but when the transfer of property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled it is an agreement to sell which become a tale when the time elapses or such conditions are fulfilled In the first case the contract is executed while in the second case it is executory The distinction between an agreement to sell and sale and the legal consequences flowing from each have been succinctly stated in Benjamin s Sale of Goods paras 25 26 at page 23 as follows Agreement to sell 
An Agreement to sell is simply a contract and as such cannot give rise to any rights in the buyer which are based on ownership or possession but only to claims for breach of contract
In the normal case at least so long as the property in the goods remains in the seller they are his to deal with as he chooses except that he may be in breach of his contract with the buyer they are liable to seizure in distress or execution as his property and they pass to the trustee in the event of his bankruptcy
The Sale of Goods Act 1979 defines a sale in the following passages first where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale  and secondly an agreement to sell becomes a sale when the time elapses or 74 the conditions are fulfilled subject to which the property in the goods is to be transferred
It is therefore possible for a sale within the statutory meaning to come about ill one of two ways either by a contract which itself operates to transfer the goods from the ownership of the seller to that of the buyer the property passing when the contract is made or by a contract which is initially only an agreement to sell but is later performed or executed by the transfer of the property
In either case it is clear that the sale involves not only a contract but also a conveyance of the property in the goods and so it may confer on the buyer the right to bring a claim in tort for wrongful interference with the goods as well as rights in contract
 The test therefore is the transfer of the property in the goods from the seller to the buyer
In order to determine whether for the impugned provisions to apply standing trees or bamboos are to be severed before sale or under the contract of sale what is required to be ascertained therefore is the point of time when the property in the goods is transferred from the seller to the buyer Under section 18 of the Sale of Goods Act where there is a contract for the sale of unascertained goods no property in the goods transferred to the buyer unless and until the goods are ascertained
Under section 19 where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred and for the purpose of ascertaining the intention of the parties regard is to be had to the terms of the contract the conduct of the parties and circumstances of the case
Further unless a different intention appears the rules contained in sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer
Sections 20 to 23 provide as follows 20
Specific goods in a deliverable state
Where there is an unconditional contract for the sale of specific goods in a deliverable state the property in the goods passes to the buyer when the contract is made and it is immaterial whether the time of payment of the price or the time of delivery of the goods or both is postponed 75 21
Specific goods to be put into a deliverable state
Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state the property goes not pass until such thing is done and the buyer has notice thereof 22
Specific goods m a deliverable state when the seller has to do anything thereto in order to ascertain price
Where there is a contract for the sale of specific goods in a deliverable state but the seller is bound to weigh measure test or do some other act or thing with reference to the goods for the purpose of ascertaining the price the property does not pass until such act or thing is done and the buyer has notice thereof 23
Sale of unascertained goods and appropriation
1 Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract either by the seller with the assent of the buyer or by the buyer with the assent of the seller the property in the goods thereupon passes to the buyer
Such assent may be expressed or imp lied and may be given either before or after the appropriation is made
2 Delivery to the Carrier
Where in pursuance of the contract the seller deli vers the goods to the buyer or to a carrier or other bailee whether named by the buyer or not for the purpose of transmission to the buyer and does not reserve the right of disposal he is deemed to have unconditionally appropriated the goods to the contract
 We are not concerned with section 24 which provides when property in the goods passes to the buyer where goods are delivered 76 to the buyer on approval or on sale or return or other similar terms
The terms deliverable state and specific goods are defined in clauses 3 and 14 of section 2 of the Sale of Goods Act as follows 3 goods are said to be in a deliverable state  when they are in such state that the buyer would under the con tract be bound to take delivery of them 14 specific goods  means goods identified and agreed upon at the time a contract of sale is made
 Under the Orissa Act also sale is defined as meaning transfer of property in goods and the word purchase is to be construed accordingly
The language of the impugned provisions especially the governing words thereof makes it clear that what is made eligible to tax is not an executory contract of sale but an executed contract of sale or in other words not an executory con tract of purchase but a completed contract of purchase
Bearing in mind the statutory provisions referred to above it is further clear that such purchase would be complete when the standing trees or bamboos are specific goods that is when they arc identified and agreed upon at the time the contract of sale is made and the con tract is unconditional and further such standing trees or bamboos arc in a deliverable state that is nothing remains to be done except for the buyer to enter upon the land of the seller and to fell and remove the trees Of bamboos as the case may be without any let or hindrance
If these factors exist then unless a different intention appears either from the terms of the contract or can be infer red from the conduct of the parties and other circumstances of the case the property in such standing trees and bamboos would pass from seller to the buyer when the contract is made and it is immaterial whether the time of payment of the price or the time of taking delivery of standing trees agreed to be severed or bamboos agreed to be severed or both is postponed
If however there is an unconditional contract for the sale of standing trees or bamboos which are unascertained then unless a different intention appears the property in them would be transferred to the buyer when the standing trees and bamboos are ascertained and it would be equally immaterial whether the time of payment of the price or the time of taking delivery of standing trees agreed to be severed or bamboos agreed to be severed or both is postponed
In either event the sale and purchase would be completed before severance as under 77 the impugned provisions there has to be a completed purchase of standing trees or bamboos agreed to be severed for the impugned provisions to apply
The severance obviously cannot be before sale because in that case the property would only pass and the sale completed after severance and the impugned provisions would have no application
Therefore for the impugned provisions to apply the severance of the standing trees or bamboos must not be before sale but under the contract of sale that is after the sale thereof is completed
The absence in the impugned provisions of the words before sale or under the contract of sale thus makes no difference
The subject matter of the impugned provisions is goods and the tax that is levied thereunder is on the completed purchase of goods
The fallacy underlying the reasoning of the High Court is that it has confused the question of the interpretation of the impugned provisions with the interpretation of Timber Contracts and the Bamboo Contract
On the interpretation it placed upon the Timber Contracts it came to the conclusion that the property in the standing trees passed only after severance and after complying with the conditions of that contract ar d therefore the impugned provisions purported to levy a purchase tax on an agreement to sell
In the case of bamboos agreed to be severed the High Court on an interpretation of the Bamboo Contract held that it was a grant of a profit a prendre and from that it further held that the impugned provisions were bad in law because they amounted to a levy of purchase tax on a profit a prendre
This approach adopted by the High Court was erroneous in law
The question of the validity of the impugned provisions had nothing to do with the legality of any action taken thereunder to make exigible to tax a particular transaction
If a notification is invalid all actions taken under it would be invalid also
The converse however is not true
Where a notification is valid an action purported to be taken thereunder contrary to the terms of that notification or going beyond the scope of that notification would be bad in law without affecting in any manner the validity of the notification
Were the interpretation placed by the High Court on the Bamboo Contract and the Timber Contracts correct the transactions covered by them would not be liable to be taxed under the impugned provisions and any attempt or action by the State to do so would be illegal but the validity of the impugned provisions would not be 78 affected thereby
The challenge to the validity of the impugned provisions on the ground of their unconstitutionality must therefore fail
Double taxation Another ground on which the High Court invalidated the impugned provisions was that bamboos agreed to be severed and trees agreed to be severed were the same as bamboos and timber after they are felled and as bamboos and timber were liable to tax at the sale point the taxation of the same goods at the purchase point amounted to double taxation and was contrary to the provisions of the Orissa Act
The general rule of construction is that a taxing statute will not be so construed as to result in taxing the same person twice in respect of the same income or transaction
There is however nothing to prohibit the legislature from so enacting it
If what the High Court held were correct it would not be double taxation in the strict sense of the term because the same person is not being taxed twice in respect of the same transaction but the same transaction is being taxed twice though in different hands that is the seller in a transaction Or sale is being subjected to sales tax and the purchaser in the same transaction is being subjected to purchase tax
Not only does the Orissa Act expressly forbid this but it also forbids the levying of tax at more than one point in the same series of sales or purchases by successive dealers
The provisions in this behalf are to be found in the proviso to section 3 B and the proviso to section 8
Under the proviso to section 3 B no tax is to be payable on the sales of goods or class of goods declared under that section to be liable to tax on the turn over of purchases
Under the proviso to section 8 the same goods are not to be taxed at more than one point in the same series of sales or purchases by successive dealers
According to the High Court under the Orissa Act all goods are liable to sales tax unless exempted from tax by the State Government under section 6 and therefore if particular goods are liable to sales tax no purchase tax is leviable in respect of the same goods unless the State Government issues three notifications namely I a notification under section 3 B declaring the goods to be taxable at the purchase point 2 a notification under section 5 prescribing the rate of purchase tax and 3 a notification deleting the goods from the list of goods taxable at the sale point
The High Court has illustrated this by setting out what was done when fish was made liable to purchase tax instead of sales tax 79 We find that the High Court has misunderstood the scheme of taxation under the Orissa Act
As the Notifications dated December 29 1917 were issued as a result of the amendments made by the Orissa Sales Tax Amendment Ordinance 1977 replaced by the Orissa Sales Tax Amendment Act 1978 while the Notifications dated May 23 1977 were issued prior to these amendments it is necessary to consider the scheme of taxation under the Orissa Act both prior to and after January 1 1978 being the date on which the relevant provisions of the said Ordinance came into force
Prior to January 1 1978 under section 5 1 the tax payable by a dealer under the Orissa Act on his taxable turnover was at the rate specified in that sub section
At the relevant time the rate was six per cent
The rate specified in section 5 1 was for both sales tax and purchase tax
As under the Orissa Act a dealer is liable to pay tax on his turnover of sales as also on his turnover of purchases and as purchase tax is payable only on the turnover of purchases of those declared under section 3 B in respect of the goods not so declared a dealer would be liable to pay sales tax
Under the proviso to section 3 B when any goods are declared to be liable to tax on the turnover of purchases no tax is payable on the sales Or such goods
Prior to January 1 1978 a notification was to be issued by the Slate Government under the first proviso to section 5 1 only when it wanted to fix a rate of tax higher or lower than that specified in section 51
If no such notification was issued then the tax which was payable whether it was sales tax or purchase tax was to be at the rate mentioned in section 5 1
The illustration given by the High Court was in respect of goods for which under the first proviso to section 51 the State Government had notified a rate of tax different from that mentioned in section 51
Where however any goods were declared under section 3 B to be liable to tax on the turnover of purchases the notification prescribing a higher or lower rate of sales tax issued under the first proviso to section 51 would there upon cease to be operative by reason of the operation of the proviso to section 3 B and it was not necessary to repeal expressly that notification
It was also not necessary for the State Government to issue a notification fixing the rate of purchase tax unless it wanted to fix a rate higher or lower than that specified in section 5 1
Where no such notification was issued the rate of purchase tax would be the one which was mentioned in section 51 80 After January 1 1978 the scheme of taxation is that no rate of tax is specified in the Orissa Act but under section 51 the State Government is given the power to notify from time to time the rate of tax whether sales tax or purchase tax by issuing notifications
The notifications issued under section 5 1 fixing the rate of sales tax namely Notification No 67184 CTA 13577 F dated December 29 1977 does not contain any entry in respect of bamboos or timber or in respect of bamboos agreed to be severed or standing trees agreed to be severed
If they were liable to sales tax they would fall under the residuary entry No 101 and be liable to sales tax at the rate of seven per cent
If however any goods falling under the residuary entry or any other entry in that notification arc declared under section 3 B to be liable to tax on the turnover of purchases the residuary entry or that particular entry would automatically cease to operate in respect of those goods by reason of the proviso to section3 B without there being any necessity to delete that particular entry or to amend the residuary entry by excluding those goods therefrom
It would however be necessary for the State Government to issue a notification specifying the rate of purchase tax on those goods because unlike what the position was prior to January 1 1978 on and after that date the new sub section 51 does not specify any rate of tax but leaves it to the State Government to notify it from time to time
The High Court was therefore in error in holding that the impugned provisions were invalid and ultra vires the Orissa Act as they amounted to double taxation
Effect of Supersession Yet another contention raised by the contesting Respondents with respect to the impugned provisions was that the two Notifications dated December 29 1977 having been made in supersession of all previous Notifications issued on the subject the effect was to wipe out all tax liability which had accrued under the Notifications dated May 23 1977
The High Court held that to hold that the liability was so wiped out would amount to giving a retrospective effect to the Notifications dated December 29 1977 and as the Legislature had not conferred upon the State Government the power to issue notifications having retrospective effect to so hold would be to render the said Notification void
The High Court referred to a number of decisions on the question of the power to make subordinate legislation having retrospective effect
81 We find it unnecessary for the purpose of deciding this point to refer to any of the authorities cited by the High Court
Both the Notifications dated December 29 1977 are in express terms made with effect from January 1 1918
They do not at all purport to have any retrospective effect and therefore they could not affect the operation of the earlier Notifications dated May 23 1977 until they came into force on January 1 1978
Further both section 3 B and section 51 in express terms confer power upon the State Government to issue notifications from time to time
Section 3 B provides that the State may from time to time by notifications declare goods liable to purchase tax
Prior to January 1 1978 the proviso to sub section l of section 5 provided that The State Government may from time to time by notification fix a higher rate not exceeding thirteen per cent or any lower rate of tax  Section S I as amended with effect from January 1978 provides that The tax shall be levied at such rate not exceeding thirteen per cent as the State Government may from time to time by notification specify Thus the Power of the State Government to issue notification under these two sections is to be exercised by it from time to time and therefore the State Government can under section 51 issue a notification and repeal and replace it by another notification enhancing or lowering the rate of tax and similarly it can issue a notification under section 3 B declaring particular goods or class of goods to be liable to tax on the turnover of purchases and subsequently by another notification repeal that notification with the result that the particular goods or class of goods will from the date of such repeal be again liable to pay tax on the turnover of sales
In the Notifications dated December 29 1977 the word supersession is used in the same sense as the word repeal or rather the words repeal and replacement
The Shorter Oxford English Dictionary Third Edition at page 2084 defines the word supersession  as meaning The action of superseding or condition of being superseded
 Some of the meanings given to the word supersede  on the same page in that Dictionary which are relevant for our purpose are to put a stop to to render superfluous or unnecessary to make of no effect to annul to take the place of something set aside or abandoned to succeed to the place occupied by to supply the place of a thing
Webster s Third New International Dictionary at page 2296 defines the word supersession as the state of being superseded removal and replacement
Thus by using in the Notifications dated December 29 1977 82 the expression in suerssion of all previous notification  that was done was to repeal and replace the previous notifications by new notifications
By repealing and replacing the previous notifications by other notifications the result was not to wipe out any liability accrued under the previous notifications
If this contention of the Respondents were to be accepted the result would be startling
It would mean for example that when a notification has been issued under section 5 13 prescribing a rate of tax and that notification is later superseded by another notification further enhancing the rate of tax all tax liability under the earlier notification is wiped out and no tax can be collected by the State Government in respect of any transactions effected during the period when the earlier notification was in force
The two Notifications dated December 29 1977 impugned by the Respondents were not the only notifications which were issued on that date
There was another notification issued on that date namely Notification No 67184 CTA 13577 F directing that with effect from January l 1978 the rate of tax payable by a dealer under the Orissa Act on account of the sale of goods specified in column 2 of the Schedule to the said Notifications would be at the rate specified against each in column 3 thereof
The issuance of these three Notifications became necessary by reason of the change brought about in the scheme of taxation by the Orissa Sales Tax Amendment Ordinance 1977
Prior to that Ordinance the rate of tax was as specified in sub section l of section 5 with power conferred upon the State Government by the first proviso to that sub section to fix by notification issued from time to time a higher rate of tax not exceeding the limit mentioned in the said proviso or to fix from time to time a lower rate of tax on account of the sale or purchase of any goods or class of goods specified in such notification
Thus if no notification was issued by the State Government enhancing or lowering the rate of tax the tax whether sales tax or purchase tax payable by a dealer would be at the rate specified in sub section 1 of section 5 which at the relevant time was six percent
In pursuance of the power conferred by the said proviso the State Government had from time to time issued notifications enhancing and in some cases lowering the rate of tax payable on account of either sale or purchase of goods
The new section 51 did not specify any rate of tax but what was done was to confer upon the State Government the power by notification to specify 83 from time to time the rate of tax subject to a maximum of thirteen per cent
Therefore With effect from January 1 1978 unless a notification was issued specifying the rate of tax no dealer would be liable to pay any tax under the Orissa Act
It was for this reason that the Notification No 67184 CTA 13517 F dated December 29 1977 was issued specifying the rates of sales tax with effect from January 1 1978
As under section 3 B the State Government had to declare the goods or class of goods which were liable to tax on the turnover of purchases the State Government had issued from time to time notifications declaring such goods or class of goods
The purchase of such goods or class of goods were liable to purchase tax at the rate specified in the old section 51
Where however the State Government wanted that the turnover of purchase of particular goods or class of goods should be taxed at a higher or lower rate it issued notifications specifying such rate
As no rate of tax was specified in the new section 51 but it was left to the Government to specify the rate of tax by notification both in respect of sales tax and purchase tax from the date the amending Ordinance of 1977 came into force namely from January 1 1978 it was necessary to issue a notification consolidating all previous notifications on the subject in respect of goods liable to purchase tax which the State Government did by the impugned Notification No 67178 CTA 13577 Pt F dated December 29 1977 declaring what goods would be liable to tax on the turnover of purchases with effect from January 1 1978
Unless however the rate of purchase tax in respect of these goods was specified under the new section 51 the goods though declared to be liable to tax on the turnover of purchase would not be exigible to any tax at all it therefore became necessary for the State Government to issue Notification No 67181 CTA 13577 F dated December 29 1977 specifying the rates of purchase tax with effect from January 1 1978
Exigibility to tax Preliminary Contention The question which now remains to be considered is as regards the exigibility to purchase tax of the amounts payable under the Bamboo Contract and the Timber Contracts
Before we address ourselves to this question it is necessary to dispose of a preliminary contention raised by the Appellant with respect to this part of the case
It was submitted that the question whether a particular contract is a sale or purchase of goods is a question of fact or a question of interpretation of documents and one to be decided by 84 the assessing authorities and therefore if this Court holds that the impugned provisions are valid as we have now done it should not go into the question of the exigibility to purchase tax of the transactions in question
This plea was not raised at any stage before the High Court but has been raised for the first time in the Petitions for Special Leave to Appeal and that too only with respect to the Bamboo Contract though during the course of hearing before us it was raised with respect to the Timber Contracts also
Before the High Court the matter proceeded on the basis that the question of validity of the impugned provisions and of the exigibility to purchase tax of the transactions covered by the Bamboo Contract and the Timber Contracts were inextricably linked together as if the impugned provisions were issued only in order to levy a purchase tax on the transactions covered by these Contracts
The Appellant can therefore hardly raise such a plea for the first time before this Court
It is true that normally it is for assessing authorities to ascertain 
the facts and to interpret the documents in question if there be any and to decide whether a particular transaction is exigible to tax
Here however the facts are not in dispute and the determinations of this question involves only an interpretation of the documents
The major part of the hearing before the High Court was taken up with the nature of the transactions covered by these Contracts
We have also heard the parties at length on the merits of this question
Even though the judgment of the High Court with respect to the validity of the impugned provisions has been held by us to be erroneous in law it may well be said that the High Court s finding on the true nature of the Bamboo Contract and the Timber Contracts remains unaffected
If we refuse to decide this question and leave it to the assessing authorities to do so they may well feel themselves bound by the High Court s findings on this point or on the other hand they may consider that the whole judgment of the High Court has been reversed particularly in view of the fact that in their writ petitions the Respondent company had challenged the notice issued to it to file a return and the Respondent Firm had challenged the assessment order made against it and therefore feel free to determine the question afresh
In either event the matter would ultimately come back for decision to this Court and that too after the lapse of several years a consequence not to be contemplated with equanimity by this Court
We therefore reject this preliminary contention raised by the Appellant
85 Timber Contracts We will first take up the Timber Contracts
The High Court held that standing trees were unascertained goods and continued to be the property of the State Government until felled and therefore the title to them was transferred to the forest contractor only when the trees were felled or severed by him after complying with all the conditions of the forest contract and as the impugned provisions applied only to standing trees that is to trees before their severance purchase tax was not attracted and any attempt to levy purchase tax on the amounts payable under the Timber Contracts would amount to taxing an agreement of sale of goods and not a completed sale or purchase of goods
The High Court further held that the trees so severed in which the property passed to the forest contractor were liable to sales tax by reason of the retrospectively amended definition of the term dealer in clause c of section 2 of the Orissa Act and they could not therefore be again made liable to purchase tax
The High Court also rejected the contention of the Appellant State that timber and dressed or sized logs were different commercial commodities and that sales tax could therefore be levied on both
According to the High Court they were the same commodity and therefore they could not be made liable to sales tax at two points in the same series of sales
The High Court did not decide the question whether the Timber Contracts were works contracts
This point was however urged before us on behalf of the Respondent firm
We will deal with this point separately but for the present suffice it to say that according to us none of the Timber Contracts is a works contract
On behalf of the Appellant State it was submitted that the Timber Contracts read with the sale notice advertising the auction in respect of the standing trees showed that the standing trees which were the subject matter of the Timber Contracts were goods identified and agreed upon at the time when the contract of sale was made and were thus specific goods and that therefore there was an unconditional contract for the sale of specific goods in a deliverable state and the property in the said trees passed to the forest contractor namely the Respondent Firm when the contract was made and the fact that the time of delivery as also payment of price was postponed was irrelevant
It was the Appellant s 86 submission that for the reason set out above the amounts payable under the Timber Contract were exigible to purchase tax
It was further submitted that in any event the property in the standing trees passed when the forest contractor was permitted to get into the area as delineated under Rule 12 of the Orissa Forest Contract Rule 1966 hereinafter referred to as The Forest Contract Rules to enable the contractor to fell the trees
The same submissions as found favour with the High Court were advanced before us on behalf of the Respondent Firm
While setting out the facts of Civil Appeal No 220 of 1982 we have outlined the procedure followed by the State of Orissa in entering into forest contracts
The notice of public auction with which we are concerned was published in the Orissa Gazette and was headed Sale Notice of Timber and Other Forest Products  This Sale Notice related to different forest produce and was in three parts
Part I gave the list of timber and other forest products for the session 1977 78 which would be sold by public auction and the places and dates where such auction sales were to be held
Clause 2 of Part I of the Sale Notice stated that the sale lots were subject to the Special Conditions of Sale as published in Part II of the Sale Notice the General Conditions of Sale as published in Part III of the Sale Notice so far as they may be applicable and the Conditions mentioned in the sanctioned form of agreement
Clause 3 stated that the successful bidders shall be bound by the Orissa Forest Act
1972 the Forest Contract Rules the Orissa Timber and other Forest Produce Transit Rules and all other relevant rules in force or which might hereinafter come into force and promulgated under the Orissa Forest Act 1972
Under condition 1 of the Special Conditions of Sale set out in Part II of the Sale Notice the contract period of timber coupes was to commence from the date of the ratification of sale by the competent authority and was to include the number of working months mentioned in the sale notice against each lot
Condition 2 stated the time and manner of payment of purchase price in full or by instalments
Under condition the intending bidders were asked to inspect the coupes and lots before bidding in the auction and their act of bidding was to be deemed as sufficient proof of their having inspected the coupes the coupes and satisfied themselves about the correctness of the quality and quantity of the 87 produce and the area of the contract
Condition 9 provided that no extension of time for working any coupe beyond the contract period as published in the Sale Notice and declared in the auction hall would be allowed except under very exceptional circumstances
Under condition 14 the prescriptions contained in the working plan working schedule and their amendments or the executive instructions of the higher authority and local rules were to be binding on the contractors as regards felling of trees in coupes
Under condition 21 the purchaser was to pay the sales tax as per the Orissa Act over and above the bid amount
In the event of his delay in payment of sales tax the same was to be adjusted from the earnest money deposit or the security deposit as the case may be and the purchaser was bound to replenish the same forthwith
Condition 22 provided that the contractor was to pay sales tax on the amount of each instalment as per the Sales Tax Rules along with the instalment of consideration money and non payment of sales tax or non submission of appropriate declaration under the Sales Tax Rules was to amount to incomplete payment of instalment and thereupon Rule 9 A of the Forest Contract Rules was to be applicable
a Under condition 1 of the General Conditions of Sale Published in Part III of the Sale Notice the bid was to be accepted by the Divisional Forest Officer subject to the approval of the competent authority and the right to take contract for exploiting forest produce in the lots advertised in Part I of the Sale Notice was to be granted when the competent authority approved the bid
Under condition 4 intending bidders were to deposit as earnest money a sum of Rs 200 
In the case of unsuccessful bidders this amount was to be refunded immediately after the auction was held and in the case of successful bidders the amount was to be adjusted towards the security deposit
Under condition 10 a bidder whose bid was conditionally of finally accepted by the Divisional Forest Officer was to make the security deposit in cash
On payment of the security deposit the bidder was to sign the necessary agreement but the signing of such agreement was not to confer any right on the bidder unless the sale was ratified by the competent authority and the ratification order was communicated to him
No sale of any lot was to be considered valid or complete unless these conditions had been complied with and in the event of failure to do so the Divisional Forest Officer was to be at liberty to quash the sale and forfeit the 88 earnest money or the security deposit as the case may be and resell the lot and recover from the successful bidder who had failed to comply with the conditions the shortfall on such resale
Condition 12 provided for the payment of purchase price in full or by instalments
Under condition 15 orders of ratification of sale by the competent authority were to be communicated to the successful bidder by the Divisional Forest Officer specifying there in the dates of the payment of instalments in accordance with condition 12 and the period of the contract
Under condition 16 the contractor was not to commence the work in the contract area before the payment of the first instalment or the full consideration money if it was payable in one instalment and before furnishing the coupe declaration certificate or intimation about starting work as the case may be as required by Rule 12 of the Forest Contract Rules
Under condition 18 an agreement was to be executed by the competent authority on behalf of the Government and a copy thereof was to be delivered to the contractor as soon as may be
On its bids being accepted the Respondent Firm entered into five Timber Contracts in the forms prescribed in the Schedule to the Forest Contract Rules
The main heading of each of these Timber Contracts is Forest Contract Agreement Form  and the long heading states that it is An agreement for the sale and purchase of forest produce
Under clause 1 the forest produce sold and purchased under the Timber Contract was to be as specified in Schedule I thereof and the forest area in which it was situated was indicated in Schedule V thereof and was to be referred to as the contract area
Schedule I in each of the Timber Contracts mentioned that the forest produce sold and purchased under the Timber Contract consisted of a certain number of sound and unsound trees marked and numbered serially on the blazes one at the base of the trees and the other about 4 12  from the ground level with the hammer mark of facsimile shown in the Sale Notice
Clause 2 stated that the quantity of the forest produce sold and purchased under the Timber Contract was all the said forest produce which then existed or might come into existence in the contract area which the forest contractor might remove from the said area during the period of the contract and it was further provided that the said U forest produce was to be extracted by the forest contractor only 89 during the aforesaid period
That part of clause 2 which spoke of forest produce which might come into existence in the contract area was obviously inapplicable to the Respondent Firms s case inasmuch as the Timber Contracts were in respect of a certain number of existing trees
This provision was there because the Timber Contract was in the form which is the prescribed form of contract in respect of all forest produce and under Rule 33 of the 1 Forest Contract Rules all forest contracts are required to be made in this form
Clause 4 started that the routes by which the said forest produce was to be removed from the contract area and the depots at which it was to be presented for examination were to be those specified in Schedule 111
Under clause 5 it was agreed that the Timber Contract was to be subject to the Forest Contract Rules and conditions laid down in the Sale Notice except to the extent that the said Rules and conditions were deemed to be modified to the extent prescribed in Schedule IV
Under Schedule 4 to the contract the Forest Contract Rules were deemed to be modified by the Special Conditions in the Sale Notice
By clause 6 the forest contractor bound himself to perform all acts and duties required and to abstain from performing any act forbidden by or under the Orissa Forest Act 1972 and the Forest Contract Rules and by the Timber Contract
Schedule II set out the number and amounts of instalments and the dates of payment of the instalments
The bids given by the Respondent Firm were ratified in due course by the Government of Orissa and the fact of such ratification was communicated to the Respondent Firm by the Divisional Forest Officer
Each of these notification letters specified the number and amounts of the instalments payable by the Respondent Firm and the dates when each instalment was payable
Each of these ratification letters required the Respondent Firm to take delivery of the particular coupe within one and half months from the date of issue of the ratification order and to get the Respondent Firm  s property hammer mark registered in the office of the Divisional Fores  Officer on payment of the appropriate registration fee
Each of these letters required the Respondent Firm not to commence work in the contract area before the payment of the first instalment and before furnishing the Coupe Declaration Certificate or intimating in writing that it intended to commence work from a particular date as the case may be as required under Rule 12 Of 90 the Forest Contract Rules
By the said letters the Respondent Firm was also required to submit monthly returns of removal of forest produce from the contract area to the concerned Range Officer
A copy of each of these letters was forwarded to the concerned Range Officer with a direction that he should give delivery of the coupe to the Respondent Firm within one and a half months from the date of the ratification order and allow the Respondent firm to commence work in the contract area after it had furnished the Coupe Declaration Certificate and made payment of the first instalment
As the Orissa Forest Contract Act 1972 Orissa Act 14 of 1972 and the Forest Contract Rules formed part of the agreement between the State of Orissa and the Respondent Firm it may be convenient at the stage to look at the relevant provisions thereof
Clause g of section 2 of the Orissa Forest Contract Act defines forest produce  as including inter alia timber whether found in or brought from a forest or not and trees when found in or brought from a forest
Clause n defines timber as including trees fallen or felled and all wood cut up or sawn
Clause o of section 2 of the Act defines trees as including bamboos
Section 36 of the Orissa Forest Act confers powers upon the State Government to make rules inter alia for the cutting sawing conversion and removal of trees and timber and the collection manufacture and removal of forest produce from protected forests Under section 37 any infringement of a rule made under section 36 is an offence punishable with imprisonment for a term which may extend to one year or with fine which may extend to Rs 2000 or both
Under section 451 the control of all rivers and their banks as regards the floating of timber as well as the control of all timber and other forest produce in transit by land or water is vested in the State Government and the State Government is conferred the power to make rules to regulate the transit and possession of all timber and other forest produce including rules prescribing the routes by which alone timber or other forest produce may be imported exported or moved into from or within the State and to provide for punishment of imprisonment which may extend to one year or fine which may extend to Rs 1000 or both for any breach of such rules
Under rule 2 of the Forest Contract Rules all contracts whereby 91 the Government sells forest produce to a purchaser are subject to the Forest Contract Rules in so far as they are applicable and the Forest Contract Rules are deemed to be binding on every forest contractor
The Forest Officer executing a forest intricate is however given the power to vary the rules by express provision in such intricate
A forest contract  is defined in clause 1 of Rule 3 as meaning  a contract whereby Government agrees to sell and purchaser agrees to buy forest produce and a forest contractor  is defined in clause 2 of Rule 3 as meaning the person who purchases produce under a forest contract
Under Rule 6 a forest contract is to carry with it an accessory licence entitling the forest contractor and his servants and agents to go Upon the land specified in the contract and to do all acts necessary for the proper extraction of the forest produce purchases under the contract
Under Rule 6 where a period is specified in the forest contract for the extraction of the forest produce purchased under the contract time is deemed to be of the essence of such contract and upon the completion of the specified period the contractor s right under the contract is to cease and any forest produce not removed across the boundaries of the contract area is to become the absolute property of the Government
The Conservator of Forests or the Divisional Forest Officer as the case may be is however given the right for special reasons to grant an extension of time on such terms as may be decided for a total period inclusive of the original contract period not exceeding the period for which he is empowered to sanction contracts on payment of a monthly extension fee Of one per cent of the amount of the contract
Under Rule 9 the Divisional Forest Officer or the Range Officer as the case may be is given the power to stop extraction of the forest produce where the consideration payable to the Government under a forest contract is payable by instalments and at any time before the last instalment is paid he considers that the value of the forest produce removed by the contractor exceeds the amount of instalments already paid
Further removal is to be permitted only after the contractor has paid such further sum as in the opinion of the Divisional Forest Officer or the Range Officer is sufficient to cover such excess
Under Rule 9 A it is open to the Divisional Forest Officer or the Range Officer of the concerned range to stop extraction if the contractor fail s to pay any instalment due from him within the grace period of ten days beyond the date fixed for payments of the instalment
It is equally open to these officers 92 to stop work in the contract area if the contractor fails to pay two instalments due from him
Under Rule 12 before commencing any work in the contract area the forest contractor is to sign and submit to the Divisional Forest Officer or the e concerned Range Officer a written declaration to the effect that he or his authorized agent or both have been shown the boundaries and limits of the lot covered by the contract by the Range Officer or by a subordinate deputed by him for the purpose and that the area shown on the ground agrees with the area delineated on the map annexed to the forest contract and until such a declaration has been given the Divisional Forest Officer or the Range Officer may refuse to allow any work to commence and the contractor is not to be entitled to any compensation for any loss that might be sustained by him by reason of any delay in commencing the work owing to such refusal
Rule 12 further provides that if such declaration is not furnished within one and a half months from the date of issue of the ratification order the Divisional Forest Officer is to cancel the contract forfeit the security deposit resell the contract at the risk of the contractor and recover the shortfall from him
Condonation of delay in furnishing such intimation or declaration is expressly prohibited
Under Rule 13 a forest contractor is not to remove any forest produce from the contract area unless it is accompanied by a permit signed by the contractor or his authorized agent
Such permits are to be obtained on payment from the Range Officer
Further the divisional Forest Officer or the Range Officer as the case may be has the power to withdraw a permit book if in his opinion such permit book has been misused for unlawful gain
In the event of such withdrawal the forest contractor is not entitled to any compensation for any loss that might be sustained by him for any stoppage of his work in or extraction from the contract area
Under Rule 14 the method employed by the forest contractor for extraction of forest produce along forest roads is to be subject to the approval of the Divisional Forest Officer and the forest contractor is not to cart any produce over forest roads between such periods as the Divisional Forest Officer might appoint without the previous permission in writing of the Divisional Forest Officer Further the Divisional Forest Officer is given the discretion to close forest roads for extraction of forest produce on any rainy days and for three days thereafter during the rest of the year
He may also close roads temporarily for urgent or special repairs should this in his opinion become 93 necessary
Further the forest contractor is prohibited from extracting forest produce by dragging along forest roads
Under Rule 15 except with the special permission of the Divisional Forest Officer a forest contractor is not to remove any forest produce from the contract area after sunset or before sunrise
Under Rule 16 a forest contractor is not to remove any forest produce except by routes specified by rules made under the Orissa Forest Act or by the forest contract and is to take all forest produce removed by him to such depots or places as may be similarly prescribed for check and examination
Under Rule 19 the forest contractor is to keep and submit accounts of the amount of the various kinds of forest produce removed by him from the contract area in such form as the Divisional Forest Officer may prescribe or approve and such accounts are to be open to inspection at any time by the Divisional Forest Officer or by any subordinate duly authorized by him
Rule 20 prescribes the mode of felling standing trees
The Divisional Forest Officer has the power to stop further felling until these provisions are complied with
Under Rule 21 the Divisional Forest Officer is to divide the contract area into such number of sections as he may think fit and has the power to regulate and confine the operations of the forest contractor within these sections in accordance with the provisions set out in the said Rule
Under the said Rule the work is to be allowed progressively from section to section
When the forest contractor begins his operations under the contract he is to be allowed to carry out cutting operations in sections Nos
I and 2 E only
As soon as he begins cutting operation in section No 3 he is deemed to have surrendered all his rights to standing trees in section No 1
When he begins cutting operations in section No 4 he is deemed to have surrendered all his rights to the standing trees in section No 2 and so on throughout the contract area
Under Rule 22 the forest contractor unless otherwise directed to do so in writing by the Divisional Forest Officer is to register his property mark or trade mark in the Office of Divisional Forest Officer and get it registered by paying the registration fee in respect thereof
No timber is to be conveyed from the contract area without the impress of the forest contractor s registered property or trade mark and the Divisional Forest Officer and his subordinates have the right to mark any piece of timber with the Government hammer mark before it is removed from the stump side beyond the limits of such 94 checking station as the Divisional Forest Officer may appoint in writing
Under Rule 34 if the forest contractor makes default in the payment of the consideration for his contract or any instalment thereof or does not pay the compensation assessed under any of the Forest Contract Rules the contract is liable to be terminated by the authority competent to do so
The termination is to be notified to the forest contractor and the contract is deemed to have been terminated unless the contractor pays within one month from the date of receipt of the notice of termination all arrears due to the Government together with interest assessable under Rule 42 and renewal fee not exceeding one per cent of the arrears due and if he fails to do so all his rights under the contract including all necessary licences are to cease and all the forest produce remaining within the contract area or at the depots and bearing the contractor s registered property or trade mark and the Government hammer mark are to become the absolute property of she Government Further the Government becomes entitled to keep all sums already paid by the contractor and to recover as arrears of land revenue any compensation which may be assessed and to resell the contract together with produce at the depots and other produce which has become the property of the Government and to recover the shortfall as arrears of land revenue and to forfeit the security deposit of the contractor
Under Rule 35 if the forest contractor commits any breach of condition of the contract other than those mentioned in Rule 341 the contract is liable to be terminated and thereupon all the contractor s rights under the contract including all accessory licences are to cease and all the forest produce remaining within the contract area or at the depots is to become the absolute property of the Government
Under Rule 36 if in the opinion of the State Government it is considered necessary to supply any kind of forest produce from any contract area to the people in case of flood famine cyclone and other calamities and if the contractor does not supply the materials at the rate fixed by the Government such contract can be terminated by the Government in writing by a written notice to the contractor and from the date of such termination the contractor is to forfeit all his rights in the coupes
Under Rule 40 a forest contractor is not to be entitled to any compensation for any loss that may be sustained by reason of fire tempest disease pest flood drought or other natural calamity or by reason of any wrongful act committed by any third party or 95 by reason of the unsoundness or breakage of any forest produce purchased by him or for any loss sustained by him through any operation undertaken in the interest of fire conservancy
He is equally not entitled to claim any reduction or refund of the sums payable or paid by him under his contract on the ground that the roads provided by the e Forest Department or any other department are insufficient or in bad order or remain closed under any special order or that the quantity of produce falls short of any quantity specified in the schedule annexed to the contract or in the sale notice or that the area of the contract area differs in any way from that indicated in the schedule attached to the e contract
Under Rule 44 all forest produce removed from a contract area in accordance with the forest Contract Rules is to be at the absolute disposal of the forest contractor
Bearing in mind the terms and conditions of the Timber Contracts not only those expressly set out therein but also those incorporated therein by reference namely the terms of the Sale Notice the Special Conditions of Contract the General Conditions of Contract and the various statutory provisions we have now to determine whether the property in the trees which were the subject matter of the Timber Contracts passed to the Respondent Firm while the trees were still standing or after they were severed
In the first case the impugned provisions would apply and the amounts payable under the Timber Contracts would become exigible to purchase tax while in the second case the impugned provisions would not apply and no purchase tax would be payable
The above conspectus of these terms and conditions shows that the heading of the Sale Notice namely Sale Notice of Timber as also the use of the words timber and other forest products will be sold by public auction are not determinative of the matter
Though clause 1 of the Timber Contracts speaks of the forest produce sold and purchased the other terms and conditions of the contract make it clear that the Timber Contracts were not unconditional contracts for the sale of goods in a deliverable state and the property in the trees specified in Schedule I of the Contract therefore did not pass to the Respondent Firm when each of the Contracts was made
As mentioned earlier the Timber Contracts are in the prescribed form for all forest produce annexed to the Forest Contract Rules and the provisions of the Orissa Forest Act and the Forest Contract Rules are expressly made applicable thereto
Clause 1 of Rule 3 of the 96 Forest Contract Rules defines a forest contract as meaning a contract whereby Government agrees to sell and purchaser agrees to buy forest produce
 That this is also such an agreement is borne out by the long heading of the Timber Contracts which describes these contracts as an agreement for the sale and purchase of forest produce
 In fact the signing of the Timber Contracts did not result in a concluded contract because each contract was conditional upon the State Government ratifying the acceptance of the bid given by the Respondent Firm
Even after the ratification order was issued by the Government it did not become an unconditional contract for the sale of specific goods in a deliverable state for the Respondent Firm had no right to severe the trees and take them away before it had complied with the other conditions of the contract set out above
To recapitulate the most important amongst them under Rule 12 of the Forest Contract Rules the respondent Firm had to furnish a Coupe Declaration Certificate within one and half months of the issue of the ratification order
If it did not do so the contract would stand cancelled
It had also under Rule 22 of the Forest Contract Rules to register within the same period its property mark or trade mark with the Divisional Forest Officer
Further the Respondent Firm could not commence any work unless it had given the required security deposit and before paying the first instalment as under the Timber Contracts in the present Appeals the amounts were payable by instalments
That the property in the trees did not pass to the respondent Firm while the trees were standing is also shown by the fact that the Divisional Forest Officer or the concerned Range Officer had the power to stop further removal of the felled trees until the Respondent Firm had paid the amount required to make up the excess of the value Of the felled trees removed over the amount of the installments already paid by it and under Rule 9 A it was further open to the Divisional Forest Officer or the concerned Range Officer to stop further work if there was a default in payment of any instalment or in payment of any two instalments and the contract could also be terminated under Rule 33 for such default
Further work or removal could not be stopped or the contract terminated if the property in the trees had passed to the Respondent Firm because in such event the only remedy open to the seller would be to sue for the balance of the price
It is also pertinent that under Rule 33 the contract could Also be terminated and the Respondent Firm would forfeit its right to all further trees to he severed by it if it 97 committed a breach of any of the other conditions of the contract
The mode of felling the trees was also not of the choice of the Respondent Firm but was one prescribed by Rule 20
Even after felling the trees the Respondent Firm was not entitled to remove the felled trees by any route which it liked but only by routes which were prescribed and that too only if covered by a permit signed by the Respondent Firm or its duly authorized agent from a permit book obtained from the Range Officer
Further under Rule 16 after felling the trees the Respondent Firm had to remove them to the prescribed depots or places for check and examination and it was only after the trees felled by it were checked and examined to ascertain that they were felled in the manner prescribed in Rule 20 and were the trees which were the subject matter of the contract that it could take them out of the contract area
Unless the Respondent Firm felled and removed all the trees which were the subject matter of the contract within the period of the contract on the expiry of such period it would lose all rights to the trees not so removed
It is true that under Rule 40 if the trees were destroyed by reason of fire tempest disease pest flood drought or other natural calamity or by reason of any wrongful act committed by any third party or by reason of the unsoundness or breakage of any trees which were the subject matter of the contract the Respondent Firm was not entitled to any compensation for any loss sustained by it
This would show that after a Timber Contract was concluded the risk passed to the Respondent Firm
Under section 26 of the Sale of Goods Act the goods remain at the seller s risk until the property in the goods is transferred to the buyer and when the property is transferred to the buyer the goods are at the buyer s risk whether delivery has been made or not
Section 26 is however qualified by the phrase Unless otherwise agreed Thus this section is subject to a contract to the contrary and what we have stated above is sufficient to show that the Timber Contracts were subject to a contract to the contrary and under them the risk passed to the Respondent Firm before the property passed to it
This is made abundantly clear by Rule 44 which states that All forest produce removed from a contract area in accordance with these rules shall be at the absolute disposal of the forest contractor
 It is therefore clear that the Timber Contracts were not 98 transactions of sale or purchase of standing trees agreed to be severed
They were merely agreements to sell such trees
As pointed out above each stage of the felling and removal operations was governed by the Forest Contract Rules and was under the control and supervision of the Forest Officers
The property passed to the Respondent Firm only in the trees which were felled that is in timber after all the conditions Of contract had been complied with and after such timber was examined and checked and removed from the contract area The impugned provisions therefore did not apply to the transactions covered by the Timber Contracts
It will be useful in the context of the conclusions which we have reached to refer to the decision of this Court in Badri Prasad vs State of Madhya Pradesh  Anr
the question in that case was whether there was a contract of sale of standing timber and whether under the contract the property had passed to the appellant or whether the property had passed after the trees had been felled and hence the right of the appellant s transferor had vested in the State Government before the trees were felled by reason of the provisions of the Madhya Pradesh Abolition of Proprietary Rights Estates Mahals Alienated Lands Act 1950 MP Act No I of 1951
The Court held that under the terms of the contract the trees had to be felled before they become the property of the appellant
The Court observed at pages 390 1 It will be noticed that under cl 1 of the contract the plaintiff was entitled to cut teak trees of more than 12 inches girth
It had to be ascertained which trees fell within that description
Till this was ascertained they were not ascertained goods  within section 19 of the Sale of Goods Act
Clause 5 of the contract contemplated that stumps of trees after cutting had to be 3 inches high
In other words the contract was not to sell tile whole of the trees
In these circumstances property in the cut timber would only pass to the plaintiff under the contract at the earliest when the trees are felled
But before that happened the trees had vested in the state
 It is pertinent to note that conditions 16 to 18 of the special Conditions of Sale which form part of the Timber Contracts also 1  99 prescribe the girth of the trees which are to be felled and the height above the ground level at which they are to be felled
Timber and Logs
On our above finding that the transactions under the Timber Contracts are sales of Timber and not sales of standing trees agreed to be severed the tax which would be attracted would be sales tax and not purchase tax under the impugned provisions
This would however be so if the Divisional Forest Officer were a dealer
Under the terms of the Timber Contracts the Respondent Firm is liable to reimburse the Divisional Forest Officer the amount of sales tax he would which be liable to pay
T he question whether the Divisional Forest Officer is a dealer within the meaning of that term as defined in clause c of section 2 prior to its being substituted with retrospective effect by the Orissa Sales tax Amendment and Validation Act 1979 which repealed and replaced the Ordinance with the same title is pending before the Court in Civil Appeals Nos
1237 1238 of 1979 and 1420 1421 of 1979 Whatever be the position under the old definition after the substitution of that definition with retrospective effect by the said Amendment and Validation Act the Divisional Forest Officer ought be a dealer
The validity of this amendment is however also under challenge in this Court in Writ Petitions Nos
958 of 1979 and 966 of 1979
We therefore express no opinion on either OF these questions
It was however submitted on behalf of the Respondent Firm that assuming these challenges fail it would be called upon to reimburse the Divisional Forest Officer According to the Respondent Firm the Divisional Forest Officer
would not be entitled to do so because it had made sized and dressed logs from the timbers which it had purchased under the Timber Contracts and had sold such logs and paid sales tax on these sales and therefore to tax the sales of timber to them would be to levy the tax at an earlier point in the same series of sales which is not permissible by reason of the prohibition contained in the proviso to section 8
According to them timber and sized or dressed logs are one and the same commercial commodity
This contention was upheld by the High Court
Though the High Court had so decided in order to consider whether the same transaction could be taxed both at the sale point as also at the purchase point it none the less becomes necessary for us to determine this question in or to prevent needless litigation in the future
Though under section 8 the State Government has the power to 100 prescribe the points in the series of sales or purchases by successive dealers at which any goods or class or description of goods may be taxed it has not done so either in the case of timber or logs though in the case of some of other goods as pointed out earlier the State Government has made rules prescribing that the tax would be levied at the first point of sale
Thus if the contention of the the Respondent Firm were correct as tax has already been levied at one point in the same series of sales it would not be now open to the State Government to say that by reason of the substituted definition of the term dealer sales tax could also be levied at another point
We will first see how different High Courts have dealt with this question
In Saw Bros and Co vs The State of West Bengal1 all learned Single Judge of the Calcutta High Court held that planks sawed out of logs are different things from logs and timber in its nascent state
No reasons are given in that Judgment for reaching this conclusion In Bachha Tewari and another vs Divisional Forest Officer West Midnapore Division and others2 the same learned Judge held that the the chopping of timber into firewood was a manufacturing process
and therefore the imposition of a tax on timber and on firewood manufactured from that timber did not amount to double taxation The question in both those cases was whether sawing of planks and chopping of timber into firewood amounted to manufacture so as to make the assessee liable to pay sales tax on the manufactured goods
This is a different question from that to which we have to address ourselves
We may however point out that even where the question is whether a certain process has resulted in a manufacture the resultant product must be a different commercial commodity and merely because certain articles are known by different names it does not mean that they are different commercial commodities if in fact they are merely different forms of the same commodity
Thus in Tungabhadra Industries Ltd Kurnool vs Commercial Tax Officer Kurnool3 hydrogenated groundnut oil commonly called Vanaspati  was held by this Court to be groundnut oil within the meaning of Rules S I k and 18 2 of the Madras General Sales Tax Turn 1 1963 14 STC 878
2 1963 14 STC 1067
3 1960 11 STC 827  101 Over and Assessment Rules 1939
The Court further held that the processing of groundnut oil to render it more acceptable to the customer by improving its quality would not render the oil a commodity other than groundnut oil
Similarly in the State of Gujarat vs Sakarwala Brosl this Court held that pates  harda  and alchidana  were sugar in different forms and fell within the definition of sugar in Entry 47 of Schedule to the Bombay Sales Tax Act 1959
A decision more relevant to our purpose than the two Calcutta decisions is a decision of a Division Bench of the Madhya Pradesh High Court in Mohanlal Vishram vs Commissioner of Sales Tax Madhya Pradesh Indore2
In that case the Madhya Pradesh High Court held that by felling standing timber trees cutting them and converting some of them into ballis  a dealer did not alter their character as timber or used them for manufacture of other goods within the meaning of section 81 of the Madhya Pradesh Sales Tax Act 1958
Another decision equally relevant for our purpose is that of a Division Bench of the Andhra Pradesh High Court in G Ramaswamy and others vs The State of Andhra Pradesh and others3 in which the question was very much the same as the one which we have to decide
The assessees in that case purchased nascent timber that is logs of wood and had swan or cut them into planks rafters cut sizes etc and sold them for the purpose of construction of buildings and the like
Under section 52a of the Andhra Pradesh General Sales Tax Act 1957 read with Item 63 in the First Schedule to that Act a dealer in timber was liable to pay sales tax at the rate of three pies in a rupee at the point of first sale
The assessees were however sought to be taxed under section 51 of that Act on their sales of planks rafters out sizes etc
treating them as general goods
The contention of assessees was that these goods were timber which was taxable at the first point of sale and the first point of sale was when the Forest Department sold the standing timber trees to them and therefore the planks rafters cut sizes etc sold by them could not again be made liable to sales tax 1 1967 19 section TC24 SC  2 1969 24 STC 101
3 1973 32 STC 309 102 treating those goods as different commercial commodities
The Division Bench held that in dealing with matters relating to the general public statutes are presumed to use words in their popular rather than their narrowly legal or technical sense and that as the provision levying a tax on timber was directed to deal with a matter affecting people generally as timber is in common use the word timber would have the same meaning attached to it as in the common and ordinary use of language
The Division Bench further held that although dictionaries are not to be taken as authoritative exponents of the meanings of words used in a statute it was a well known rule of courts of law that words should be taken to be used in the ordinary sense and courts are there fore sent for instruction to the dictionaries in the absence of any legislative or judicial guidance
The Division Bench then referred to the meaning given to the word timber in different dictionaries
The Division Bench also considered the meaning in commercial parlance of the term timber
In that case the assessees in their affidavits had asserted that timber in the commercial field also meant planks cut sizes etc
There was no convincing denial by the Government of that assertion
The Division Bench then turned to the Rules for gradation of cut sizes of timber prepared and issued in October 1960 by the Indian Standards Institution which showed the word timber was freely used for kinds of standard cut sizes for building purposes
The Division Bench also looked at Indian Airlines Quotation No 406 of April 26 1972 in which the words used were timber teak wood setting out the particular sizes thereafter
The Division Bench also referred to the other documentary evidence produced in that case and held that the documents and affidavits before it clearly made out that even the cut sizes of timber were commonly known as timber in commercial field and that therefore both in the popular sense and in the commercial sense the word timber had the same meaning
The Division Bench also laid emphasis on the interpretation given to the term timber by the sales tax Administration
For all these reasons the Division Bench held that merely because planks rafters cut sizes etc were sawn or cut from logs of woo3 they did not alter their character and still continued to be raw materials which by themselves and in the same form could not be directly put to use for construction purposes and the logs of wood purchased by the assessees were merely cut or sawn to sizes 103 for the sake of convenience and to make them acceptable to the customers and that by reason of this process they did not lose their character as timber
We will now turn to the decisions of the Orissa High Court on this point
In State of Orissa vs Rajani Timber tradersl a Division Bench of that High Court held that timber logs and sized timber U were different commodities in the commercial sense though sized timbers were brought out only from timber logs by a particular process
The Division Bench further observed that the person who had a need of timber logs would not be satisfied had sized timber been offered to him and similarly a person requiring sized timber would not be satisfied if timber logs were supplied
In Kripasindhu Sahu  Sons vs State of Orissa2 another Division Bench of the same High Court held that the dictum in the Rajani Timber Traders  case was too widely stated and it did not indicate the meaning of the word timber as used in common parlance in commercial circles and it also did not purport to specify the meaning of the expression sized timber as used in that judgment
The Division Bench further held that timber in common parlance in Orissa took within its ambit only long and big sized logs of wood ordinarily used in house construction as beams and pillars and that when timber was converted into planks rafters and other wood products like tables and chairs or cut into various small sizes so as to be unfit for use as beams and pillars and similar such uses they could not be termed as timber in common parlance though they may retain their essential character as wood because the essential characteristic of timber as a commercial commodity was lost after such conversion
The judgment in that case does not indicate any basis for holding that the word timber had in common parlance in Orissa the meaning which according to the Division Bench it bore
It is also curious to note that one learned Judge was common to both the Division Benches though in each case the judgment was delivered by the other learned judge Having seen how the different High Courts have dealt with this question we will now ascertain the true position for our 1 1974 34 STC 374
2 1975 35 STC 270
104 selves
In Ganesh Trading Co Karnal vs State of Haryana and anotherl Hedge J speaking for this Count said  This Court has firmly ruled that in finding out the true meaning of the entries in a Sales Tax Act what is relevant is not the dictionary meaning but how those entries are understood in common parlance specially in commercial circles
Applying this principle the Court held that although rice was produced out of paddy paddy did not continue to be paddy after dehusking and that when paddy was dehusked and rice produced there was a change in the identity of the goods and therefore rice and paddy were two different things in ordinary parlance
A careful reading of the judgment in that case shows that there was no evidence before the court to show how paddy and rice were understood in commercial circles or what these words meant in commercial or trade parlance and that what the Court did was to refer to various authorities dealing not with rice or paddy but with other goods and the meaning in ordinary parlance of the words paddy and  rice in order to ascertain the meaning of these words in the sense stated by it above
So far as the case before us is concerned there is material on the record to show what the word timber and logs mean in commercial or trade parlance nor do the pleadings of the parties filed in the Orissa High Court throw any light on the matter
The averment of the Respondent Firm in this behalf is to be found in paragraph 13 of its writ petition in the High Court and all that is stated therein is that under the impugned provisions it would be required to pay purchase tax on timber agreed to be severed and after savering the timber while effecting sales of timber would be liable to pay sales tax on such sales
In the counter affidavit of the Law Officer in the office of the Commissioner of Commercial Taxes Orissa filed on behalf of the Commissioner of Commercial Taxes and the Sales Tax Officer Sambalpur Circle while replying to the said paragraph 13 all that is stated is that timber commercially does not remain the same after being cut sized and shaped and therefore there was no legal obstruction to tax an altogether different commercial commodity at sale point
1 1973 32 STC 623 625 SC 105 In view of this state of the record we must seek to ascertain the meaning of these two terms in common parlance with such aid as is available to the Court
It is now well settled that the dictionary meaning of a word cannot be looked at where that word has been statutorily defined or judicially interpreted but where there is no such definition or interpretation the court may take the aid of dictionaries to ascertain the meaning of a word in common 1 parlance
In doing so the court must bear in mind that a word is used in different senses according to its context and a dictionary gives all the meanings of a word and the court therefore have to select the particular meaning which would be relevant to the context in which it has to interpret that word
The Orissa Act does not define the term  timber or logs
Orissa is however a State which is rich in natural wealth and mostly all if not all forests in the State of Orissa are protected or reserved forests and come within the purview of the Orissa Forest Act 1972 which was an Act passed to consolidate and amend the laws relating to the protection and management of forests in the State of Orissa
The real object behind the issue of impugned provisions was to levy purchase tax on standing trees agreed to be severed and bamboos agreed to be servered in view of the judgment of the Orissa High Court in Straw Products Ltd vs State of Orissa in which it was held that a Divisional Forest Officer was not a dealer and therefore not liable to pay sales tax and hence could not call upon forest contractors to reimburse him in respect thereof
In view of this background it would be relevant for our purpose to look at the statutory definition of the term timber
given in the Orissa Forest  Act 1972
That term is defined in clause n of section 2 of that Act which reads as follows n timber  includes trees fallen or felled and all wood cut up or sawn
 Prior to the enactment of the Orissa Forest Act 1972 there were two Forest Acts in force in the State of Orissa namely the Madras Forest Act 1882 Madras Act V of 1882 and the Act XVI of 1927
The Madras Forest Act applied to the districts of Koraput and Ganjam and part of Phulbani District namely Baliguda and G Udaygiri Taluks
The applied to the rest of the State
Both these Acts were repealed in their application to the State Of H 106 Orissa by the Orissa Forest Act but as prior to the enactment of the Orissa Forest Act these were the two Acts which provided for the protection and management of forests in the State of Orissa we may also refer to the definition of the word timber given in those Acts
Section 2 of the Madras Forest Act defines timber as including trees when they have fallen or have been fallen and all wood whether cut up or fashioned or hollowed out for any purpose or not
Clause 6 of section 2 of the defines timber in identical terms
Though none of these definitions is an exhaustive one since each of them uses the word includes  and not means there is a large and substantial measure of identity in these definitions and it will be apparent from these definitions that the word timber is not confined merely to felled trees in forestry in the State of Orissa
In this connection it would not be out of place to see how this word has been defined in subsequent legislation In August 1981 trade in certain forest produce in Orissa was made a State monopoly and the Orissa Forest Produce Control of Trade Act 1981 Orissa Act No 22 of 1981 was passed to achieve that purpose
The list of forest produce set out in the definition of that term given in clause c of section 2 of that Act includes timber of any species specified in clause j of that section
Clause j of section 2 defines timber  as meaning marketable wood round sawn or fashioned straight piece of and above two metres in length standing or felled excluding fuel of the following categories namely 
The portion of the definition omitted above lists the different species of timber
The definition of timber given in the Orissa Forest Produce Control of Trade Act is an exhaustive definition inasmuch as the object of that Act was to create a State monopoly of trade in specified forest produce and therefore such forest produce had to be particularized
What is however pertinent is that even in subsequent legislation the cardinal concept that timber is not merely felled trees has been underlined and emphasized
On turning to various dictionaries we find that the dictionary meaning largely coincides with the statutory meaning of the word timber
While discussing the question of the subject matter of the impugned provisions we have set out the definition of the word timber contained in the Webster Collegiate Dictionary occurring ring in the passage from the judgment of Vivian Bose J in 107 Shrimati Shantabai v State of Bombay The relevant meanings of the term timber given in the Shorter Oxford Dictionary Third Edition are building material generally wood used for the building of houses ships etc or for the use of the carpenter joiner or other artisan
This definition also states that the word is applied to the wood of growing trees capable of being used for structural purposes hence collectively to the trees themselves
Amongst the meanings given in the Concise Oxford Dictionary Sixth Edition are wood prepared for building carpentry etc
trees suitable for this woods forests piece of wood beam
One of the meanings of the word timber given in Webester s Third New International Dictionary is wood used for or suitable for building as a house or boat for carpentry or joinery
A log according to the Shorter Oxford English Dictionary means a bulky mass of wood now usually an unhewn portion of a felled tree or a length cut off for firewood and according to the Concise Oxford Dictionary it means unhewn piece of felled tree or similar rough mass of wood especially cut for firewood
Thus logs will be nothing more than wood cut up or sawn and would be timber
A question which remains is whether beams rafters and planks would also be logs or timber
The Shorters Oxford English Dictionary defines beam inter alia as a large piece of squared timber long in proportional to its breadth and thickness and the Concise Oxford Dictionary defines it as a  long piece of squared timber supported at both ends used in houses ships etc and according to Webester s Third New International Dictionary it means a long piece of heavy often squared timber suitable for use in house construction
 A beam is thus timber sawn in a particular way
Rafter as shown by the Shorter Oxford English Dictionary is nothing but one of the beams which give shape and form to a roof and bear the outer covering of slates tiles thatch etc The Concise Oxford Dictionary and Webster s New International Dictionary define rafter in very much the same way the first defines it as one of the sloping beams forming framework of a roof and the seconds as one of the often sloping beams that sup port a roof
 Rafter would also therefore be timber or log put to a particular use
A plank is defined in Shorter Oxford English Dictionary as a long flat piece of smoothed timber thicker than a board specially a length of timber sawn to a thickness of from two to six inches a width of nine inches or more and eight feet or H 108 upwards in length
 According to the Concise Oxford Dictionary it is a long wide piece of timber a few inches thick and according to Webster s Third New International Dictionary it is a heavy thick board that in technical specifications usually has a thickness of 2 to 4 inches and a width of at least 8 inches
 The exact thickness and width of a plank may be of importance in technical specifications but in ordinary parlance planks would be flattened and smoothed timber
Such flatness and smoothness can only be achieved by using a saw and other implements required for that purpose
The same would be the case when timber is rounded or shaped
The statutory definitions of timber extracted above read along with the meaning of the word timber given in different dictionaries would show that the conclusion reached by the Madhya Pradesh High Court in Mohanlal Vishram vs Commissioner of Sales Tax Madhya Pradesh Indore and by the Andhra Pradesh High Court in G Ramaswamy and others vs The State of Andhra Pradesh and others is more germane to our purpose than the two Orissa cases neither of which has referred to the statutory definition of the word timber in the relevant statutes
The observations of the Orissa High Court in the case of Krupasindhu Sahu  Sons vs State of Orissa that timber in common parlance in Orissa takes within its ambit only long and big sized logs of wood ordinarily used in house construction as beams and pillars but not when timber is converted into planks rafters and other wood products like tables and chairs cannot therefore be said to be correct so far as planks and rafters are concerned
In our opinion planks and rafters would also be timber
The result is that sales of dressed or sized logs by the Respondent Firm having already been assessed to sales tax the sales to the First Respondent Firm of timber by the State Government from which logs were made by the Respondent Firm cannot be made liable to sales tax as it would amount to levying tax at two points in the same series of sales by successive dealers assuming without deciding that the retrospectively substituted definition of dealer in clause c of section 2 of Orissa Sales Tax Act 1947 is valid
Yet another aspect of this question now arises for our consideration
During the period from June 1 1977 to December 31 3 1977 by reason of Notification No SRO 37477 dated May 23 109 1977 the rate of sales tax on timber was fixed at ten per cent by the State Government
Since it was the contention of the State Government that logs are commercially a different commodity the tax could not have been assessed on the sales of logs by the Respondent Firm during this period at the rate of ten per cent but would have been assessed at the general rate of six per cent specified in section 51 of the Orissa Act
If such was the case on the findings given by us above the Respondent Firm would be liable to pay sales tax not at the rate of six per cent but at the rate of ten per cent and it might be argued that the Respondent Firm has been under assessed or part of its turnover of sales of logs has escaped assessment
The assessment order made on the Respondent Firm referred to earlier includes both the amount of purchase tax and sales tax but this is not a composite assessment order but a severable one because the turn over of sales as also the turnover of purchases have been shown separately and the amount of sales tax and purchase tax have equally been shown separately
Thus though as a result of our holding that the amounts paid by the Respondent Firm under the Timber Contracts are not eligible to purchase tax the assessment order would require to be modified and corrected such modification and correction would not affect the rest of the assessment order
The question then is Whether the sales tax authorities can reopen the assessment of the Respondent Firm so far as the turnover of sales of logs is concerned Under sub section 8 of section 12 of the Orissa Act the Commissioner of Sales Tax or those sales tax authorities to whom such power is delegated have the power to reopen an assessment but under section 128 the exercise of this power is subject to a period of limitation namely thirty six months from the expiry of the year to which that period for which the assessment is to be reopened relates
Since three years have long since expired from the year to which the period in question relates it would not now be open to the sales tax authorities assuming it was a case for re opening the assessment to reopen the Respondent Firm s assessment and tax the turnover of sales of dressed or sized logs at the rate of ten per cent instead of six per cent
This question of course would not arise for any period on or after January 1 1978 on which date the substituted sub section 1 of section 5 came into force as under the notification issued under the substituted sub section 1 no separate rate of tax is specified either for timber or logs or any of the other goods which we have been considering above and all of them would fall for the purpose of payment of sales tax under the residuary 110 Entry No 101 of the Notification No 67184 CTA 135771  dated December 29 1977 and would be liable to sales tax at the rate of seven percent and there would thus be no under assessment or escapement of assessment
Bamboo Contract We will now ascertain the nature of the Bamboo Contract
Unlike the Timber Contracts the Bamboo Contract is not in a prescribed statutory form but it appears from the judgment of the High Court that all the Bamboo Contracts before it contained identical terms and conditions except with respect to the contract area the period of the contract and the amount of royalty
The parties to the Bamboo Contract were the Governor Or the State of Orissa referred to in the said Contract as the Grantor and the Respondent Company
The Bamboo Contract is headed Agreement of Bamboo Areas in Bonai Forest Division to the Titaghur Paper Mills Company Limited
 The second and the third recitals of the Bamboo Contract are as follows AND WHERAER the Company is desirous of obtaining grant from the Grantor of exclusive right and licence to fell cut obtain and remove bamboos from all felling series of Bamboos Working Circle in the Bonai Forest Division in the State of Orissa for the purpose of converting the bamboos into paper pulp or for purposes connected with the manufacture of paper or in any connection incidental therewith
AND WHEREAS the Grantor has agreed to grant the said licence to the Company subject to the restrictions terms and conditions hereinafter appearing Clause T of the Bamboo Contract is headed Arc a over which the grant operates
Sub clause a of clause I sets out the dates of commencement of the Bamboo Contract in respect of different contract areas
Under Sub clause b of clause l the forest produce sold and purchased is stated to be as specified in Schedule I and to be situated in the areas indicated in Schedule V Under the said subclause the grantor understood to render at all times to the Respondent Company all possible facilities to enable it to extract II and obtain its requirements of bamboos upto the limit imposed by 111 the Bamboo Contract
Under clause II the quantity of forest A produce sold and purchased is stated to be all the said forest produce which now exist or may come into existence in the contract area which the Company may fell cut obtain and remove from the said area in accordance with the time table given in Schedule V during the period  and then the periods in respect of different areas already mentioned while reciting the facts of Civil Appeal No 219 of 1982 have been set out
Clause III provides that the Bamboo Contract can be terminated in accordance with the provisions in that behalf contained in the Forest Contract Rules subject to the right of the Respondent Company to appeal to the State Government in which case the Respondent Company could with the previous permission of the State Government on such conditions as the Government might think fit to impose be entitled to carry on its business in terms of the agreement until the final decision by the Government
Under clause IV the Respondent Company is given an option to renew the Bamboo Contract for a further term of twelve years
Under clause V the Respondent Company was to perform all acts and duties and to refrain from doing any act forbidden by the Orissa Forest Act 1972 and to give a sum of Rs 58190 as security for the due performance and observance by it of the terms of the Bamboo Contract which sum was to be returned to it on the expiry of six months after the termination or expiry of the Bamboo Contract
The Grantor was to be entitled to forfeit the said deposit and to appropriate the whole or part thereof in the event of the Respondent Company committing a breach of the terms of the Bamboo Contract such as would entitle the Grantor to terminate the Bamboo Contract
Clause VI provided that this licence shall be subject to the Orissa Forest Contract Rules as modified from time to time subject to the amendments thereto set out in the said clause which are not material for our purpose
Clause VIII stated that the forest produce sold and purchased under this Agreement consists of all Salia and Daba bamboos subject to the cutting rules in the annual coupe of the felling series Clauses IX to XIII deal with the payment of royalty
What is pertinent to note about these clauses is that under clause XIII the Respondent Company was to pay an annual minimum royalty in the sums mentioned therein and was not to be entitled to the refund of the whole or any part of such minimum royalty should it fail to cut the minimum quantity of bamboos in any year except on the ground that the yield of the area fell below the quantity required to 112 make up the minimum royalty payable for the year owing to gregarious or sporadic flowering of bamboos in the contract areas or from any cause whatsoever not being due to the negligence on the part of the Respondent Company or failure on its part to extract the minimum number of bamboos
The amount of royalty was to be calculated on all bamboos which the Respondent Company would cut from the contract area whether such bamboos were removed or not to be ascertained as provided in clauses XI and XII
Under clause XI for ascertaining the quantity of the bamboos so cut the Respondent Company was to remove the bamboos through such river ghats railway motor and other transport depots as may be agreed upon between the parties from time to time and under clause XII the royalty was to be paid in advance in such manner that it would always be in excess of the royalty actually due
Under clause XIV for the purpose of checking the felling and keeping an account of all bamboos to be cut by the Respondent Company the Forest Department had the right to employ such staff as it might deem necessary and was to have free access to the contract area and to the books and other records of the Respondent Company
Further the Respondent Company was to submit to the Divisional Forest Officer a yearly account of bamboos cut and removed from the contract area and under clause XV the company was to issue to the carter of each cart or the driver of each truck on its leaving the forest a machine numbered pass of a pattern to be approved by the Chief Conservator of Forests Orissa
Such pass was to state the number of bamboos which each cart or truck would carry
Clause XVI prescribed the routes by which the bamboos were to be removed as also the depots at which they were to be presented for examination Under clause XVII at every naka the checking staff was to check each cart or truck with the pass referred to in clause XV before such cart or truck left the depot
Clause XVIII gave to the Respondent Company subject to such restrictions as might be imposed from time to time by the Divisional Forest Officer Bonai Division the right during the continuance of the Bamboo Contract to use any lands roads or streams outside the licensed areas which belonged to or were under the control of the Grantor for the purposes of having free ingrees to or egrees from the contract areas and also to such lands roads or streams within the contract areas
Under clause XX the Respondent Company was bound to meet the local demands of bamboos in which event the royalty on such bamboos was not to be paid by the Respondent 113 Company but was to be paid by the local people
Under clause XX subject to obtaining prior written consent of the Grantor the Respondent Company was to be at liberty to make dams across streams cut canals make water courses irrigation works roads bridges buildings tramways and any other work useful or necessary for the purpose of the said business in or upon the licensed areas and also with the like consent to widen or deepen existing streams channels or waterways for the purpose of the said business and all timber and other forest produce required for this purpose was to be paid for by the Respondent Company at current schedule of rates
All such dams canals irrigation works roads bridges building and other works which were not removed by the Respondent Company within six months from the expiry of or earlier termination of a the contract were to become the property of the Grantor
Clause XXI prohibited the Respondent Company from interfering with the surface of the land except in so far as it might be necessary for immediate purpose of carrying on the necessary operations in connection with the said business
Clause XXII expressly reserved and excepted to the Grantor in regard to the contract area granted to the Respondent Company l  the possession and beneficial ownership in the soil and all mines and minerals upon in or under the contract area and the right to make such use of the soil to erect such buildings or structures and install such plant upon it and subject it to such operations for the purpose of extraction of minerals or otherwise as the Grantor might deem proper 2 the surface of the licensed areas and all
grazing cultivating and other surface E rights other than those expressly granted to the Respondent Company by the Bamboo Contract 3 the right to all trees other than trees made over to the Respondent Company and the natural products of the soil other than bamboos 4 the right of the Grantor to destroy bamboos in any portion of the contract areas for silvicultural purposes Including the raising of plantations subject in each case to the minimum area limit of 500 acres per annum and further subject to giving in place of such area equal facilities for bamboos extraction in other convenient areas and 5 the right to extract bamboos from any portion in the contract areas for departmental works in Bonai Forest Division subject to a limit of 5000 bamboos yearly
Clause XXIII prescribed cutting rules for bamboos
Clause XXIV conferred upon the Respondent Company the right to extract fuel from areas allotted for that purpose in order to meet the fuel requirements of domestic consumption in the houses and offices of H 114 the persons employed by it in connection with its business in the contract areas subject to the payment of a fixed royalty per tonne
Under that clause the Respondent Company had the right to cut and collect such poles of unreserved species and creepers as might be necessary for construction of rafts on obtaining a permit in that behalf and on payment of royalty according to the schedule of rates
Under clause XXV the Grantor if so required by the Respondent Company was to lease to it a suitable site or sites to be selected by it out of such sites as were at the disposal of the Grantor within the licensed areas for the erection of store houses sheds depots bungalows staff offices agencies and other buildings of a like nature bonafide required by it for the purposes of the business connected with the Bamboo Contract rent free for the term of such contract
Under clause XVI in the event of the Grantor setting fire to the forest for silvicultural purposes it was to give to the Respondent Company as long a notice as possible of the commencement of such operations and it was the Respondent Company which was to be responsible for safeguarding the forest produce which was the subject matter of the Bamboo Contract
Under clause XXIX the contract areas were to be worked on four years cutting cycle for Salia and twelve years cutting cycle for Daba and were to comprise the areas stated in the said clause
It was submitted on behalf of the Appellant that the Bamboo Contract was a composite contract of sale in that it was an agreement to sell existing goods namely bamboos standing in the contract areas at the date of the Bamboo Contract coupled with an agreement to sell future goods namely bamboos to come into existence in the future
According to the Appellant the property in the existing bamboos would pass after they were ripe for cutting and under Rule 12 of the Forest Contract Rules the Divisional Forest Officer had delineated the boundaries and limits of the annual coupe from which bamboos were to be cut for the Respondent Company to take delivery of them in as much as the bamboos then became ascertained goods
In the alternative it was submitted that the property passed when the Respondent Company started the work of cutting bamboos
According to the Appellant in either event property passed before the bamboos were severed
So far as the bamboos which were not in existence at the date of the Bamboo Contract but were to come into existence thereafter were concerned it was submitted that as they were future goods once they came 115 into existence and became ripe for cutting the property in them passed to the Respondent Company in the same way as in the case of bamboos in existence at the date of the Bamboo Contract
While discussing the subject matter of the impugned provisions we have already held that they apply where there is a completed con tract of purchase and the property in the goods which are the subject matter of the contract passes from the seller to the buyer when the contract is made
In other words the purchase would be complete when the standing trees or bamboos are specific goods that is when v  they are identified agreed upon at the time the contract of sale is made and the contract is unconditional and further such standing trees or bamboos are in a deliverable state that is nothing remains to be done except for buyer to enter upon the land of the seller and to fell and remove the trees or bamboos as the case may be without any let or hindrance
The very submission of the Appellant with respect to when the property passes to the Respondent Company in the case of the Bamboo Contract are sufficient to show that the impugned provisions cannot have any application to the case
The Bamboo Contract like the Timber Contract is also made subject to the Forest Contract Rules and while with Timber Contract we have pointed out that by reason of the operation of those Rules property in the trees passed to the forest contractor after the trees were felled and taken to the inspection points and there checked and examined and thereafter removed from the contract area
The same position would apply to the case of the Bamboo Contract assuming for the sake of argument that it is a contract of sale of goods
In this view of the matter the impugned provisions would have no application and the amounts payable under the Bamboo Contract would not be exigible to purchase tax
By reason however of the substitution of the definition of the term dealer in clause c of section 2 of the Orissa Act with retrospective effect it may be argued that if the Bamboo Contract was a contract of sale of goods then on the sale taking place to the Respondent Company sales tax would become payable and the Respondent Company would be bound to reimburse to the Forest Department the amount payable by it as sales tax
In order to avoid future legal controversy and particularly in view of the fact that the High Court has held the Bamboo Contract to be a grant of a profit a prendre it becomes 116 necessary to determine whether the Bamboo Contract is at all a contract of sale of goods
According to the Respondent Company the High Court was right in holding that Bamboo Contract was not a contract of sale of goods but was a grant of a profit a prendre
The meaning and nature of a profit a prendre have been thus described in Halsbury s Laws of England Fourth Edition Volume 14 paragraphs 240 to 242 at pages 115 to 117 240
Meaning of profit a prendre  A profit a prendre is a right to take something off another person s land
It may be more fully defined as a right to enter another s land to take some profit of the soil or a portion of the soil itself for the use of the owner of the right The term profit a prendre  is used in contradistinction to the term profit a prendre  which signified a benefit which had  to be rendered by the possessor of land after it had come into his possession
A profit a prendre is a servitude
Profit a prendre as an interest in land
A profit a prendre is an interest in land and for this reason any disposition of it must be in writing
A profit a prendre which gives a right to participate in a portion only of some specified produce of the land is just as much an interest in the land as a right to take the whole of that produce
What may be taken as a profit a prendre
The subject matter of a profit a prendre namely the substance which the owner of the right is by virtue of the right entitled to take may consist of animals including fish and fowl which are on the land or of vegetable matter growing or deposited on the land by some agency other than that of man or of any part of the soil itself including mineral accretions to the soil by natural forces
The right may extend to the taking of the whole of such animal or vegetable matters or merely a part of them
Rights have been established as profits a prendre to take acorns and beech mast brakes fern heather and litter thorns turf and peat boughs and branches of growing trees rushes 117 freshwater fish stone sand and shingle from the seashore A and ice from a canal also the right of pasture and of shooting pheasants
There is however no right to take seacoal from the foreshore
The right to take animals ferae naturae while they are upon the soil belongs to the owner of the soil who may grant to others as a profit a prendre a right to come and take them by a grant of hunting shooting fowling and so forth
 A profit a prendre is a servitude for it burdens the land or rather a person s ownership of land by separating from the rest certain portions or fragments of the right of ownership to be enjoyed by persons other than the owner of the thing itself see Jowitt s Dictionary of English Law Second Edition Volume 2 page 1640
under the heading Servitude
Servitude is a wider term and includes both easements and profits a prendre see Halsbury s Laws of England Fourth Edition Volume 14 paragraph 3 page 4
The distinction between a profit a prendre and an easement has been thus stated in Halsbury s Laws of England Fourth Edition paragraph 43 at pages 21 to 22 The chief distinction between an easement and a profit a prendre is that whereas an easement only confers a right to utilise the servient tenement in a particular manner or prevent the commission of some act on that tenement a profit a prendre confers a right to take from the servient tenement some part of the soil of that tenement or minerals under it or some part of its natural produce or the animals ferae naturae existing upon it
What is taken must be capable of ownership for otherwise the right amounts to a mere easement
In Indian law an easement is defined by section 4 of the Indian Easement Act 1882 Act No V of 1882 as being  a right which the owner or occupier of certain land possesses as such for the beneficial enjoyment of that land to do and continue to do something or to prevent and continue to prevent something being done in or upon or in respect of certain other land not his own
A profit a prendre when granted in favour of the owner of a dominant heritage for the beneficial enjoyment of such heritage would therefore be an easement but it would not be so if the grant was not for the beneficial enjoyment of the grantee s heritage
118 Clause 26 of section 3 of the  defines immovable property as including inter alia benefit to arise out of land
The definition of immovable property in clause f of section 2 of the  illustrates a benefit to arise out of land by stating that immovable property includes rights to ways lights ferries fisheries or any other benefit lo arise out of land
As we have seen earlier the  does not give any definition of immovable property except negatively by stating that immovable property does not include standing timber growing crops or grass
The was enacted about fifteen years prior to the  However by section 4 of the  the definitions of certain words and expressions including immovable property and movable property given in section 3 of that Act are directed to apply also unless there is anything repugnant in the subject or context to all Central Acts made after January 3 1968 and the definitions of these two terms therefore apply when they occur in the 
In Ananda Behra and another vs The State of Orissa and another 1 this Court has held that a profit a prendre is a benefit arising out land and that in view of clause 26 of section 3 of the  it is immovable property within the meaning of the 
The earlier decisions showing what constitutes benefits arising out of land have been summarized in Mulla on The  and it would be pertinent to reproduce the whole of that passage
That passage at pages 16 17 of the Fifth Edition is as follows A benefit to arise out of land  is an interest in land and therefore immovable property
The first Indian Law Commissioners in their report of 1879 said that they had abstained from the almost impracticable task of defining the various kinds of interests in immovable things which are considered immovable property
The  however expressly includes as immovable property benefits to arise out of land here diary allowances rights of way lights ferries and fisheries 
The definition of immovable property in the applies to this Act
The following have been held to be immovable 1 11955 2 section C R 919 119 property varashasan or annual allowance charged on land a right to collect dues at a fair held on a plot of land a hat or market a right to possession and management of a saranjam a malikana a right to collect rent or jana a life interest in the income of immovable property a right of way a ferry and a fishery a lease of land
B Having seen what the distinctive features of a profit a prendre are we will now turn to the Bamboo Contract to ascertain whether it can be described as a grant of a profit a prendre and thereafter to examine the authorities cited at the Bar in this connection
Though both the Bamboo Contract in some of its clauses and the Timber Contracts speak of the forest produce sold and purchased under this Agreement there are strong countervailing factors which go to show that the Bamboo Contract is not a contract of sale of goods
While each of the Timber Contracts is described in its body as an agreement for the sale and purchase of forest produce the Bamboo Contract is in express terms described as a grant of exclusive right and licence to fell cut obtain and remove bamboos for the purpose of converting the bamboos into paper pulp or for purposes connected with the manufacture of paper  Further throughout the Bamboo Contract the person who is giving the grant namely the Governor of the State of Orissa is referred to as the Grantor While the Timber Contracts speak of the consideration payable by the forest contractor the Bamboo Contract provides for payment of royalty
Royalty is not a term used in legal parlance for the price of goods sold
Royalty is defined in Jowitt s Dictionary of English Law Fifth Edition Volume 2 page 1595 as follows Royalty a payment reserved by the grantor of a patent lease of a mine or similar right and payable proportionately to the use made of right by the grantee
It is usually a payment of money but may be a payment in kind that is of part of the produce of the exercise of the right
Royalty also means a payment which is made to an author or composer by a publisher in respect of each copy of his work which is sold or to an inventor in respect of each article sold under the patent
 We are not concerned with the second meaning of the word H 120 royalty given in Jowitt
Unlike the Timber Contracts the Bamboo Contract is not an agreement to sell bamboos standing in the contract areas with an accessory licence to enter upon such areas  for the purpose of felling and removing the bamboos nor is it unlike the Timber Contracts in respect of a particular felling season only
It is an agreement for a long period extending to fourteen years thirteen years and eleven years with respect to different con tract areas with an option to the Respondent Company to renew the contract for a further term of twelve years and it embraces not only bamboos which are in existence at the date of the contract but also bamboos which are to grow and come into existence thereafter
The payment of royalty under the Bamboo Contract has no relation to the actual quantity of bamboos cut and removed
Further the Respondent Company is bound to pay a minimum royalty and the amount of royalty to be paid by it is always to be in excess of the royalty due on the bamboos cut in the contract areas
We may pause here to note what the Judicial Committee of the Privy Council had to say in the case of Raja Bahadur Kamkashya Narain Singh of Ramgarh vs Commissioner of Income tax Bihar and Orissa about the payment of minimum royalty under a coal mining lease
The question in that case was whether the annual amounts payable by way of minimum royalty to the lessor were in his hands capital receipt cr revenue receipt
The Judicial Committee held that it was an income flowing from the covenant in the lease
While discussing this question the Judicial Committee said at pages 522 3 These are periodical payments to be made by the lessee under his covenants in consideration of the benefits which he is granted by the lessor
What these benefits may be is shown by the extract from the lease quoted above which illustrates how inadequate and fallacious it is to envisage the royalties as merely the price of the actual tons of coal
The tonnage royalty is indeed only payable when the coal or coke is gotton and despatched but that is merely the last stage
As preliminary and ancillary to that culminating act liberties are granted to enter on the land and search to dig and sink pits to erect engines an 1 194311 ITR 513 PC 121 machinery coke ovens furnaces and form railways and  roads
All these and the like liberties show how fallacious it is to treat the lease as merely one for the acquisition of a certain number of tons of coal or the agreed item of royalty as merely the price of each ton of coal
 Though the case before the Judicial Committee was of a lease of a coal mine and we have before us the case a grant for the purpose of felling cutting and removing bamboos with various other rights and licences ancillary thereto the above observations of the Judicial Committee are very pertinent and apposite to what we have to decide
Under the Bamboo Contract the Respondent Company has the right to use all lands roads and streams within as also outside the contract areas for the purpose of free ingress to and egress from the contract areas
It is also given the right to make dams across streams cut canals make water courses irrigation works roads bridges buildings tramways and other work useful or necessary for the purpose of its business of felling cutting and removing bamboos for the purpose of converting the same into paper pulp or for purposes connected with the manufacture of paper
For this purpose it has also the right to use timber and other forest produce to be paid for at the current schedule of rates
The Respondent Company has the right to attract fuel from areas allotted for that purpose in order to meet the fuel requirements of the domestic consumption in the houses and offices of the persons employed by it and to pay a fixed royalty for this purpose
Further the Government was bound if required by the Respondent Company to lease to it a suitable site or sites selected by it for the erection of store houses sheds depots bungalows staff offices agencies and other buildings of a like nature
We have highlighted above only the important terms and conditions which go to show that the bamboo Contract is not and cannot be a contract of sale of goods
It confers upon the Respondent Company a benefit to arise out of land namely the right to cut and remove bamboos which would grow from the soil couple with several ancillary rights and is thus a grant of a profit a prendre
It is equally not possible to view it as a composite contract one an agreement relating to standing bamboos agreed to be severed H 122 and the other an agreement relating to bamboos to come into existence in the future
The terms of the Bamboo Contract make it clear that it is one integral and indivisible contract which is not capable of being severed in the manner canvassed on behalf of the Appellant
It is not a lease of the contract areas to the Respondent Company for its terms clearly show that there is no demise by the State Government of any area to the Respondent Company
The Respondent dent Company has also no right to the exclusive possession of the contract areas but has only a right to enter upon the land to take a part of the produce thereof for its own benefit
Further it is also pertinent that while this right to enter upon the contract areas is described as a licence under clause XXV of the Bamboo Contract the Respondent company has the right to take on lease a suitable site or sites of its choice within the contract areas for the erection of store houses sheds depots bungalows staff offices agencies and other buildings of alike nature required fourth purpose of its business
The terms and conditions of the Bamboo Contract leave no doubt that it confers upon the Respondent Company a benefit to arise out of land and it would thus be an interest in immovable property
As the grant is of the value exceeding Rs 100 the Bamboo Contract is compulsorily registrable
It is in fact not registered
This is however immaterial because it is a grant b the Government of an interest in land and under section Registration Act it is exempt from registration
The High Court was therefore right in holding that the Bamboo Contract was a grant of a profit prendre though the grant of such right not being for the beneficial enjoyment of any land of the Respondent Company it would not be an easement
Being a profit a prendre or a benefit to arise out of land any attempt on the part of the State Government to tax the amounts payable under the Bamboo Contract would not only be ultra vires the Orissa Act but also unconstitutional as being beyond the State s taxing power under Entry 54 in List II in the Seventh Schedule to the Constitution of India
We will now turn to the authorities cited at the Bar
The cases which have come before the courts on this point have mainly involved the question whether the document before the court required registration
After the coming into force of the Constitution of India and the introduction of land reforms with consequent abolition of Zamindari  and other proprietary into rests in land the question whether a particular document was a 123 grant of a proprietary interest in land has also fallen for determination by various courts
It is unnecessary to refer to all the decisions which were cited before us and we propose to confine ourselves to considering only such of them as are directly relevant to the question which we have to decide
Of the High Court decisions the one most in point is that of a Full Bench OF the Madras High Court in Seeni Chettiar vs Santhanathan Chettiar and othersl The question in that case was whether a document which granted to the defendant a right to enjoy the produce of all the trees on the bank and bed of a tank as also the grass and the reeds and further to cut and remove the trees for a period exceeding four years required registration
The court held that the document was not a lease because it did not transfer to the defendant exclusive possession of the tank but conferred upon him merely a right of access to the place for the reasonable enjoyment of what he was entitled to under the contract The court however came to the conclusion that the document required registration as it transferred an interest in immovable property and that it was not a sale of mere standing timber but it was contemplated by the document as shown by the fact that a comparatively long period of a little more than four years was granted to the defendant for cutting and removing the trees that the purchaser should derive a benefit from the further growth of the thing sold from further vegetation and from the nutriment to be afforded by the land
The above words quoted in the judgment in that case were those of Sir Edward Vaughan Williams in the following passage cited with approval by Lord Coleridge CJ in Marshall vs Green 2 The principle of these decisions appears to be this that wherever at the time of the contract it is contemplated that the purchaser should derive a benefit from the further growth of the thing sold from further vegetation and from the nutriment to be afforded by the land the contract is to be considered as for an interest in land but where the process of vegetation is over or the par ties agree that the thing sold shall be immediately with drawn from the land the land is to be considered as a 1 ILR 18971 FB 2  39
H 124 mere warehouse of the thing sold and the contract is for goods
 So far as the decisions of this Court are concerned the one which requires consideration first is Firm Chhotabhai Jethabai Patel  Co and other cases vs The State of Madhya Pradesh
This was one of the two cases strongly relied upon by the Appellant the other being State of Madhya Pradesh  Ors
v Orient Paper Mills Ltd2
The facts in Chhotabhai s Case were that the petitioners had entered into contracts with the proprietors of certain estates and mahals in the State of Madhya Pradesh under which they acquired the right to pluck collect and carry away tendu leaves to cultivate culture and acquire lac and to cut and carry away teak and timber and miscellaneous species of trees called hardwood and bamboos
On January 26 1951 the Madhya Pradesh Abolition of Proprietary Rights Estates Mahals Alienated Lands Act 1950 Madhya Pradesh Act I of 1951 came into force and on the very next day a notification was issued under the said Act putting an end to all proprietary rights in estates mahals and alienated villages and vesting the same in the State for the purposes of the State free of all encumbrances with effect from March 31 1952
The petitioners therupon approached this Court under Article 32 of the Constitution of India praying for a writ prohibiting the State of Madhya Pradesh from interfering with the rights which they had acquired under the contracts with the former proprietors
It was averred in the petitions that not only had the petitioners paid the consideration under the said contracts but had also spent large sums of money in the exercise of their rights under the said contracts
This Court held that the contracts appeared to be in essence and effect licenses granted to the petitioners to cut gather and carry away the produce in the shape tendu leaves lac timber or wood and did not create any interest either in the land or in the trees or plants
In arriving at this conclusion the Court relied upon a decision of the Judicial Committee of the Privy Council in Messrs Mohanlal Hargovind of Jubbulpore vs Commissioner of income tax CP  Berar Nagpur3
In that case the assesses carried on 1 19531 SCR 476
2   3 LR 1949 76 IA Nag
PC 311
125 business as manufacturers and vendors of bidis composed of tobacco contained or rolled in tendu leaves
The contracts entered into by the assesees were short term contracts under which in consideration of a sum payable by instalments the assessees  were granted the exclusive right to collect and remove tendu leaves from specified areas
Some of the contracts also granted to the assessees a small ancillary right of cultivation
The Judicial Committee held that the amounts paid by the assessees under the said contracts constituted expenditure in order to secure raw materials for their business and therefore such expenditure was allowable as being on revenue account
In Chhotabhai s Case this Court took the view that the contracts before it were similar to the contracts before the Judicial committee and quoted with approval the following passage from the judgment in Messrs Mohanlal Hargovind s Case at page 241 The contracts grant no interest in land and no interest in the trees or plants themselves
They are simply and solely contracts giving to the grantees the right to pick and carry away leaves which of course implies the right to appropriate them as their own property
The small right of cultivation given in the first of the two contracts is me rely ancillary and is of no more significance than would be eg a right to spray a fruit tree given to the person who has bought the crop of apples
The contracts are short term contracts
The picking of the leaves under them has to start at once or practically at once and to proceed continuously
 According to this Court the contracts entered into by the petitioners before it related to goods which had a potential existence and there was sale of a right to such goods as soon as they came into existence the question whether the title passed on the date of the contract itself or later depending upon the intention of the parties
This Court therefore came to the conclusion that the State had no right to interfere with the petitioners  rights under the said contracts
As we will later point out the authority of the decision in Chhotabhai s Case has been considerably shaken if not wholly eroded by subsequent pronouncements of this Court
For the 126 present it will be sufficient for us to point out that the reliance placed in Chhotabhai s Case on the decision of the Judicial Committee in Messrs Mohanlal Hargovind s Case does not appear to be justified for the contracts before the Judicial Committee and before this Court were different in their contents and this Court appears to have fallen into an error in assuming that they were similar
For instance the contracts before the Privy Council were short term contracts while those before the Court in Chhotabhai s Case were for different periods including terms of five to even fifteen years
Apart from this we have pointed out above the features which go to make the Bamboo Contract a benefit to arise out of land
These features were conspicuously absent in the contracts before the court in Caotabhai s Case
The decision next in point of time on this aspect of the case is Ananda Behare and another vs The State of Orissa and another
The petitioners in that case had obtained oral licenses for catching and appropriating fish from specified sections of the Chilka Lake from its proprietor the Raja of Parikud on payment of large sums of money prior to the enactment of the Orissa Estates Abolition Act 1951 Orissa Act I of 1952
Under the said Act the estates of the Raja of Parikud vested in the State of Orissa and the State refused to recognize the rights of the petitioners and was seeking to re auction the rights of fishery in the said lake
The petitioners contending that the State had infringed or was about to infringe their fundamental rights under Articles 19 1 f and 3 1 of the Constitution of India filed petitions in this Court under Article 32 of the Constitiution
In their petition the petitioners claimed that the  transactions entered into by the were sales of future goods namely fish in the sections of the lake covered by the licences and that a s fish was movable property the sai Act was not attracted because it was confined to immovable property
The Court observed that if this contention of the petitioners was correct then their petition under Article 32 was misconceived because until any fish was actually caught the petitioners would not acquire any property in it
The Court held that what was sold to the petitioners was the right to catch and carry away fish in specific sections of the lake for a specified future period and that this amounted to a licence to enter on the land coupled with a grant to catch and carry away the fish which right was a profit and in England it would be regarded as an interest in land because it was a right to take some profit of the soil 127 for the use of the owner of the right in and India it would be regarded as a benefit arising out of the land and as such would be immovable property
The Court then pointed out that fish did not come under the category of property excluded from the definition of immovable property
The Court further held that if a profit a prendre is regarded as tangible immovable property then the property  being over Rs 100 in value the document creating such right would repuire to be registered and if it was intangible immovable property then a registered instrument would be necessary whatever the value but as in the case before the Court the sales were all oral and therefore there being neither writing nor registration the transactions passed no title or interest and accordingly the petitioners had no fundamental rights which they could enforce Ananda Behera s Case was the first decision in which Chhotabhai s Case was distinguished
The relevant passage in the judgment at pages 9234 is as follows It is necessary to advert to Firm Chhotabhai Jethabai Patel  Co vs The State of Madhya Pradesh and explain it because it was held there that a right to pluck collect and carry away  tendu leaves does not give the owner of the right any proprietary interest in the land and so that sort of right was not an encumbrance  within the meaning of the Madhya Pradesh Abolition of Proprietary Rights Act
But the contract there was to pluck collect and carry away the leaves
The only kind of leaves that can be plucked  are those that are growing on trees and it is evident that there must be a fresh drop of leaves at periodic intervals
That would make it a growing crop and a growing crop is expressly exempted from the definition of immovable property  in the 
That case is distinguishable and does not apply here
The next decision which was cited and on which a considerable debate took place at the Bar was Shrimati Shantabhai vs State of Bombay  Others
The faces in that case were that by an unregistered document the petitioner s husband had granted to her in consideration of a sum of Rs 20000 the right to take and appropriate all kinds of wood from certain forests in his Zamindari
On the coming into force of the Madhya Pradesh Abolition of Proprietary Rights Estates Mahals Alienated Lands Act 1950 all proprietary rights in land vested in the State of Madhya Pradesh and the petitioner 128 could no longer cut any wood
She thereupon applied to the Deputy Commissioner and obtained from him an order permitting her to work the forest and started cutting the trees
The Divisional Forest Officer took action against her and passed an order directing that the cut materials be forfeited
She made representations to the Government and they proving fruitless she filed in this Court a petition under Article 32 of the Constitution of India alleging breach of her fundamental rights under Article 19 1 f and g of the Constitution
Four of the five learned Judges who heard the case pointed out that the foundation of the petitioner s claim was an unregistered document and that it was not necessary to determine the true meaning and effect thereof for whatever construction be put on it the petitioner could not complain of breach of any of her fundamental rights
The majority of the learned Judges held that if the document were considered as conveying to the petitioner any part or share in her husband s proprietary right no such part or share was conveyed to her as the document was not registered and assuming that any such part or share was conveyed it had become vested in the State under section 3 of the said Act if the document were considered as a licence coupled with a grant then the right acquired by the petitioner would be either in the nature of a profit a prendre which being an interest in land was immovable property and would require registration and as the document was not registered it did not operate to transmit to her any such profit a prendre as held in Ananda Behera s Case and if the document were construed as conferring a purely personal right under a contract assuming without deciding that a contract was property within the meaning of Article 191f and 311 of the Constitution she could not complain as the State had not acquired or taken possession of the contract which remained her property and as the State was not a party to the contract and claimed no benefit under it the petitioner was free to sue the grantor upon that contract and recover damages by way of compensation and assuming the State was also bound by the contract she could only seek to enforce the contract in the ordinary way and sue the State if so advised and claim whatever damages or compensation she might be entitled to for the alleged breach of it
After so holding the majority of the learned Judges observed at page 269 This aspect of the matter does not appear to have been brought to the notice of this when it decided the case 129 of Chhotobhai Jethabai Patel and Co vs The State of Madhya Pradesh and had it been so done we have no doubt that case would not have been decided in the way it was done Unlike the majority of the Judges Vivian Bose J
in his separate judgment considered in detail the nature of the document in that case
Vivian Bose J
pointed out the distinction between standing timber and a tree
We have earlier extracted those passages from the learned Judge s judgment
The learned Judge then pointed out that the duration of the grant was for a period of twelve years and that it was evident that trees which would be fit for cutting twelve years later would not be fit for felling immediately and therefore the document was not a mere sale of trees as wood
Vivian Bose J
held that the transaction was not just a right to cut a tree but also to derive a profit from the soil itself in the shape of the nourishment in the soil that went into the tree and made it to grow till it was of a size and age fit for felling as timber and if already of that size in order to enable it to continue to live till the petitioner chose to fell it The learned judge therefore held that though such trees as can be regarded as standing timber at the date of the document both because of their size and girth and also because of the intention to fall at an early date would be movable property for the purposes of the and the  the remaining trees that were covered by the grant would be immovable property and as the total value was Rs 26000 the deed required registration and being unregistered it did not pass any title or interest and therefore as in Ananda Behera s Case the petitioner had no fundamental right which she could enforce
According to learned Counsel for the Appellant the judgment of Vivian Bose J
in that case was not the judgment of the Court since the other learned Judges expressly refrained from expressing any opinion as to the actual nature of the transaction under the document in question
Learned Counsel submitted that what the Court really held in that case was that there was no breach of any fundamental right of the petitioner which would entitle her to approach this Court under Article 32 of the Constitution and this decision was therefore not an authority for the proposition that a document of the type before the Court was a grant of a profit a prendre as held by Vivian Bose
J It is true as contended by learned Counsel 130 that the majority expressly refrained from deciding the nature of the document because as it pointed out in any view of the matter the petition would fail and it would therefore be difficult to say that what Vivian Bose J
held was that the decision of the Court as such
However the judgment of Vivian Base J is a closely reasoned one which carries instant conviction and cannot therefore be lightly brushed aside as learned Counsel has attempted to do
It is also pertinent to note that the majority in that case pointed out the principal errors into which the Court had fallen in Chhotabhai s Case and disapproved of what was decided in that case
The decision to which we must now advert is Mahadeo vs The State of Bombay and connected petitions
The facts in that case were that some proprietors of Zamindaris situate in territories then belonging to the State of Madhya Pradesh and on the reorganization of States transferred to the erstwhile State of Bombay granted to the petitioners right to take forest produce mainly tendu leaves from forests included in their Zamindaris
The agreements conveyed to the petitioners in addition to the tendu leaves other forest produce like timber bamboos etc the soil for making bricks and the right to build on and occupy land for the purpose of their business
In a number of cases these rights were spread over many years
Some of the agreements were registered and the others unregistered
After the coming into force of the Madhya Pradesh Abolition of Proprietary Right s Estates Mahals Alienated Lands Act 1950 the Government disclaimed the agreements and auctioned the rights afresh acting under section 3 of the said Act
The petitioners thereupon filed petitions under Article 32 of the Constitution of India challenging the legality of the action taken by the Government on the ground that it was an invasion of their fundamental rights
The main contention of the petitioners was that the agreements were in essence and effect licenses granted to them to cut gather and carry away the produce in the shape of tendu leaves or lac or timber or wood and did not grant to them any interest in land or benefit to arise out of land  and the object of the agreements could therefore only be described as sale of goods as defined in the Indian Sale of Goods Act
In support of that contention the petitioners relied upon the decision in Chhotabhai s case
The Court examined the terms of the agreements in question and concluded that under none of them was there a naked right to take leaves of tendu trees together with a right of ingress and of regress 131 from the land but there were further benefits including the right to accupy the land to erect buildings and to take other forest produce not necessarily standing timber growing crop or grass
The Court further held that whether the right to the leaves could be regarded as a right to a growing crop had to be examined with reference to all the terms of the documents and all the rights conveyed thereunder and that if the right conveyed comprised more than the leaves of the trees it would not be correct to refer to it as being in respect of growing crops simpliciter
On an examination of the terms of the documents and the rights conveyed thereunder the Court came to the conclusion that what was granted to the petitioners was an interest in immovable property which was a proprietary right within the meaning of the said act and therefore it vested in the State
With reference to Chhotabhai Case relied upon by the petitioners
Hidayatullah J as he then was  speaking for the court said at page 346  It is clear from the foregoing analysis of the decision in Chhotabhai s Case that on a construction of the documents there under consideration an adopting a principle enunciated by the privy Council in Mohanlal Hargovind of Jubbalpure vs Commissioner of Income tax Central Provinces and Berar and relying upon a passage each in Benjamin on Sale and the well known treatise of Baden Powell the Bench came to the conclusion that the documents there under consideration did not create any interest in land and did not constitute any grant of any proprietary interest in the estate but were merely contracts or licenses given to the petitioners to cut gather and carry away the produce in the shape of tendu leaves or lac or timber or wood 
But then it necessarily followed that the Act did not purport to affect the petitioners  rights under the contracts or licences
But what was the nature of those rights of the petitioners It is plain that if they were merely contracual rights then as pointed out in the two later decisions in Ananda Behera vs The State of Orissa Shantabai s case the State has not acquired or taken possession of those rights but has only declined to be bound by the agreements to which they were not a party
If on the other hand the petitioners were mere licensees then also as pointed out in the second of the two cases cited the licences came to T l 132 an end on the extinction of the title of the licensors
In either case there was no question of the breach Or any fundamental right of the petitioners which could support the petitions which were presented under article 32 of the Constituion
It is this aspect of the matter which was not brought to the notice of the Court and the resulting omission to advert to it has seriously impaired if not completely nullified the effect and weight of the decision in Chhotabhai s case as a precedent
 We may also usefully reproduce the following passages at page 354 from the concluded portion of the judgment From this it is quite clear that forests and trees be longed to the proprietors and they were items of proprietary rights  If then the forest and the trees belonged to the proprietors as items in their proprietary rights  it is quite clear that these items of proprietary rights have been transferred to the petitioners
Being a proprietary right  it vests in the State under sections 3 and 4 of the Act
The decision in Chhotabhai s case treated these rights as bare licences and it was apparently given perincuriam and cannot therefore be followed Emphasis supplied Faced with this decision learned Counsel for the Appellant sought to distinguish it on the ground that the terms of the agreements in that case were different from the terms of the Bamboo Contract
We are unable to accept this submission
It is unnecessary to set out in detail the terms of the agreements in Mahadeo s Case
The differences sought to be pointed out by learned Counsel for the Appellant are unsubstantial and make no difference
The essential and basic features are the same and the same interpretation as was placed upon the agreements in Mahadeo s Case must there fore apply to the Bamboo Contract
In State of Madhya Pradesh vs Yakinuddin1 the respondents had entered into agreements with the former proprietors of certain estates in the State of Madhya Pradesh acquiring the right to pro pagate lac collect tendu leaves and gather fruits and flowers of Mahua leaves
Some of these documents were registered and others 1  133 unregistered
On the coming into force of the Madhya Pradesh Abolition of Proprietary Rights Estates Mahals Alienated Lands Act 1950 the State of Madhya Pradesh took possession of all the villages comprised in the respective estates of the proprietors who had granted the aforesaid rights to the respondents and refused to recognize the respondents  rights
The respondents thereupon filed petitions under Article 226 of the Constitution in the High Court of Madhya Pradesh and the High Court relying upon the decision in Chhotabhai s Case granted to the respondents the reliefs claimed by them
A Bench of five Judges of this Court allowed the appeals filed by the State of Madhya Pradesh
In its judgment this Court considered its earlier decisions in Shantabai vs State of Bombay and others and Mahadeo vs the State of Bombay and observed as follows at page 21 In view of these considerations it must be held that these cases are equally governed by the decisions aforesaid of this Court which have overruled the earliest decision in the case of Chhotabhai Jethabai Patel and Co vs The State of Madhya Pradesh
In Board of Revenue Etc
vs AM Ansari Etc1 the respondents were the highest bidders at an auction of forest produce namely timber fuel bamboos minor forest produce bidi leaves tanning barks parks mohwa etc held by the Forest Department of the Government of Andhra Pradesh
They were called upon to pay in terms of the conditions of sale stamp duty on the agreements to be executed by then as if these documents were leases of immovable property
The respondents there upon filed petitions under Article 226 of the Constitution in the High Court of Andhra Pradesh
In the said petitions the State contended that under the agreements the respondents had acquired an interest in immovable property
The High Court held in favour of the respondents
The State went in appeal to this court
On consideration of the terms of the agreements this Court held that the agreements were licences and not leases
The Court laid emphasis upon three salient features of those agreements for reaching its conclusion namely l that these were agreements of short duration of nine lo ten months 2 that they did not create any estate or interest in the 1 1976 3 SCR 661
H 134 land and 3 that they did not grant exclusive possession and control of the land to the respondents but merely granted to them the right to pluck cut carry away and appropriate the forest produce that might have been existing at the date of the agreement or which might have come into existence during the short period of the currency of the agreements and that the right of the respondents to go on the land was only ancillary to the real purpose of the contract
The Court observed as follows at page 667 
Thus the acquisition by the respondents not being an interest in the soil but merely a right to cut the fructus naturales we are clearly of the view that the agreements in question possessed the characteristics of licences and did not amount to leases so as to attract the applicability of Article 31c of the Stamp Act
The conclusion arrived at by us gains strength from the judgment of this Court in Firm Chhotabhai jethabai Patel and Co  Ors
The State of Madhya Pradesh where contracts and agreements entered into by person with the previous proprietors of certain estates and mahals in the State under which they acquired the rights to pluck collect and carry away tendu leaves to cultivate culture and acquire lac and to cut and carry away teak and timber and miscellaneous species of trees called hardwood and bamboos were held in essence and effect to be licences There is of course a Judgment of this Court in Mahadeo vs State of Bombay where seemingly a somewhat different view was expressed but the facts of that course were quite distinguishable
In that case apart from the bare right to take the leaves of tendu trees there were further benefits including the right to occupy the land to erect buildings and to take away other forest produce not necessarily standing timber growing crop or grass and the rights were spread over many years
 We fail to see how this authority in any way supports the case of the Appellant before us or resuscitates the authority of Chhotabhai s Case
In Ansari s Case the Court seems to have assumed that Chhotabhai s Case dealt with short term contracts while as we have seen above most of the contracts in Chhotabhai s 135 Case were of far greater duration extending even to fifteen years nor was the Court s attention drawn to the case of State Or Madhya Pradesh vs Yakinuddin
While the agreement in Ansari s Case was a mere right to enter upon the land and take away tendu leaves etc the right under the Bamboo Contract is of a wholly different nature
Further the question whether the agreements were a grant of a profit a prendre or a benefit to arise out of land was not raised and therefore not considered in Ansari s Case and the only point which fell for decision by the Court was whether the agreements were licences or leases
In fact another question which arose in that case was whether the respondents were liable to pay the amounts demanded from them as reimbursement of sales tax
Affirming the decision of the High Court on this point the Court held that the Forest Department did not carry on any business s by holding auctions of forest produce and was therefore not a dealer within the meaning of that term as defined in the Andhra Pradesh General Sales Tax Act 1957
The question whether the agreements were contracts of sale of goods was however not considered in that case We now come to the case of State of Madhya Pradesh and others vs Orient Paper Mills Ltd the second of the two cases on which learned Counsel for the Appellant relied so strongly in support of his submission that the Bamboo Contract was a contract of sale of goods
The facts in that case as appearing from the judgment of the High Court reported as Orient Paper Mills Ltd vs State of Madhya Pradesh and Othersl were that the President of Indicating on behalf of the former Part State of Vindhya Pradesh had entered into an agreement with the respondent
The said agreement was a registered instrument and was styled as a lease and under it the respondent acpuired the right for a period of twenty years with an option of renewal for a further period of twenty years to enter upon the leased area to fell cut or extract bamboos and salai wood and to remove store and utilize the same for meeting the fuel requirement of its paper mill
A copy of the said agreement has been produced before us
Some of the terms of the said agreement were the same as those contained in the Bamboo Contracts as also in the case of Mahadeo vs The State of Bombay
The said agreement provided for payment of royalty including a minimum royalty
It also conferred upon the respondent the right to take on lease such 1 1972 28 STC 532
136 suitable site or sites as were at the disposal of the State Government within the leased area for the erection of store houses sheds depots bungalows staff offices agencies and other buildings of a like nature bonafide required for the purposes of its business connected with the said agreement as also a right to make dams across reams cut canals make water course irrigation works construct roads railways and tramways and do any other work useful or necessary for the purposes of its business connected with the said agreement in or upon the leased area in terms very similar to those in the Bamboo Contract
After the States Reorganization Act 1956 came into force the territories comprised in the State of Vindhya Pradesh became part of the new State of Madhya Pradesh
At the date when the said agreement was entered into the  P and Berar Sales Tax Act 1947 was in force in the State of Vindhya Pradesh and the definition of goods contained in clause g of section 2 of that Act as modified and in force in that State excluded from the purview of the said Act foresr contracts that gave a right to collect timber or wood to forest produce
The C P and Berar Sales Tax Act was repealed by the Madhya Pradesh General Sales Tax Act 1958 with effect from April 1 1959 and the new Act did not contain any exclusion of forest contracts from the definitions of  goods
Further the term dealer as defined in the 1958 Act included the Central Government and the State Government or any of its departments
The Forest Department of the State Government was however exempted from the payment of sales tax for the period April 1 1959 to November 2 1962
After the period of the said exemption expired the Forest Department got itself registered as a dealer and the Divisional Forest Officer called upon the respondent to reimburse to him the amount which according to him he was liable to pay as sales tax in respect of the transaction covered by the said agreement
Challenging his right to do so the respondent filed in the High Court of Madhya Pradesh a writ petition under Article 226 of the Constitution
In the said writ petition the respondent contended that the transaction covered by the said agreement was not a sale of goods and accordingly no sales tax was payable in respect of bamboos and salai wood extracted by the respondent thereunder that the said agreement did not provide for the recovery of the amount of sales tax from the respondent and that neither the State Government nor the Forest Department of that Government was a dealer and that even if the sales tax was payable it was not recoverable as arrears of land 137 revenue
The High Court held that the transaction was one of sale of goods and that if sales tax was payable it would be recoverable under section 64A of the Sale of Goods Act 1939 but the State Government or the Forest Department could not merely by selling the forest produce grown on its own land be regarded as carrying on any business of buying selling supplying or distributing goods and therefore in respect of mere sales of forest produce neither the State Government nor the Forest Department was a dealer within the meaning of that term as defined in the 1958 Act
In coming to the conclusion that the said agreement was a contract of sale of goods the High Court proceeded upon the basis that what it had to consider was the stage when bamboo and salai wood have already been felled and appropriated  
By reason of the judgment of the High Court the definition of the term dealer was amended with retrospective effect by the Madhya Pradesh General Sales Tax Amendment and Validation Act 1971 so as to nullify the finding of the High Court that neither the State Government nor its Forest department was a dealer
The State of Madhya Pradesh as also the respondent came in appeal to the Supreme Court
The appeals were heard in the Court by a Division Bench of two learned Judges
At the hearing of the appeals the respondent desired to challenge the vires of the amending Act but in view of the Presidential Proclamation suspending the operation of Article 14 it could not do so and the court held that after the proclamation lapsed it was open to the respondent to take up the point but so far E the appeals were concerned that challenge was not available and the appeals must be decided on the basis that the amendment was valid and constitutional
The main point before this Court therefore was whether the said agreement was a lease as it was styled or a simple sale of standing timber coupled with a licence to enter and do certain things on another s land
The Court held that the label given to a document was not conclusive of its real nature and that under the said agreement possession of the land was not given to the respondent as it would have been had the said agreement been a lease and that as the terms of the said agreement showed it conferred in substance a right to cut and carry away timber of specified species G and till the trees were cut they remained the property of the owner namely the State and that once the trees were severed the property in them passed to the respondent
The Court further observed that the term used in the said agreement namely royalty was a feudalistic euphemism for the price  of the timber
138 We are unable to agree with the interpretation placed by the Court on the document in the Orient Paper Mill  Case
We find that in that case this Court as also the High Court adopted a wrong approach in construing the said document
It is a well settled rule of interpretation that a document must be construed as a whole
This rule is stated in Halsbury s Laws of England Fourth Edition Volume 12 paragraph 1469 at page 602 as follows Instrument construed as whole
It is a rule of construction applicable to all written instruments that the instrument must be construed as a whole in order to ascertain the true meaning of its several clauses and the words of each clause must be so interpreted as to bring them into harmony with the other provisions of the instrument if that interpretation does no violence to the cleaning of which they are naturally susceptible
The best construction of deeds is to make one part of the deed expound the other and so to make all the parts agree
Effect must as far as possible be given to every word and every clause
In Mahadeo vs State of Bombay a five Judge Bench of this Court categorically held at page 349 that Whether the right to the leaves can be regarded as a right to a growing crop has however to be examined with reference to all the terms of the documents and all the right
conveyed thereunder
In spite of this clear and unequivocal pronouncement by a five Judge Bench of this Court the learned Judges of the High Court who decided the Orient Paper Mills  Case held at page 538 that we have to consider the stage when bamboos and salai wood have already been felled and appropriated while a two Judge Bench of this Court evolved for itself in the appeal from that judgment a rule of interpretation which was thus stated at page 152 by Krishna Iyer J who spoke for the Court The meat of the matter is the judicial determination of the true character of the transaction of lease  from the angle of the MPGST Act and the Sale of Goods Act whose combined operation is pressed into service for making the tax exigible from the Forest Department and in turn from the respondent mills
It is the part of judicial prudence to 139 decide an issue arising under the specific statute by confining the focus to that statuary compass as far as possible
Diffusion into wider jurisprudential areas is fraught with unwitting conflict or confusion
We therefore warn ourselves against venturing into the general law of real property except for minimal illumination thrown by rulings cited
In a large sense there are no absolutes in legal propositions and human problems and so in the jural cosmos of relativity our observations here may not be good currency beyond the factual legal boundaries of sales tax situations under a specific statute
 A little later the learned Judge stated at page 157 as follows We may also observe that the question before us is not so much as to what nomenclature would aptly describe the deed but as to whether the deed results in sale of trees after they are cut
The answer to that question as would appear from the above has to be in the affirmative
The above rule enunciated by this Court in that case falls into two parts namely I a document should be so interpreted as to bring it within the ambit of a particular statute relevant for the purpose of the dispute before the Court and 2 in order to do so the court can look at only such of the clauses of the document as also to just one or more of the consequences flowing from the document which would fit in with the interpretation which the court wants to put on the document to make that statute applicable
The above principle of interpretation cannot be accepted as correct in law
It is fraught with considerable danger and mischief as it may expose documents to the personal predilections and philosophies of individual judges depending upon whether according to them it would be desirable that documents of the type they have to construe should be made subject to a particular statute or not
The result would be that a document can be construed as amounting to a grant of a benefit to arise out of land when the question before the Court is whether proprietary rights and interests in estates have been abolished and the same document or a document having the same tenor could be construed as a contract of sale of goods when the question Is whether the amounts payable thereunder are exigible to sales tax or purchase tax making the interpretation of the document dependent upon the personal views of the judges with respect to the 140 legislation in question
In the very case which we are considering namely the Orient Paper Mill s Case as shown by the very first sentence in the judgment this Court obliquely expressed its disapproval of the transactions of the type represent by the document before it
That sentence is as follows at page 150 
The State of Madhya Pradesh blessed with abundant forest wealth whose exploitation for reasons best known to that government was left in part to the private sector
viz the respondent Orient Paper Mills  We may point out here that in making this observation the Court overlooked three important aspects of the matter namely I it was a matter of policy for the State to decide whether such transactions should be entered into or not 2 the transaction was entered into by the State so that a paper mill could be started in the State as shown by the various terms of the said agreement and thus was an encouragement to setting up of industries in the State and 3 the transaction ensured employment for the people of the area because the said agreement expressly provided that the respondent was to engage minim m 50 per cent of the labour for the working of the contract area from the local source if available
Just as a document cannot be interpreted by picking out only a few clauses ignoring the other relevant ones in the same way the nature and meaning of a document cannot be determined by its end result or one of the results or consequences which flow from it
If the second part of the above rule were correct the result would be startling
There would be almost no agreement relating to immovable property which cannot be construed as a contract of sale of goods
Two instances would suffice to show this
If a man were to sell his building to another and the deed of sale were to provide that the building should be demolished and reconstructed and the price should be paid to the vendor partly in money and partly by giving him accommodation in the new building according to this rule of interpretation adopted by the Court in the Orient Paper Mills Case it would for the purpose of sales tax be a sale of goods because the old building when demolished would result in movable property namely debris doors windows water pipes drainage pipes water tanks etc which would be sold by the purchaser as movables
Similarly if a man were to give a lease of his orchard or field the lessee would be entitled to the fruits already in existence as also to 141 the fruits which would come into existence in the future and equally in the case of a field the same would be the case wlth respect to the crop growing in the field as also the crops to grow thereafter
The fruits and crop whether existing or future when plucked or harvested would be movable property and would be sold as such by the lessee but on the second part of the rule of interpretation laid down the Orient Paper Mills  Case the document indisputably a lease of immovable property would for the purposes of sales tax law be a sale of goods
In looking merely at the end result of the agreement before it namely that the bamboos would be cut and then would be goods in the hands of the respondent and holding therefrom that the transaction was exigible to sales tax the Court overlooked what had been firmly established by the decision of the five Judge Bench of this Court in State of Madras vs Gannon Dunkerly Co Madras Ltd that both the agreement and the sale must relate to the same subject matter and therefore there cannot be an agreement relating to one kind of property and a sale as regards another
This principle has been consistently followed and applied by this Court see for instance
Commissioner of Sales Tax
M P vs Purshottam Premji1 Incidentally we may also point out that in the Orient Paper Mills Case this Court itself had reservations as regards what it was deciding as is shown by its statement that in the journal cosmos of relativity our observations here may not be good currency beyond the factual legal boundaries of sales tax situations under a specific statute
 We are constrained to observe that they are not good currency so far as even those situations are concerned
It is true that the nomenclature and description given to a contract is not determinative of the real nature of the document or of the transaction thereunder
These however have to be determined from all the terms and clauses of the document and all the rights and results flowing therefrom and not by picking and choosing certain clauses and the ultimate effect or result as the Court did in the Orient Paper Mills  Case
Thus in coming to the conclusion that the term royalty used in the document before it was merely a feudalistic euphemism for the price  of the timber the Court overlooked the fact that the amount of royalty payable by the respondent was consideration for all the rights conferred upon the respondent under the contract though it was to be calculated according to the quantity 1 1970 26 STC 38 41 SC 142 of the bamboos felled and the Court also overlooked the fact that this was made further clear by the provision for payment of a minimum royalty
It is also true that an interpretation placed by the court on a document is not binding upon it when another document comes to be interpreted by it but that is so where the two documents are of different tenors and not where they have the same tenor
On the ground that they dealt with the general law of real property the Court in Orient Paper Mils  case did not advert to the earlier decisions of this Court relating to documents with similar tenor even though those cases referred to in the judgment of the Madhya Pradesh High Court under appeal before it
In view of this the Orissa High Court in the judgment under appeal before us held that the Orient Paper Mill s Case was decided by this Court per in curium because it did not take into consideration decisions of larger Benches of this Court
In Union of India and another vs K section Subramanian1 this Court held as follows But we do not think that the High Court acted correctly in skirting the views expressed by larger benches of this Court in the manner in which it had done this
The proper course for a High Court in such a case is to try to find out and follow the opinions expressed by larger benches of this Court in preference to those expressed by smaller benches of the Court
That is the practice followed by this Court itself
The practice has now crystallized in to rule of law declared by this Court
 Had the Court looked at these decisions of larger Benches it would have appreciated that the only question before it could not be whether the document was a lease or a contract of sale of goods and that even though the document was not a lease it could be a grant of a profit a prendre and that where there is a grant of a profit a prendre that is a benefit to arise out of land it is immaterial whether the possession of the land is given to the grantee or whether the grantee is given only a licence to enter upon the land to receive the benefit
The bacic and salient features of the agreement before the Court in the Orient Paper Mills  Case were the same as in the case of Mahadeo state of Bombay and this Court was not 1 1977 I SCR 87 92 143 justified in not adverting to that case and the other cases referred to by us earlier on the ground that these cases dealt with the general law of real property
A chameleon may change its surroundings but document is not a chameleon to change its meaning according to the purpose of the statute with reference to which it falls to be interpreted and if documents having the same tenor are not to be construed by courts in the same way it would make for great uncertainty and would introduce confusion leaving people bewildered as to how they should manage their affairs so as to make their transactions valid and legal in eye of the law
The authorities discussed above show that the case of Firm Chhotabhai Jethabai Patel  Co vs The State of Madhya Pradesh is not good law and has been overruled by decisions of larger Benches of this Court
They equally show that the case of State of Madhya Pradesh vs Orient Paper Mills Ltd is also not good law and that this decision was given per incurium and laid down principles of interpretation which are wrong in law and cannot be assented to
The discussion of the above authorities also confirm us in our opinion that the Bamboo Contract is not a contract of sale of goods but is a grant of a Profit a prendre that is of a benefit to arise out of land and that it is not possible to bifurcate the Bamboo Contract into two one for the sale of bamboos existing at the date of the contract and the other for the sale of future goods that is of bamboos to come into existence in the future
In order to ascertain the true nature and meaning of the Bamboo Contract we have to examine the said contract as a whole with reference to all its terms and all the rights conferred by it and not with reference to only a few terms or with just one of the rights flowing therefrom
On a proper interpretation the Bamboo Contract dose not confer upon the Respondent Company merely a right to enter upon the land and cut bamboos and take them away
In addition to the right to enter upon the land for the above purpose there are other important rights flowing from the Bamboo Contract it which we have already summarized earlier and which make in clear that what the Bamboo Contract granted was a benefit to arise out of land which is an interest in immovable property
The attemp on the part of the State Government and the officer of its Sales Tax Department to bring to tax the amounts payable under the Bmboo 144 Contract was therefore not only unconstitutional but ultra vires the Orissa Act
Works Contract The only point which now remains to be considered is the one canvassed by the contesting Respondents namely that the Bamboo Contract as also the Timber Contracts arc works contracts and the amounts payable thereunder cannot therefore be made exigible to any tax under the Orissa Act
A works contract is a compendious term to describe conveniently a contract for the performance of work or services in which the supply of materials or some other goods is incidental
The simplest example of this type of contract would be where an order is given to a tailor to make a suit from suiting supplied by the customer
This would be a contract of work or servies in which the suyply of materials namely thread lining and buttons used in making the suit would be mrely incidental
Similarly if an artist is commissioned to paint a portrait it would be a contract of work and services in which the canvass on which the portrait is painted and the paint used in painting the portrait would be merely incidental
In Commissioner of Sale Tax MP vs Pershottam Premji this Court pointed out the distinction between a works contract and a contract for the sale of goods as follows at page 41 The primary difference between a contract for work or service and a contract for sale of goods is that in the former there is in the person performing work or rendering service no property in the thing produced as a whole notwithstanding that a part or even the whole of the materials used by him may have been his property
In the case of a contract for sale the thing produced as a whole has individual existence as the sole property of the party who produced it at some time before delivery and the property therein passes only under the contract relating thereto to the other party for price  As pointed out above the Timber Contracts are agreements relating to movables while the Bamboo Contract is a grant of an interest in immovable property
The question therefore whether there is a works contract or a contract of sale of goods can arise only with respect to the Timber Contracts
but the very meaning 145 of a works contract would show that the Timber Contracts cannot be works contracts
The payee of the price namely the Government has not undertaken to do any work or labour
The work or labour under the Timber Contracts is to be done by the payer of the price namely the forest contractor that is the Respondent Firm
It is the Respondent Firm which has to enter upon the land and to fell the standing trees and to remove them
Assuming for the sake of argument that the Bamboo Contract were a contract relating to movables the same position would apply to it
This contention of the Respondents is therefore without any substance
Conclusions To summarize our conclusions 1 The impugned provisions namely 1 Notification SRO No 372177 dated May 23 1977 2 Notification SRO No 373177_ dated May 23 1977 3 Entries Nos 2 and 17 in the Schedule to Notification No 67178 CTA 135177 Pt F SRO No90077 dated December 29 1977 and 4 Entries Nos 2 and 17 in the Schedule to Notification No 67181 CTA 13577 F SRO No90177 dated December 29 1977 levying purchase tax at the rate of ten per cent on the purchase of  bamboos agreed to be severed and standing trees agreed to  be severed are not ultra vires either Entry 54 in List II in the Seventh Schedule to the Constitution of India or the Orissa Sales Tax Act 1947 but are constitutional and valid
2 Under the impugned provisions the taxable event is not an agreement to sever standing trees or bamboos but the purchase of standing trees or bamboos agreed to be severed
3 The absence in the impugned provisions of the words before sale or under the contract of sale is immaterial for the impugned provisions read as a whole clearly show that the severance of standing trees or bamboos has to be under the contract of sale and before the purchase thereof has been completed and not before sale of such trees or bamboos
146 4 The subject matter of the impugned provisions is goods and the tax that is levied thereunder is on a completed purchase of goods
5 When under section 3 B of the Orissa Sales Tax Act 1947 any goods are declared to be liable to tax on the turnover of purchases such goods automatically cease to be liable to sales tax by reason of the proviso to that section
6 The word supersession in the Notifications dated December 29 1977 is used in the same sense as the words repeal and replacement and therefore does not have the effect of wiping out the tax liability under the previous notifications
All that was done by using the words in supersession of all previous notifications in the Notifications dated December 29 1977 was to repeal and replace previous notifications and not to wipe out any I liability incurred under the previous notifications
The Timber Contracts are not works contracts but are agreements to sell standing timber
Under the Timber Contracts the property in the trees which were the subject matter of the contracts passed to the Respondent Firm Messrs MM Khara only in the trees which were felled that is in timber after all the Conditions of the contract had been complied with and after such timber was examined and checked and removed from the contract area
The impugned provisions therefore did not apply to the transactions covered by the Timber Contracts
9 The dictionary meaning of a word cannot be looked at where that word has been statutorily defined or judicially interpreted but where there is no such definition or interpretation the court may take the aid of dictionaries to ascertain the meaning of a word in common parlance bearing in mind that a word is used in different senses according to its context and a dictionary gives all the meanings of a word and the court has therefore to select particular meaning which is relevant to the content in which it has to interpret that word 147 10 Timber and sized or dressed logs are one and the same commercial commodity
Beams rafters and planks would also be timber
11 As the sales of dressed or sized logs by the Respondent Firm have already been assessed to sales tax the sales to the First Respondent Firm of timber by the State Government from which logs were made by the Respondent Firm cannot be made liable to sales tax as it would amount to levying tax at two points in the same series of sales by successive dealers assuming without deciding that the retrospectively substituted definition of dealer in clause c of section 2 of the Orissa Sales Tax Act 1947 is valid
12 During the period June 1 1977 to December 31 1977 the sales of logs by the Respondent Firm would be liable to tax at the rate of ten per cent
Assuming that these sale s have been assessed to tax at the rate of ten per cent by reason of the period of limitation prescribed by section 128 of the Orissa Sales Tax Act 1947 the Respondent Firm s assessment for the relevant period cannot now be reopened to reassess such sales at ten Per cent
13 The Bamboo Contract is not a lease of the contract  areas to the Respondent Company The Titaghur Paper Mills Company Limited
14 The Bamboo Contract is also not a grant of an easement to the Respondent Company
15 The Bamboo contract is a grant of a profit a prendre which in Indian law is a benefit to arise out of land and thus creates an interest in immovable property
16 Being a benefit to arise out of land any attempt on the Part of the State Government to tax the amounts payable under the Bamboo Contract would be not only ultra vires the Orissa Act but also unconstitutional as being beyond the State s taxing power under Entry 54 in List II in the seventh Schedule to the Constitution of India
148 17 The case of Firm Chhotabhai Jethabai Patel  Co vs The State of Madhya Pradesh is not good law and has been overruled by decisions of larger Benches of this Court as pointed out by this Court in State of Madhya Pradesh vs Yakinuddin
18 The case of State of Madhya Pradesh  Ors vs Orient Paper Mills Ltd is also not good law as that decision was given per incurium and laid down principles of interpretation which are wrong in law
19 The real nature of a document and the transaction thereunder have to be determined with reference to all the terms and clauses of that document and all the rights and results flowing therefrom
On the above conclusions reached by us the judgment of the High Court in so far as it hold the impugned provisions to be unconstitutional and ultra vires the Orissa Sales Tax Act 1947 requires to be reversed
This however does not mean that the writ petitions filed by the Respondent Company and the Respondent Firm in the High Court should be dismissed because in its writ petitions the Respondent Company had played for quashing the notice dated August 18 1977 issued against it under Rules 22 and 282 of the Orissa Sales Tax Rules 1947 and the Respondent Firm in its writ petition had prayed for setting aside the assessment order dated November 28 1978 for the priod April 1 1977 to March 31 1978
On the findings given by us the said notice must be quashed
So far the said assessment order is concerned as we have pointed out earlier it is severable and does not require to be set aside in toto but only so far as it imposed purchase tax on the amounts paid by the Respondent Firm under the Timber Contract
Though the High Court did not give these consequential reliefs in view of its findings that the impugned provisions were invalid it becomes necessary for us to do so in order to do complete justice between the parties as we are entitled to do under Article 142 of the Constitution of India
In the result we reverse the judgment of the High Court in so for as it holds 1 Notification SRO No 37277 dated May 23 1977 issued under section 3 B of the Orissa Sales Tax Act 1947 149 2 Notification SRO No 37377 dated May 23 1977 issued under the first proviso to sub section 1 of section 5 of the said Act prior to the amendment of the said sub section by the Orissa Sale Tax Amendment Act 1978 which repealed and replaced the Orissa Sales Tax Amendment Ordinance 1977 3 Entries 2 and 17 in the Schedule to Notification No 67178 CTA 13577 Pt F SRO
No 90077 dated December 29 1977 issued under the said section 3 B and 4 Enteries No 2 and 17 in the Schedule to Notification No 67181 CTA 13577 F SRO No 90177 dated December 29 1977 issued under sub section 1 of the said section S after its amendment by the Orissa Sales Tax Amendment Act 1978 to be unconstitutional as being ultra vires Entry 54 in List II in the Seventh Schedule to the Constitution of India and as being ultra vires the Orissa Sales Tax Act 1947 and we declare these provisions to be constitutional and valid
In Civil Appeal No 219 of 1982 we further quash and set aside the notice dated August 18 1977 under Rules 22 and 282 of the Orissa Sales Tax Rules 1947 issued against the Respondent Company The Titaghur Paper Mills Company Limited and the assessment order if any made in pursuance thereof
In Civil Appeal No 220 of 1982 we further modify the assessment order dated November 28 1978 for the period April 1 1977 to March 31 1978 made against Respondent Firm Messrs MM Khara by deleting therefrom the item of purchase tax on the amounts paid by the Respondent Firm under the Timber Contracts entered into by it with the State of Orissa and direct consequential modifications to be made therein
As the real object of the State Government in making the mpugned provisions was to make exigible to purchase tax the amounts payable under the Bamboo Contracts and the Timber Contracts in which object it has failed in our opinion a fair order for costs would be that the parties should bear and pay their own costs of these Appeals and we direct accordingly


Summary:
Section 3B of the Orissa Sales Tax Act 1917 empowers the State Government to declare from time to time any goods or class of goods to be liable to tax on turnover of purchases
The proviso provides that no tax shall be payable on the sales of such goods or class of goods declared under this section
Section 51 prior to its amendment by the Orissa Sales Tax Amendment Ordinance 1977 provides that the tax payable by a dealer under the Orissa Act should be levied on his taxable turnover at such rate not exceeding thirteen percent and subject to such conditions as the State Government might from time to time by notification specify
On May 23 1977 the State Government issued two notifications
Notification No SRO 37277 was made under section 3B amending the earlier notification dated April 23 1976
This notification made standing trees and bamboos agreed to be severed liable to tax on the turnover of purchase with effect from 27 June 1 1977
Notification SRO No 373177 issued under the first proviso to section 51 of the Orissa Act amended with effect from June 1 1977 the second of the two notifications of April 23 1976 and directed that the tax payable by a dealer under the Orissa Act on account of purchase of bamboos agreed to be severed and standing trees agreed to be severed would be at the rate of 10
On December 29 1977 the Orissa Sales Tax Amendment Ordinance 1977 was promulgated amending the Orissa Act with effect from January 1978
With effect from the same date two notifications SRO No 900177 and SRO No 901177 were issued the first notification which was issued under the provisions of section 3B and in supersession of all previous notifications on the subject declared that the goods mentioned in Column 2 of the schedule to the notification were liable to be taxed on the turnover of purchase with effect from January 1 1978
Entries 2 and 17 in the schedule of this notification specified bamboos agreed to be severed and standing trees agreed to be severed respectively
Notification No 90177 issued under section 5 1 was in supersession of all previous notifications in that regard
The State Government by this notification directed that with effect from January l 1978 the tax payable by a dealer under the Orissa Act on account of purchase of goods specified in column 2 of the schedule to the notification would be at the rate specified against it in column 3 thereof
The rate of purchase tax for bamboos agreed to be severed and standing trees agreed to be severed was prescribed at 10
The Ordinance was repealed and replaced by Orissa Sales Tax Amendment Act of 1978
A large number of writ petitions were filed before the High Court impugning the notifications dated May 23 1977 and December 29 1977
One group of petitioners consisted of those who had entered into agreements with the State for the felling cutting obtaining and removing bamboos from forest areas for the manufacture of paper bamboo contracts and the other group consisted of those who had entered into agreements for the purchase of standing trees Timber Contracts
The bamboo contracts were a grant of exclusive right and license to fell i cut and remove bamboos from the forest
Under the terms of auction the respondent was bound to pay a minimum royalty irrespective of the quantity of bamboos cut and removed
The Governor of the State was called the grantor of the licence
The bamboo contracts were in respect of different areas for periods ranging from 11 to 14 years with an option to renew the agreements for further periods
The respondent in CA No 219182 contended before the High Court that the subject matter of the Bamboo contract was not a sale or purchase of goods but was a lease of immovable property or in any went was a creation of an interest in immovable property by way of grant profit a prendre which amounted to an easement under the and that for that reason the royalty payable under the bamboo contracts could not be made exigible to either sales tax or purchase tax and that the impugned provisions of the notifications were ultra vires the Act
It was also contended that the bamboo contract was 28 a works contract and for this reason also the transaction was not exigible to sales tax or purchase tax and since the two notifications of December 29 1977 were expressed to be made in supersession of all earlier notifications on the subject the liability to sales tax under the said notifications of May 23 1977 was wiped out
In Civil Appeal No 22082 the bids of the respondent firm at auctions held by the Government in respect of trees standing in forest areas were accepted and on confirmation of the bids by the competent authority it entered into agreements with the Government for felling and removing such trees
The respondent in turn sold the trees felled by it in the form of logs to others At the relevant time the respondent was successful at five auction sales and on ratification of the bids entered into five separate agreements timber contracts for felling and removing the trees standing in the forest areas
After the issue of the notifications of May 23
1977 the respondent filed a writ petition in the High Court against the State and the Sales Tax and Forest Authorities contending I that the levy of purchase tax on standing timber agreed to be severed was beyond the legislative competence of the State Legislature and 2 the notifications imposed a tax both at the point of sale and at the point of purchase and for this reason were invalid and ultra vires the Act
It was also contended that timber contracts were works contracts and the amounts payable under them were not exigible either to purchase tax or sales tax
The High Court allowed all the writ petitions and quashed the impugned notifications
In appeal to the Supreme Court the State contended that the subject matter of the impugned provisions is goods within the meaning of the term in the Sales of Goods Act and the Orissa Act and that what was made exigible to tax under the impugned provisions notifications was a completed purchase of goods
 HELD I Notification SRO Nos
37277 and 37377 dated May 23 1977 2 entries Nos 2 and 17 in the schedule to notification No 900177 and 3 entries Nos 2 and 17 in the schedule to notification No 901177 dated December 29 1977 levying purchase tax at the rate of ten per cent on the purchase of bamboos agreed to be severed and standing trees agreed to be severed are not ultra vires either Entry 54 List II of the Seventh Schedule to the Constitution of India or the Orissa Sales Tax Act 1947 but are constitutional and valid 145D F a The Legislative competence to enact the Orissa Act which was a pre constitution enactment was derived from section 100 3 of the Government of India Act 1935 read with Entry 48 in List II in the Seventh Schedule to that Act
While Entry 48 spoke of taxes on the sale of goods Entry 54 of List II of the Seventh Schedule of the Constitution speaks of taxes on the sale or 29 purchase of goods
 The addition of the word purchase in Entry 54 permits the State Legislature to levy a purchase tax and does not confine its taxing power merely to levying sales tax
62F H b A cantena of decisions of this Court had held that the expression sale of goods had been used in the Government of India Act 1935 in the same sense in which it is used in the and that it authorised the imposition of a tax only when there was a completed sale involving transfer of title to the goods
While construing Entry 54 in List II of the Seventh Schedule to the constitution interpretation was adopted and any attempt by the State Legislature to give that expression an artificial meaning or an enlarged meaning or to bring within its scope what would not be comprehended within that expression would be unconstitutional and ultra vires
63F 64G H 63G State of Madras vs Cannon Dunkerley  Co Madras Ltd   The Sales Tax Officer Pilibhit vs Messrs Budh Prakash Jai Prakash 955 1 SCR 243 247
Bhopal Sugar Industries Ltd MP  Anr
vs P Dube Sales Tax Officer Bhopal Region Bhopal  Anr
AIR 1964 SC 1037 KL Johar  Co vs Deputy Commercial Tax Officer  Joint Commercial Tax Officer Harbour Div
II Madras vs Young Men s India Association Reg Madras  Anr   State of Maharashtra  Anr
vs Champalal Kishanlal Mohta 1971 1 SCR 46 followed
c Although a State is free to impose a tax at one or more points in a series of sales or purchases in respect of the same goods the Orissa Act has adopted a single point levy by enacting the proviso to section 3 under which no tax is payable on the sale of goods or class of goods declared under that section to be liable to tax on the turnover of purchases
The proviso to section 8 states that the same goods shall not be taxed at more than one point in the same series of sales or purchases by successive dealers
 Therefore where in a series of sales or purchases tax is levied at a particular point neither sales tax nor purchase tax can be levied at another point in the same series
65C E d Since any attempt on the part of the State to impose by legislation tax on sales or purchases in respect of what would not be sale or a sale of goods under The is unconstitutional any attempt by it to do so in the exercise of its power of making subordinate legislation would be equally unconstitutional
Similarly
where any rule or notification travels beyond the ambit of the parent Act it would be ultra vires the Act
Equally sales tax authorities purporting to act under the Act or under any rule made or notification issued thereunder cannot travel beyond the scope of such Act rule or notification
Thus the sales tax authorities under the Orissa Act cannot assess to sales tax or purchase tax a transaction which is not a sale or purchase of 30 goods or assess to sales tax any goods or class of goods which are liable to purchase tax or assess to tax whether sales tax or purchase tax goods at another point in the same series of sales or purchases of those goods by successive dealers who are liable to be taxed at a different point in that series
65G H 56A C 2 There is no substance in the argument of the respondent that by the impugned provisions a new class of goods
not known to law had been created
The definition of the expression goods  in both the and the Orissa Act which is almost in identical terms includes things attached to or forming part of The land which are agreed to be severed before sale or under the contract of sale 66E G H a An examination of the definitions of movable property and immovable property given in the General Clauses Act Registration Act and Transfer of Property Act show that things attached to the earth are immovable property
 The term attachment means rooted in the earth as in the case of trees and shrubs Thus while trees rooted in the earth are immovable property as being things attached to the earth by reason of the definition of the term immovable property in various statutes namely the General Clauses Act and the Orissa General Clauses Act and the Registration Act read with the definition of the expression attached to the earth given in the Transfer of Property Act standing timber is movable property by reason of its exclusion from the definition of immovable property in the Transfer of Property Act and the Registration Act and by being expressly included within the meaning of the term movable property given in the Registration Act
67E 68F 68G H 69A b The term standing timber has been judicially recognised as a tree which ii in a state fit for the purposes of being used as wood for buildings houses bridges windows whether on the tree or cut and seasoned that is a tree meant to be converted into timber so shortly that it could already be looked upon as timber for all practical purposes even though it is still standing
Thus trees which are ready to be felled would be standing timber and therefore movable property While trees including bamboos rooted in the earth being things attached to the earth are immovable property and if they are standing timber are movable property trees including bamboos rooted in the earth which are agreed to be severed before sale or under the contract of sale are not only movable property but also goods
o9D E 70B C Smt
Shantabai vs State of Bombay  Ors
  275 6 followed
c The distinction which existed in English law between fructus naturales natural growth of soil regarded as part of the soil until severance and fructus industriales which are chattels considered as representing the labour and expense of the occupier and thing independent of the land does not exist in Indian law
In a case of this nature the only question that falls for consideration in Indian law is whether a transaction relates to goods or movable 31 property
If it is sale of immovable property a document of the kind specified in section 17 of the Registration Act is required to be compulsorily registered but a document relating to sale of goods or of movable property is not required to be registered
Secondly under Entry 54 of List 11 of the Seventh Schedule the State cannot levy a tax on the sale or purchase of any property other than goods
71C D 3
The respondent s contention that the impugned provisions levied a purchase tax on immovable property and not on goods and that the State Government has travelled beyond its taxing power has no merit
71F a The High Court erred in holding that the impugned provisions amounted to levying a tax on an agreement to sell and not on actual sale or purchase that standing trees being unascertained goods continued to be the property of the State Government until felled and therefore the title to such trees or bamboos is transferred in favour of the Forest Contractor only when the trees or bamboos were felled and severed in accordance with the terms of the contract
There is a fallacy in the reasoning of the High Court in that the High Court read merely the description of the goods given in the impugned provisions by itself and not in conjunction with their governing words
71G H 72A B b Tax levied under section 3B is not on goods declared under that section but on the turnover of purchases of such goods
A reading of the notification issued under sections 3B and 51 as a whole makes it clear that the taxable event is not an agreement to sever standing trees or bamboos but the purchase of bamboos or standing trees agreed to be severed
72C D c The use of the terms agreed in the description of goods showed that there must be an agreement between the buyer and the seller and under this agreement standing trees as also bamboos must be agreed to be severed
According to the definition of goods such severance may be either before sale or under the contract of sale The makes a distinction between sale and agreement to sell and provides that where there is a transfer from the buyer to the seller of property in the goods which are the subject matter of the agreement to sell the contract of sale is a sale but when the transfer of property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled it is an agreement to sell which becomes a sale when the time elapses or such conditions are fulfilled
In the first case the contract is executed contract while in the second it is executory 72E 73C D d A conspectus of the relevant sections o the shows that a purchase would be complete when the goods in the case standing trees or bamboos are specific goods
If these factors exist then unless a different intention appears either from the terms of the contract or can be inferred from the conduct of the parties and other circumstances of the case the property in such goods would pass from the seller to the buyer when the contract is made and it is immaterial whether the time of payment of the price or the time of 32 taking their delivery of standing trees agreed to be severed or bamboos agreed to be severed or both is postponed
If however there is an unconditional contract for the sale of unascertained goods then unless a different intention appear  the property in them would be transferred to the buyer when the goods are ascertained and it would be immaterial whether the time of payment of the price or the time of taking delivery of standing trees agreed to be severed or bamboos agreed to be severed or both is postponed
In either event the sale and purchase would be completed before severance
Therefore for the impugned provisions to apply the severance of the standing trees or bamboos must not be before sale but under the contract of sale that is after the sale thereof is completed
The absence in the impugned provisions of the words before sale or under the contract of sale thus made no difference
The subject matter of the impugned provisions was goods and the tax levied thereunder was on the completed purchase of goods
76F H 77A C 4
The High Court has confused the question of interpretation of the impugned provisions with the interpretation of Timber Contracts and Bamboo Contracts
The question of the validity of the impugned provisions had nothing to do with the legality of any action taken thereunder to make exigible to tax a particular transaction
If a notification is invalid all action taken under it would be invalid also
Where on the other hand a Notification is valid an action purported to be taken thereunder contrary to the terms of that notification would be bad in law without affecting in any manner the validity of the notification
Were the interpretation placed by the High Court on the Bamboo contracts and the Timber Contracts correct the transactions covered by them would not be liable to be taxed under the impugned provisions and any attempt or action by the State to do so would be illegal but the validity of the impugned provisions would not be affected thereby
There is no merit in the challenge to the validity of the impugned provisions on the ground of their unconstitutionality
77D F H 78A 5
a The High Court also erred in its view that bamboos and trees agreed to be severed were the same as bamboos and timber after they were felled and that since bamboos and trees were liable to tax at the sale point taxation of the same goods at the purchase point amounted to double taxation and that this was contrary to the provisions of the Orissa Act
78C b Not only does the Orissa Act expressly forbids double taxation but it also forbids the levying of tax at more than one point in the same series of sales or purchases by successive dealers This is evident from the provisos to sections 3B and 8
Under the proviso to section 3B no tax is payable sales of goods or class of goods declared under that section to be liable to tax on the turnover of purchases
Under the proviso to section 8 the same goods are not to be taxed at more than one point in the same series of sales or purchases by successive dealers
78E F c The two notifications of December 29 1977 were issued as a result the Orissa Sales Tax Amendment ordinance 1977 which later became the 33 Orissa Sales Tax Amendment Act 1978 while the two notifications of May 23 1977 were issued prior to the amendment
79A d Prior to January 1 1978 under section 51 tax was payable by a dealer on his taxable turnover of sales as also purchases at n certain fixed percentage
This rate applied both to sales tax and purchase tax
But the purchase tax was payable only on the turnover of purchases of goods declared B under section 3B
In respect of goods not so declared a dealer was liable to pay only sales tax
Under the proviso to this section if goods were declared to be liable to purchase tax no tax was payable on sales of such goods
Under section 51 the State Government was required to issue t notification only when it wanted to fix a rate of tax higher or lower than that specified in this section
If no such notification was issued then the tax payable be it sales tax or purchase tax was to be at the rate mentioned in section 5l
Where however any goods were declared under section 3B to be liable to tax on the turnover of purchases the notification prescribing a higher or lower rate of sales tax issued under the first proviso to section 51 would thereupon ceases to be observative by reason of the operation of the proviso to section 3B and it was not necessary to repeal expressly that notification
It was also not necessary for the State Government to issue a notification fixing the rate of purchase tax unless it wanted to fix a rate higher or lower than that specified in section 51
Where no such notification was issued the rate of purchase tax would be the one which was mentioned in section 51
79C H e After January 1 1978 no rate of tax was specified in the Orissa Act
Under section 51 the State Government is given power to notify from time to time the rate of tax sales tax or purchase tax by issuing notifications
The notification dated December 29 1977 issued under section 51 does not contain any entry in respect of bamboos or timber or in respect of bamboos agreed to be severed or standing trees agreed to be severed
If they were liable to sales tax they would fall under the residuary entry No 101 and be liable to sales tax at the rate of seven percent
If any goods feeling under the residuary entry or any other entry in that notification are declared under section 3B to be liable to tax on the turnover of purchases the residuary entry or that particular entry would automatically cease to operate in respect of those goods by reason of the proviso to section 3B without there being any necessity to delete that particular entry or to amend the residuary entry by excluding those goods therefrom
It would be necessary for the State Government to issue a notification specifying the rate of purchase tax on those goods because unlike what the position was prior to January 1 1978 on and after that date the new sub section 51 does not specify any rate of tax but leaves it to the State Government to notify it from time to time
The High Court was in error in holding that the impugned provisions were ultra vires the Orissa Act as they amounted to double taxation 80A E 6
a There was no substance in the contention that the two notifications of December 29 1977 having been made in supersession of all previous notifications issued on the subject their effect was to wipe out all tax liability which accrued under the earlier notifications of May 23 1977
80G H 34 b The word supersession in the notifications of December 29 1977 was used in the same sense as the words repeal and replacement and there fore does not have the effect of wiping out the tax liability under the previous notifications
All that was done by using the words in supersession of all previous notification in the Notifications of December 29 1977 was to repeal and replace the previous notifications and not to wipe out any liability incurred under the previous notifications
146C D c Both sections 3B and 51 in express terms conferred power upon the State Government to issue notification from time to time
Under these provisions the State Government can issue a notification and repeal and replace it by another notification
81C d The issuance of the notifications became necessary by reason of the change brought about in the scheme of taxation in 1977
With effect from January 1 1978 unless a notification was issued specifying the rate of tax no dealer would be liable to pay any tax under the Orissa Act
Under the amended section if the State Government wanted to tax any goods Or class of goods at a higher or lower rate it issued notifications specifications specifying such rate
Since no rate of lax was specified in the new section but was left to the State Government to fix it it was necessary to issue a notification consolidating all previous notifications on the subject in respect of goods liable to purchase tax which the State Government did
82E 83A C D 7
a Timber contracts were not works contracts but were agreements to sell standing timber
146D b Timber contracts were not transactions of sale or purchase of standing trees agreed to be severed They were merely agreements to sell such trees
The property in the trees passed to the respondent firm only in the trees which were felled that is in timber after all the conditions of the contract had been complied with and after such timber was examined and checked and removed from the contract area
The impugned provisions therefore did not apply to the transactions covered by the Timber Contracts 98 A B c A conspectus of the terms of the Sale Notice the Special Conditions of Contract the General Conditions of Contract and the various statutory provisions shows that the heading sale notice of timber  as also the use of the words  timber and other forest products will be sold by public auction are not determinative of the matter
The other terms and conditions of the contract make it clear that the Timber Contracts were not unconditional contracts for the sale of goods in a deliverable state and the property in the trees specified in Schedule I of the Contract did not pass to the respondent firm when each of the contracts was made
The signing of the Timber Contracts did not result in a concluded contract because each contract was conditional upon the y State Government ratifying the acceptance of the bid the ratification order did not become an unconditional contract for the sale of specific goods in a deliver able state for the respondent firm had no right to sever the trees and take them away before complying with the other conditions of the contract namely furni 35 shing a Coupe Declaration Certificate within the prescribed time registering the property mark or trade mark making the security deposit and so on
This apart the respondent firm was not at liberty to fell trees of his choice nor was he entitled to remove the felled trees by any route which it liked but only by specified routes
95F H 96B C 97A B d Although under rule 40 of the Orissa Forest Contract Rules 1966 Rules stipulates that the respondent firm was not entitled to any compensation for loss sustained by reason of fire tempest disease natural calamity or any wrongful act of a third party this only showed that after a Timber Contract was concluded the risk passed to the respondent firm
Under section 26 of the when the property is transferred to the buyer the goods are at the buyer s risk whether delivery had been made or not but this section is qualified by the phrase unless otherwise agreed
 The Timber Contracts in this case were subject to contract to the contrary
This is made clear by rule 44 which states that all forest produce removed from a contract area in accordance with these rules shall be at the absolute disposal of the forest contractor 97E H 8
a On the question whether the words timber and logs mean the same thing in commercial parlance the no material had been produced by the parties
Where a term has not been statutorily defined or judicially interpreted and there is insufficient material on record as to the meaning of the words the Court must seek to ascertain its meaning in common parlance with such aid as is available to it
The court may take the aid of dictionaries in such cases to ascertain its meaning in common parlance
In doing so the Court must bear in mind that a word is used in different senses according to its context and a dictionary gives all the meanings of a word and the Court would have to select the particular meaning which would be relevant to the context in which it has to interpret that word
104E 105B C 146G H b The Orissa Act does not define the term timber or logs
 The statutory definition of timber given in the Orissa Forest Act 1972 is that timber includes trees fallen or felled and all wood cut up or sawn The Madras Forest Act 1882 and the  the two Acts in force in the State of Orissa prior to the enactment of the Orissa Forest Act 1972 too have not given any exhaustive definition of the term timber
 But what is apparent from these definitions is that the word timber is not confined merely to felled trees in the forests In subsequent Act like the Orissa Forest Produce Control of Trade Act 1981 the concept that timber is not merely felled trees has been emphasised
Therefore
a conspectus of the meanings given to the term timber in statutes different dictionaries and as judicially interpreted by this Court as well as by some High Courts shows that it means building material generally wood used for building of houses ships etc and the word is applied to wood of growing trees capable of being used for structural purposes
Hence collectively to the trees themselves A log according to the dictionaries means a bulky mass of wood now usually an unhewn portion of a felled tree or a length cut off for firewood
These logs will be nothing more than wood cut up or 36 sawn and would be timber
Similarly a beam is timber sawn in a particular way
So too ratters would be timber logs put to a particular use
In ordinary parlance a plank would be flattened and smoothed timber
 107A D F Mohanlal Vishram vs Commissioner of Sales Tax Madhya Pradesh Indore 1969 24 STC 101 G Ramaswamy and others vs The State of Andhra Pradesh and others 1973 32 STC 309 approved and Krupasindhu Sahu  Sons vs State of Orissa 1975 35 STC 270
overruled
a Sales of dressed or sized logs having been assessed to sales tax sales to the respondent Firm of timber by the State Government from which logs were made by the respondent firm cannot be made liable to sales tax as it would amount to levying tax at two points in the same series of sales by successive dealers assuming that the retrospectively substituted definition of dealer in clause c of section 2 of the Orissa Sales Tax Act 1947 is valid
147B C b Sales of logs by the respondent firm during the period June 1 1977 and December 31 1977 would be liable to tax at the rate of ten percent
Assuming that the sales had been assessed to tax at the rate of six percent as contended by reason of the period of limitation prescribed by section 128 of the Orissa Act the respondent firms assessment for the relevant period cannot be re opened to reassess such sales at ten per cent
147D E 10
a The Bamboo Contract is not a lease of the contract area to the respondent company in CA 219182
Nor is it a grant of an easement to the respondent company as it was not a grant of any right for the beneficial equipment of any of the respondent company
In addition to the right of entry there are other important rights flowing from the contract
It is a grant of a profit a prendre which in Indian law is a benefit to arise out of land and thus creates an interest is immovable property
A profit a prendre is a benefit arising out of land and in view of section 326 of the General Clauses Act it is immovable property within the meaning of the Transfer of Property Act
147F H b There are countervailing factors which 80 to show that a Bamboo contract is not a contract of sale of goods
It is a grant of exclusive right and licence to fell cut obtain and remove bamboos
The person giving the grant the Governor of the State is referred to as grantor the consideration payable is royalty which is not a term used in legal parlance for the price of goods sold
It is not an agreement to sell bamboos standing in the contract area with the accessory licence to enter upon such area for the purpose of felling and removing bamboos nor is it for a particular felling season only
It is an agreement for a period ranging from fourteen thirteen and eleven years with the option to renew the contract for further terms of twelves years
The payment of royalty has no relation to the actual quantity of bamboos cut and removed
The respondent company was bound to pay a minimum royalty and the royalty paid was always in excess of the royalty due on the bamboos cut in the contract areas
The Bamboo contract conferred upon the respondent company a 37 benefit to arise out of land namely the right to cut and remove bamboos which would grow from the soil coupled with several ancillary rights and was thus a grant of a profit a prendre
Being a profit a prendre or a benefit to arise out of land any attempt on the part of the State Government to tax the amounts payable under the Bamboo Contract would not only be ultra vires the Orissa Act but also unconstitutional as being beyond the State s taxing power under Entry 54 in List II in the Seventh Schedule to the Constitution of India
119C E 120B D 121G H 11
The decision of Firm Chhotabhai Jethabhai Patel  Co vs The State of Madhya Pradesh on which the appellant relied is not good law and has been overruled by decisions of larger Benches of this Court
State of Madhya Pradesh vs Yakinuddin  148A Ms Mohanlal Hargovind of Jubbulpore vs Commissioner of Income Tax CP  Berar Nagpur LR 1949 76 I A 235 ILR 1949 Nagpur 892 AIR 1449 PC 311 Ananda Behra and another vs The State of Orissa and another  and Smt
Shantabai vs State of Bombay  Orissa  275 6 referred to and Board of Revenue Etc
vs AM Ansari Etc1976 3 SCR 661 held 1 inapplicable
a The case of State of MP vs Orient Paper Mills Ltd on which the appellant relied is not good law as that decision was given per incurium and had laid down principles of interpretation which are wrong in law
The basic and salient features of the agreement before the Court in Orient Paper Mills  Case were the same as in the case of Mahadeo vs State of Bombay and the Court was not justified in not adverting to that case and the other cases referred to on the ground that these cases dealt with the general law of real property
142 H 143A
b The enunciation of law made by the Court in the Orient Paper Milts case that a document should be so construed as t o bring it within the ambit of a particular statute relevant for the purpose of the dispute before the court and that in order to do so the Court could look at only such of the clauses of the document as also to just one or more of the consequences flowing from he document which would fit in with the interpretation which the court wanted to put on the document to make that statute applicable is fraught with considerable danger and mischief as it may expose documents to the personal predilictions and philosophies of individual judges depending upon whether according to them it would be desirable that documents of the type they have to construe should be made subject to a particular statute or not
139E G c Secondly in observing that the State Government for reasons best known to it had left the exploitation of the forest resources in part to the private sector the court had overlooked that it was a matter of policy for the State to decide whether such transactions should be entered into or not whether the transactions entered into by the State was for the industrial development of 38 the State and whether the transaction ensured employment for the people of the area and so on
d Thirdly the nature and meaning of a document cannot be deter mined by its end result or one of the consequences which flow from it
In look in merely at the end result of the agreement the court overlooked a firmly established principle that both the agreement and the sale must relate to the same subject matter and therefore there cannot be an agreement relating to one kind of property and a sale as regards another
141C D e In coming to the conclusion that the term royalty used in the document before it was merely a euphimism for the price of timber
the court overlooked the fact that the amount of royalty payable by the respondent was consideration for all the rights conferred upon it under the contract though it was to be calculated according to the quantity of bamboos felled141H 142A 13
Where there are two or more conflicting views of this court on the same point the proper course for the High Court or even for smaller Benches of this court is to find out and follow the views expressed by larger Benches of this court in preference to those expressed by smaller benches This practice has crystallised into a rule of law declared by this Court
142E F UOI vs KS Subramanian 19771 SCR 87 92 followed
A works contract is a compendious term to describe conveniently a contract for the performance of work or services in which the supply of materials or some other goods is incidental
In the instant case the timber Contracts being agreements relating to movable property and the Bamboos Contracts being a grant of an interest in immovable property cannot be works contracts
The payee of the price namely the Government has not undertaken to do any work or labour
It was the contractor who had to enter upon the land to fell the trees and remove them
So is the case of Bamboo Contracts
144H 145A Commissioner of Sales tax MP v Purshottam Premji 1970 26 STC 38 41 SC referred to