125 of 1959
Petition under Article 32 of the Constitution of India for enforcement of Fundamental Rights
GS Pathak A P Sen and J B Dadachanji for the Petitioners
H J Umrigar and T M Sen for the Respondents
September 20
The Judgment of the Court was delivered by DAs GUPTA J
In this petition under article 32 of the Constitution the petitioner a partnership firm carrying on the business of manufacture of bidis and having its head office at Jabalpur within the State of Madhya Pradesh complain that its fundamental rights under article 191f and g of the Constitution have been violated by the illegal imposition of a purchase tax on certain purchases of tobacco made by it in the State of Bombay
It appears that the Sales Tax Officer Baroda made an order assessing the petitioner to a purchase tax under section 14 sub section
6 of the Bombay Sales Tax Act 1953 Bom
Act III of 1953 for the period April 1 1954 to September 29 1955
The petitioner contends that this assessment was illegal inasmuch as these transactions are purchases  outside the State of Bombay  within the meaning of article 2861a of the Constitution read with the Explanation and also because these transactions took place in the course of inter State trade and commerce within the meaning of article 2862 of the Cons titution
It was also urged that the provisions of the Bombay Sales Tax Act 1953 do not authorise the imposition levy or collection of any purchase tax on the transactions in question
In appears that against this assessment order made by the Sales Tax Officer on October 18 1955 the petitioner preferred an appeal to the Assistant Collector of Sales Tax
This officer set aside the order of the Sales Tax Officer imposing a penalty under section 164 but dismissed the appeal against the order of assessment to tax
The order in appeal was made on 91 712 November 26 1957
The present petition was
filed on August 4 1958 praying for a writ in the nature of mandamus or any other appropriate direction or order against the respondents The State of Bombay The Collector of Sales Tax State of Bombay The Sales Tax Officer Baroda and the Assistant Collector of Sales Tax Northern Division Range III Baroda preventing them from enforcing the provisions of the Bombay Sales Tax Act against the petitioner on the transactions in question for a writ in the nature of certiorari for quashing the proceedings taken against the petitioner and the orders of assessment made by the Sales Tax Officer and the order in appeal by the Assistant Collector of Sales Tax and for a declaration that the Act does not authorise the imposition levy or collection of tax on the transactions in question
It will be convenient to consider first the petitioner s contention that the Bombay Sales Tax Act 1953 does not authorise the imposition of a tax on the purchase of bidi tobacco
The relevant portion of section 101 which provides for the levy of a purchase tax is in these words  there shall be levied a purchase tax on the turnover of purchase of goods specified in column 1 of Schedule B at the rates if any specified against such goods in column 4 of the said schedule  The petitioner s contention is that bidi tobacco which was purchased by it is not one of the goods specified in Column 4 of the said schedule
Turing to Schedule B we find there are 80 entries in the first column
Against each of these entries the second column of the schedule mentions the rates of sales tax leviable under section 8 of the Act the third column mentions the rate of general sales tax leviable under section 9 while the fourth column which is the last column men tions the rate of purchase tax
While the entries from 1 to 79 mention specific articles entry 80 as it stood before its amendment in 1957 was in these words  All goods other than those specified from time to time in Schedule A and in the preceding entries An amendment by the Bombay Act 71 of 713 1958 added the words  and sec
7A  after the words  Schedule A 
The question is whether these words all goods other than those specified from time to time in Schedule A and in the preceding entries  amount to a specification of goods for the purpose of section 10
On behalf of the petitioner Mr Pathak contends that only the mention of specific goods can amount to specification and mention of goods in such general language as  all goods other than those specified from time to time in Schedule A and in the preceding entries  cannot be said to be a specification of goods
We are unable to accept this argument
While it is true that mention of specific goods is specification for the purpose of section 10 as also for the purpose of sections 8 and 9 of the Act we see no reason to think that mention of goods in a general way as  all goods other than those specified from time to time in Schedule A and in the preceding entries  of Schedule B itself is not a specification
We are of opinion that the entry 80 in Schedule B is a specification of goods within the meaning of section 10 and as bidi tobacco which the petitioner purchased is not within either Schedule A or any of the earlier entries in Schedule B purchase tax under section 10 is leviable on these purchases at the rate mentioned against Entry 80
This brings us to the petitioner s main contention that the purchases took place outside the State of Bombay
The contention as stated in para
11 of the petition is that the purchases would be
deemed to have taken place in the State of Madhya Pradesh where the tobacco was delivered for consumption
At the hearing however it was not disputed that the tobacco was delivered to the Company s Ranoli Branch within the State of Bombay which made the purchase
The despatch by the Ranoli Branch to the company s head office at Jabalpur is not a delivery as a direct result of the sale
It has been urged however that even though there was delivery in Bombay State that delivery was not for the purpose of consumption within Bombay State and so the Explanation to article 286 1a does not come into operation
714 The sales tax authorities have proceeded on the basis that as a direct result of the purchase goods were delivered in the State of Bombay for the purpose of consumption in the State of Bombay
Unless that view is shown to be wrong the purchase must be held to have taken place within the State of Bombay and it will be unnecessary to consider the larger question whether even if the Explanation be not applicable Bombay State is entitled to tax
The definite case of the petitioner is that the purchased tobacco is delivered to it within the State of Bombay as a direct result of the purchase
The further question that has been raised is whether such delivery was for the purpose of consumption in the State of Bombay
On behalf of the petitioner it was contended that after its delivery the tobacco was intended to be sent to the State of Madhya Pradesh to be manufactured into bidis at that place
All that used to be done to the purchased tobacco in the State of Bombay was to have the stems and dust removed from the tobacco
Such removal of the waste material like stems and earth it is urged does not amount to consumption of tobacco
It is further stated that the tobacco which is despatched to the head office after removal of the waste material is not an article Cc commercially different  from the tobacco purchased from the cultivators
In the respondents  counter affidavit it is stated that  the petitioners after purchasing raw tobacco from the cultivators in the State of Bombay subject the raw tobacco so purchased to process leading to its conversion into bidi pattis for immediate use in the manufacture of bidis   that marketable value of raw tobacco and bidi pattis differs and that both these are commercially different articles  
There was no further affidavit filed on behalf of the petitioner to traverse the averments of the respondents that the raw tobacco is con verted into bidi patti before it is despatched outside Bombay State and that the market value of raw tobacco and bidi patti differs
Mr Pathak also con
ceded at the hearing the correctness of the statement that anybody could go to the market to purchase the 715 article known as raw tobacco or Akho Bhuko and that he could also go and purchase from the market the article known as  bidi Patti 
That itself is sufficient proof that raw tobacco and bidi Patti are distinct and different commercial articles
It is in the background of these facts that we have to consider the question whether tobacco was delivered in the State of Bombay for consumption in that State
In answering that question it is unnecessary and indeed inexpedient to attempt an exhaustive definition of the word  consumption  as used in the explanation to article 286 of the Constitution
The act of consumption with which people are most familiar occurs when they eat or drink or smoke
Thus we speak of people consuming bread or fish or meat or vegetables when they eat these articles of food we speak of people Consuming tea or coffee or water or wine when they drink these articles we speak of people consuming cigars or cigarettes or bidis when they smoke these
The production of wealth as economists put it consists in the creation of  utilities 
Consumption consists in the act of taking such advantage of the commodities and services produced as constitutes the  utilization  thereof
For each commo dity there is ordinarily what is generally considered to be the final act of consumption
For some commodities there may be even more than one kind of final consumption
Thus grapes may be  finally consumed  by eating them as fruits they may also be consumed by drinking the wine prepared from  grapes 
Again the final act of consumption may in some cases be spread over a considerable period of time
Books articles of furniture paintings may be mentioned as examples
It may even happen in such cases that after one consumer has performed part of the final act of consumption another portion of  the final act of consumption may be performed by his heir or successor in interest a transferee or even one who has obtained possession by wrongful means
But the fact that there is for each commodity what may be Considered ordinarily to be the final act of consumption should not make us forget that in reaching 716 the stage at which this final act of consumption takes place the commodity may pass through different stages of production and for such different stages there would exist one or more intermediate acts of consumption
Thus the final act of consumption of cotton may be considered to be the use as wearing apparel of the cloth produced from it
But before cotton has become a wearing apparel it passes through the hands of different producers each of whom adds some utility to the commodity received by him
There is first the act of ginning  ginned cotton is spun into yarn by the spinner the spun yarn is woven into cloth by the weaver the woven cloth is made into wearing apparel by the tailor
At each of these stages distinct utilities are produced and what is produced is at the next stage consumed
It is usual and correct to speak of raw cotton being con sumed in ginning of ginned cotton being consumed in spinning of spun yarn being consumed in weaving of woven cloth being consumed in the making of wearing apparel
The final product the wearing apparel is ultimately consumed by men women and children in using it a dress
In the absence of any words to limit the connotation of the word  consumption  to the final act of Consumption it will be proper to think that the Constitution makers used the word to connote any kind of user which is ordinarily spoken of as consumption of the particular commodity
Reverting to the instance of cotton mentioned above it will be proper to hold that when raw cotton is delivered in State A for being ginned in that State
 it is delivered for consumption in State A  when ginned cotton is delivered in State B for being spun into yarn it is delivered for consumption in State B  when yarn is delivered in State C for being woven into cloth in that State it is delivered for consumption in State C when woven cloth is delivered in State D for being made by tailor in that State into wearing apparel there is delivery of cloth for consumption in State D and finally when wearing apparel is delivered in State E for being sold as dress 717 in that State it is delivery of wearing apparel for con sumption in State E Except at the final stage of consumption which consists in using the finished commodity as an article of clothing there will be noticed at each stage of production the bringing into existence of a commercial commodity different from what was received by the producers
This conversion of a commodity into a different commercial commodity by subjecting it to some processing is consumption with
in the meaning of the Explanation to article 286 no less than the final act of user when no distinct commodity is being brought into existence but what was brought into existence is being used up
At one stage of the argument what Mr Pathak appeared to insist was that there must be destruction of the substance of the thing before the thing can be said to be consumed
That takes us nowhere because we have still to find out what is meant by destruction of the substance
It may well be said that when a commodity is converted into a commercially different commodity its former identity is destroyed and so there is destruction of the substance to satisfy the test suggested by the learned counsel
We think it unnecessary however to enter into a discussion of what amounts to  destruction  as even without deciding whether there was destruction or not we think it proper and reasonable to say that whenever a commodity is so dealt with as to change it into another commercial commodity there is consumption of the first commodity within the meaning of the Explanation to article 286
This aspect of consumption was pointed out by Das J as he then was in State of Travancore Cochin vs Shanmugha Vilas Cashew Nut Factory 1 at p 113 of the Report
The purchase there was of raw cashew nuts
Discussing the question whether the delivery of these nuts in Travancore was for the purpose of consumption in that State Das J observed  The raw cashew nuts after they reach the respondents are put through a process and new articles of commerce namely cashew nut oil and edible cashew nut kernels are obtained
It follows 1 1954 SCR 53 718 therefore that the raw cashew nut is consumed by the respondents in the sense I have mentioned
Das J here proceeded on the view that using a commodity so as to turn it into a different commercial article amounts to consumption within the meaning of the Explanation to article 2861 a a view which he had earlier indicated at p 110 of the Report
We are not aware of any case where such use of a commodity has been held not to amount to consumption
It must therefore be held on the facts of this case that when tobacco was delivered in the State of Bombay for the purpose of changing it into a commercially different article viz bidi patti the delivery was for the purpose of consumption
The purchases in this case therefore fall within the meaning of Explanation to article 2861a and must be held to have taken place inside the State of Bombay
There remains for consideration the objection that the transactions took place in the course of inter State trade or commerce within the
meaning of article 2862 of the Constitution and the levy of tax was therefore prohibited by the provisions thereof
Even if these transactions were in the course of inter State trade the bar of article 2862 of the Constitution stands removed by the Sales Tax Laws Validation Act for the entire period upto September 6 1955
The levy of tax for the period September 7 1955 to September 29 1955 would be illegal if these transactions are in the course of inter State trade
The petitioner s counsel however informed us that he did not want a decision on his question and would not in this case press his objection under article 2862
It is unnecessary for us therefore to decide whether the transactions in question took place in the course of interState trade or commerce within the meaning of article 2862 of the Constitution
As the petitioner has failed to establish any violation of its fundamental right the petition is dismissed with costs
Petition dismissed


Summary:
On November 15 1954 the Registrar wrote to the company of which the appellant was the Managing Agent under section 137 Indian Companies Act 1913 that it had been represented to him that the business of the company was carried on in fraud and called upon it to furnish certain information
On April 15 1955 the Registrar made a report to the Central Government under section 1375 to the effect that in his opinion the affairs of the company were carried on in fraud of contributories and they disclosed an unsatisfactory state of affairs and that a case had been made out for an investigation under section 138
Thereupon the Central Government on November 1 1955 appointed an Inspector to investigate the affairs of the company and to report thereon
The Inspector was authorised under section 140 to examine any person on oath and he wrote to the appellant that he would examine him on oath in relation to the business of the company
On April 1 1956 the Indian Companies Act 1913 was repealed by the Indian  which conferred wider and more drastic powers of investigation
On July 26 1956 the Central Government accorded approval under section 2392 of the new Act to the Inspector exercising his powers of investigating into and reporting on the affairs of the company
In May 1957 the Inspector served notices upon the appellant calling upon him to attend his office on the date and the time specified for the purpose of being examined on oath and to produce certain account books and papers relating to the company
The appellant challenged the investigation and contended  i that since the Inspector was appointed under the old Act he had no jurisdiction to exercise the powers referable to the provisions of the new Act ii that section 240 of the new Act which provided for the production of documents and evidence at such investigations offended article 203 of the Constitution and iii that section 239 of the new Act which conferred powers on inspectors for investigation and section 240 offended article 14 of the Constitution
418 Held that the Inspector appointed under section 1384 of the old Act must be deemed to have been appointed under section 235 of the new Act and had authority and power to issue notices under section 240 of the new Act
Section 645 of the new Act provided that the appointment of an Inspector under the old Act shall on repeal of the old Act and on coming into force of the new Act have effect as if it was made under the new Act
Section 646 which provided that nothing in the new Act shall affect the operation of section T38 of the old Act as respects inspectors was not an exception or proviso to section 645 and the two sections being saving sections had to be read as independent of and in addition to and not as exceptions to each other
Held further that section 240 of Indian  did not offend article 203 of the Constitution
For invoking the constitutional right against testimonial compulsion guaranteed under article 203 there must be at the relevant stage a formal accusation against the party pleading the guarantee relating to the commission of an offence which may result in a prosecution
The enquiry undertaken under section 240 by the Inspector was in substance an enquiry into the affairs of the company at this stage there was no accusation formal or otherwise against any specified individual
The mere fact that a prosecution may ultimately be launched against the alleged offenders would not retrospectively change the complexion or character of the proceedings held by the Inspector when he makes the investigation
Maqbool Hussain vs The State of Bombay   section A Venkataraman vs The Union of India 1954 SCR 1150 M P Sharma vs Satish Chandra District Magistrate Delhi   Thomas Dana vs State of Punjab 1959 Supp 1 SCR 274 and Mohammed Dastagir vs The State of Madras   relied on
Held further that SS 239 and 240 of the Indian  did not violate article 14 of the Constitution
These sections denied the company and persons in charge of the management of such companies the ordinary protection afforded to witnesses under section 132 of the Evidence Act and under section 1611 and 2 of the Criminal Procedure Code
As they were entrusted with the financial interests of a large number of citizens it was legitimate to treat such companies and their managers as a class by themselves and to provide for necessary safeguards and checks against abuse of power by the managers
The basis of the classification is founded on an intelligible differentia which has a rational relation to the object sought to be achieved
Shri Ram Krishna Dalmia vs justice Tendolkar 1959 SCR 297 applied