Case: Anwarkhan Mahboob Co Vs. The State of Bombay and Ors

1. In this petition under Art. 32 of the Constitution the petitionera partnership firm carrying on the business of manufacture ofand having its head office at Jabalpur within the State of Madhya Pradeshthat its fundamental rights under Art. 19(1)(f) and (g) of the Constitution have been violated by the illegal imposition of a purchase tax on certain purchases of tobacco made by it in the State of Bombay. It appears that the Sales Tax Officer, Barodamade an order assessing the petitioner to a purchase tax under) of theBombay Sales Tax Act, 1953 (Bom. Act III of 1953) for the period April 1,to September 29, 1955.It appears thatagainst 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 SalesOfficer imposing a penalty under16(4) but dismissed the appeal against the order of assessment to tax. The order in appeal was made on November 26, 1957.

Reasoning: While the entries from 1 to 79 mention specific articles, entry 80 as it stood before its amendment in 1957 was in these"All goods other than those specified from time to timein Schedule A and in the preceding(An amendment by the Bombay71 of 1958added the words "ander the words "ScheduleThe question is whether these words "all goods other than those specified from timein Schedule A and in the precedingamount to a specification of goods for the purpose of10. 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 timein Schedule A and in the precedingcannot 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 specificationfor the purpose of10 as alsofor the purpose of8 and 9 of the Act, we see no reason to think that mention of goods in ageneral way as "all goods other than those specified from time to timein Schedule A and in the precedingof 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 of10 and aswhich the petitioneris not within either Schedule A or anythe earlier entries in Schedule B, purchase tax under10 is leviable on these purchasesat the rate mentioned against Entry 80.This brings us to the petitioners main contention that the purchases took place outside the State of Bombay. The contention as stated in11 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 Companys Ranoli Branch within the State of Bombay which made the purchase. Theby the Ranoli Branch to the companys head office at Jabalpur is not a delivery as a direct result of the sale.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 wasfor the purpose ofconsumption 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 intoat 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 isto the head office after removal of the waste material is not an article "commerciallyfrom the tobaccofrom 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 ofmarketable value of raw tobacco and bidi pattis differs and that both these are commercially differente was no further affidavit filed on behalf of the petitioner to traverse the averments of the respondents that the raw tobacco is converted into bidi patti before it isoutside Bombay State and that the market value of raw tobacco and bidi patti differs. Mr. Pathak also conceded at the hearing the correctness of the statement that anybody could go to the market to purchase the article known as raw tobacco or Akho Bhuko and that he could also go and purchase from the market the article known as "bidiThat 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 wordas used in the explanation to Art. 286n. Theact 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 ofwe 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 productionwealth, as economists put it, consists in the creation ofConsumption consists in the act of taking such advantage of the commodities and services produced as constitutes thethereof. For each commodity, there is ordinarily what is generally considered to be the final act of consumption. For some commodities, there may be eventhan one kind of final consumption. Thusgrapes may be "finallyby eating them as fruits; they may also be consumed by drinking the wine prepared fromAgain, 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 evenin such cases, that after onehas performed part of the final act of consumption, another portion of the final act of consumption may be performed by his heir ora 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 theat which this final act of consumption takes place the commodity may pass through different stages of production and for such differentthere would exist one or more intermediateus, 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 thesedistinct utilities are produced and what is produced is at the nextconsumed. It is usual, and correct to speak of raw cotton being consumed in ginning; of ginned cotton being consumed in spinning; of spun yarn being consumed inof woven cloth being consumed inf woven cloth being consumed inthe making of wearing apparel. The final productthe wearing appareled bymen, women and children in using it as dress. In the absence of any words to limit the connotation of the wordto the final act of consumption, it will be proper to think that theused the word to connote any kind of user which is ordinarily spoken ofconsumption of theparticular commodity.10. 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 consumptionState 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 ine into wearingapparel, there is delivery of cloth for consumptionState D; and finally when, wearing apparel is delivered in State E for being sold as dress in that State, it is delivery of wearing apparel for consumption in State E. Except at the finalof consumption which consists in using the finished commodity as an article of clothing, there will be noticed at eachof production the bringing into existence of a commercial commodity different from what washe producers. This conversion of a commodity into a different commercial commodity by subjecting it to some processing, is consumption within the meaning of the Explanation to Art. 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 testhe learned counsel. We think it unnecessary however to enter into a discussion of what amounts toas even without deciding, whether there was destruction orthink it proper and reasonable to say that whenever a commodity is so dealt with as to change it into another commercial commodity there isconsumption of thefirst commodity within the meaning of the Explanation to Art.aspect of consumption was pointed out by Das,(as he then was)in State ofv. Shanmugha Vilas Cashew Nut. The purchase there was of raw cashew nuts. Discussing the question whether the delivery of these nuts in Travancore wasfor the purpose ofconsumption in thatIt must therefore be held on the facts of this case that when tobacco was delivered in the State of Bombayfor the purpose ofchanging it into a commercially different article, viz., bidi patti the delivery wasfor the purpose ofpurchases in this case therefore fall within the meaning of Explanation to Art. 286) and must be held to have taken place inside the State oflevy of tax for the period September 7, 1955to September 29, 1955, would be illegal if these transactions are in the course oftrade. The petitioners counsel however informed us that he did not want a decision on