Case: State of Maharashtra Vs. Central Provinces Manganese Ore Company Limited

2. M/s. Central Provinces Manganese Ore Co. Ltd., the assessee, has its Head Office in London. It carries on business on an extensive scale. It owns 22 manganese ore mines in Madhya Pradesh from where manganese ore, after being excavated, is sent mostly abroad through different ports. The Company is a registered dealer under the Act. I t used to enter into contracts at places outside Madhya Pradesh for the despatch of what came to be known, in the special parlance of this companys business, as Oriental Mixture But the contracts contain specification s only of strengths of manganese ore to be supplied with permissible percentages of other ingredients as admixtures. The term Oriental Mixture was evidently employed by the Company itself to describe a particular type of conglomerate which the unloading at one place of Various types of manganese ore produced. The required average consistency or strength of manganese ore specified in the contracts, which did not contain a reference to any Oriental Mixture, was said to be obtained in the course of this mechanical process of transportation when various grades of manganese ore were heaped together. These grades of manganese ore were transported, in railway wagons, from one or more mines, and, it appears that the order in which trucks were loaded in goods trains and unloaded was also so, arranged that the mixture came into existence, as described above, in the mere process of unloading at the port.But, this procedure did not seem to involve a process of Manufacture, as that term is ordinarily understood, to which the assessee could be s aid to have subjected its manganese ore3. The case of the assessee company was that the Oriental Mixture as a taxable commodity came into existence only after the ores got mixed up in the process of unloading and not before so that it could not be taxed as goods in existence in Madhya Pradesh at the time when , contracts relating to these goods were made.

Court's reasoning:
4. As the High Court pointed out, the periods involved in the four references before it were not governed by the provisions of the Constitution. They related to the following period:1. Reference No. 17 of 1964 for the period 1st January, 1947 30th September, 19472. Reference No. 18 of 1964 for the period 1st October, 1947 to 31st December, 19483. Reference No. 19 of 1964 for the period 1st January, 1949 to 31st December, 19494. Reference No. 20 of 1964 for the period 1st January, 1950 to 25th January, 1950., therefore, agree with the High Courts view that Article 286 of the Constitution, which is not retrospective in operation, could not help the assessee merely because it was there at the time of assessment.According to this submission, neither the old unamended provision nor the replacement of it were in operation during the last two. assessment periods. Of course, this argument assumes that the repeal and the new enactment are separate. In Shriram Gulabdas v. Board of Revenue, Madhya Pradesh &Ant. ((1952) 3 S.T .C. 343. 367.) which was cited before us, it was held, on the question argued before us (at p. 366-367):...... we have already shown that the second Explanation in clause (g) of Section 2, which makes an agreement of sale taxable even though the sale may have taken place outside. the province, is not ultra vires the Provision Legislature. We must make it clear that our answer to this question is in the affirmative, free from considerations arising under Article 286. We have shown that the necessary power to make the unamended Explanation did exist in the State Legislature; but we have also made it clear that by virtue of Article 286 the Explanation can no longer be enforced because under the present Constitution the sales tax can only be collected at the market and where the goods are delivered for consumption. We may also state that the amended Explanation II is not validly enacted because it makes drastic changes in the rules as found in the Sale of Goods Act without obtaining the assent of the Governor-General. The effect of the amended Explanation going out would be to rehabilitate the old Explanation as it existed because the amendment being unconstitutional will fail to work any change in the law (See the opinion given by one of us, Hidayatullah, J., in Laxmibai v. The State (I.L.R. 1951) Nag. 563, 608, 610 (F.B.).. No question relating to the enforcement of the Sales-tax by any collection to be made after the Constitution came into force was raised the cases before us. Only questions relating to taxability arise here As we have already indicated, Article 286 does not stand in the way of taxability. This was held to be the correct position in the ca se of Shriram Gulabdas (Supra). It was also clearly held there that the result of the invalidity of the amended explanation was to leave the law unaltered as it stood before the amendment. We approve of this pronouncement made long ago on this very question.Other questions framed indicate that it was not only the validity of the provision, both before and after its amendment, which was directly considered and pronounced upon, but the application of the concept of sale under the unamended law and its effects were also under consideration. Therefore, we think that the decision was directly on a question which necessarily arose for determination before the Court on that occasion. We think that the view that the unamended law was in operation was not a mere obiter dictum. It was necessary to decide that question before other questions could be determined. We give out own reasons below for accepting the correctness of the view taken then.But, this argument is basically different from the argument which prevailed in Koteswars case (supra) where a distinction was drawn between a substitution and super session. It is true that, as the term substitution was not used there, the old rule was not held to have been repealed. Nevertheless, the real basis of that decision was that what was called super session was void ab initio so that the law remained what it would have been if no such legislative process had taken place at all. It was held that the void and inoperative legislative process did not affect the validity of the pre-existing rule. And, this is precisely what is contended or by the State before us11. In the case before us although the word substitution is used in the amending Act, yet the whole legislative process termed substitution was itself abortive. The whole of that process did not take effect as the assent of the Governor-General, required by Section 107 Govt. of India Act, was lacking. Such ineffectiveness was the very reason why, in the case of Sriram Gulabdas (supra), it was held that the previous law stood unaffected by the attempted legislation called substitution. Moreover, the case of Shriram Gulabdas (supra) is a direct authority on the very provisions now before us. Other cases cited are on very different legislative provisions12. We do not think that the word substitution necessarily or always connotes two severable steps, that is to say, one of repeal and another of a fresh enactment even if it implies two steps. Indeed, the natural meaning of the word substitution is to indicate that the process cannot be split up into two pieces like this. If the process described as substitution fails, it is totally ineffective so as to leave intact what was sought to be displaced. That seems to us to be the ordinary and natural meaning of the words shall be substituted. This part could not become effective without the assent of the Governor-General. The State Governors assent was insuffi - cient. It could not be inferred that, what was intended was that, in case the substitution failed or proved ineffective, some repeal, not mentioned at all, was brought about and remained effective so as to create what may be described as a vacuum in the statutory law on the subject matter. Pri- marily, the question is one of gathering the intent from the use of words in the enacting provision seen in the light of the procedure gone through. Here, no intention to reveal, without a substitution, is deducible. In other words, there could be no repeal if substitution failed. The two were a part and parcel of a single indivisible process and not bits of a disjointed operation.Looking at the actual procedure which was gone through, we find that, even if the Governor had assented to the substitution, yet the amendments would have been effective, as a piece of valid legislation, only when the assent of the Governor-General had also been accorded to it. It could not be said that what the Legislature intended. or what the Governor had assented to consisted of a separate repeal and a fresh enactment. The two results were to follow from one and the same effective Legislative process. The process had, therefore, to be so viewed and interpreted13. Some help was sought to be derived by the citation of B.N. Tewari v. Union of India &Ors., ([1965] 2 S.C.R. 421.) and the case of Firm A.T.B. Mehtab Majid &Co v. State of Madras (supra). Tewaris case (supra) related to the substitution of what was described as the carry forward rule contained in the departmental instruction which was sought to be substituted by a modified instruction declared invalid by the Court. It was held that when the rule contained in the modified instruction of 1955 was struck down the rule contained in a displaced instruction did not survive. Indeed, one of the arguments there was that the original carry forward rule of 1952 was itself void for the very reason for whic h the carry forward rule, contained in the modified instructions of 1955, had been struck down. Even the analogy of a merger of an order into another which was meant to be its substitute could apply only where there is a valid substitution. Such a doctrine applies in a case where a judgment of a Subordinate Court merges in the judgment of the Appellate Court or an order reviewed merges in the order by which the review is gran ted. Its application to a legislative process may be possible only in cases of valid substitution. The legislative intent and its effect is gathered, inter alia, from the nature of the action of the authority which func- tions. It is easier to impute an intention to an executive rule making authority to repeal altogether in any event what is sought to be displaced by another rule. The cases cited were of executive instructions. We do not think that they could serve as useful guides in interpreting a Legislative provision sought to be amended by a fresh enactment. The procedure for enactment is far more elaborate and formal. A repeal and a displacement of a Legislative provision by a fresh enactment can only take place after that elaborate procedure has been followed in toto. In the case of any rule contained in an executive instruction. on the other hand, the repeal as well as displacement are capable of being achieved and inferred from a bare issue of fresh instructions on the same subject.In Mehtab Majid &Cos case (supra) a statutory role was held not to have revived after it was sought to be substituted by another held to be invalid. This was also a case in which no elaborate legislative procedure was prescribed for a repeal as it is in the case of statutory enactment of statutes by legislatures. In every case, it is a question of intention to be gathered from the language as well as the acts of the rulemaking or legislating authority in the context in which these occur.14. Although, there is no corresponding provision in our General Clauses Acts, yet, it shows that the mere use of words denoting a substitution does not ipso facto or automatically repeal a provision until the provision which is to take its place becomes legally effective. We have, as explained above reached the same conclusion by considering the ordinary and natural meaning of the term substitution when it occurs. without anything else in the language used or in the context of it or in the surrounding facts and circumstances to lead to another inference. It means, ordinarily, that unless the substituted provision is there to take its place, in law and in effect, the pre-existing provision continues. There is no question of a revival15. This question of interpretation was referred separately to the Full Bench of the Bombay High Court which drew a distinction between the two meanings of the word substituted; firstly, where it involved a direction as to what would have to be removed or repealed simultaneously with another as to what was to be substituted, so as to involve two directions and secondly where the substitution merely carried one direction to modify . It is difficult to see how a single direction to -one direction to modify. It is difficult to see how a single direction to substitute would be effective without implying in it another to remove what was to be displaced. Perhaps more simply and correctly stated, the difference between two meanings of the word substituted is one where it stands for two separable legislative process and another where it stands for one total or completed legislative procedure, including the assent of the Governor-General, which would be covered by the words shall be substituted. The Full Bench came to the conclusion that, in the context in which the words directing substitution occur, they do not imply that in the event of the failure of the amendment, taken as a whole a repeal would survive. To be a ble to Survive a repeal had first to come into existence. In the situation before us no repeal came into legal existence.16. The real question for determination is always one of the meaning of words used in a purported enactment in a particular context. We think that the Full Bench of the High Court correctly held that there was no repeal of the existing provision when substitution, by means of an amendment, failed to be effective. It had also rightly distinguished some of the cases cited before it on the ground that, in those cases, the process for substitution was interpreted to necessarily imply both a repeal and re-enactment out of which only the repeal which took place had survived when the re-enactment proved abortive.After giving the findings set out above, on the question whether the goods existed in the State of Madhya Pradesh when they were sold and, whether the contracts were referable to these goods, the High Court proceeded to consider the question whether Oriental Mixture itself had come into existence in Madhya Pradesh or at the port where the goods forming the Oriental Mixture became mixed up in the process of unloading and transportation. Apparently, what the High Court had meant by its earlier findings was not that the Oriental Mixture was in existence in Madhya Pradesh, but that the ingredients which went into its composition existed in Madhya Pradesh at the time when the contracts were made. It had finally reached the conclusion that the Mixture itself was formed at the port where the ingredients were unloaded20. We are unable to accept the High Courts reasoning that, while the goods which went into the composition of the Oriental Mixture existed in Madhya Pradesh when the contracts were made, yet, they were not taxable in Madhya Pradesh because the Oriental Mixture came into existence at the port. In other words, it held that a mere mixture of goods, even if it occurs in the process of unloading, converts the goods, which existed in Madhya Pradesh and were transported to the port, into separately identifiable commercial commodity Known as Oriental Mixture. As already mentioned above, this term is not used in the contracts but is a term employed by the firm itself to indicate the specifications contained in the contracts of goods ordered. It is difficult to see what process of manufacture is gone through so as to bring a new category or genus of commercial goods into existence at the port.21. The High Court had relied on cases where raw tobacco subjected to various processes, such as sprinkling of jaggery juice or water on it and allowing it to ferment for some time before cutting it up and packing it, was held to become a new commodity. These cases were: The State of Madras v. Bell Mark Tobacco Co. ((1967) 19 S.T.C. 129.); The State of Madras v. Swasthik Tobacco Factory((1966) 17 S.T.C. 316.); Anwarkhan Mehboob Co. v. The State of Bombay (Now Maharashtra) &Ors. ((1960) 11 S.T.C. 698).Reliance was also placed on behalf of the assessee on Shaw Wallace &Co. Ltd. v. The State of Tamil Nadu((1976) 3 S.T.C. 522.), where it was held that goods were actually subjected to a process of manufacturing when chemical fertilisers and fillers like China clay, gypsum, and other ingredients, were mixed at a mixing works of a company, by means of shovels, so as to conform to a particular formula. It was held there by this Court that the resulting product was a commercially distinct commodity. Several cases of manure mixtures are referred to in the case. Now,  in the case of manure mixtures, made out of different ingredients, at a mixing works, it can per- haps be said that a chemical process is gone through. In any case, the product which came into existence was known and sold as a separate commercial commodity in the mar- ket. It required a process to be gone through at what were known as mixing works of the company to convert it into that commodity. On the other hand, in the case before us, it seems to us that what has been manufactured by the assessee is the same Oriental Mixture only if the term manufacture can be employed at all to anything done by the assessee.What is to be determined is whether there has been the manufacture of a new product which has a separate commercially current name in the market.The mere giving of a new name by the seller to what is really the same product is not the manufacture of a new product. There is, it appears to us, no new process of the manufacture of goods at all by the assessee before us.22. Again, cases in which logs of wood were cut in order to convert them into planks [e.g. Shaw Bros &Co. v. The State of West Bengal((1963) 14 S.T.C. 878.)] could be of no assistance in the case before us. That too could be a process of manufacture. The High Court had also made a passing reference to Nilgiri Ceylon Tea Supplying Co. v. The State of Bombay((1959) 10 S.T.C. 500.), a case decided by the Bombay High Court, where different brands of tea, purchased in bulk and without application of any mechanical or chemical process, were mixed so as to conform to a particular mixing formula, but this mixture was held not to constitute a fresh commodity as neither processing nor alteration of the ingredients of the tea in any manner had taken place. We think that the similarity of the process to which goods sold were subjected in this case seems to make the reasoning adopted in this case more properly applicable to the cases before us than any other found in other cases mentioned above.23. In any event, we are unable to see how, without Subjecting to some process the various grades of ores, mixed up in the process of transporting, so as to conform to the specifications given in the contract, could result in a new commercial product as it is known in the market. The ingredients were not even shown to have got so mixed up as to become inseparable. As already mentioned above, this is a case in which the term Oriental Mixture was nothing more than a name given by the appellant company itself to the goods which were in the State of Madhya Pradesh at the relevant time and sent from there specially in order to satisfy the specifications given in the contracts. The goods get mixed up in the process of unloading. The mere fact that the specifications in the contracts are satisfied when they get mixed up is not a good enough ground for holding that a new product has been manufactured. They could no more constitute a new commodity than parts of some machinery sent by its manufacturer to a purchaser outside a State, so that the buyer has to just fit in the various parts together, becomes a new commodity when the parts are fitted in. The mere fitting up of parts or a mixture of goods, without employing any mechanical or chemical process of manufacture, could not, we think, result in a new commodity.