1976 (10) TMI 121 - SC - VAT and Sales Tax

Was the Tribunal right in holding that, although the assessment order was made after the Constitution of India came into force, article 286 was thereby not contravened, because such order related to a period prior to January 26, 1950 - Held that - Yes. The provisions of article 286 were not contravened. Was the Tribunal right in holding that explanation (II) to section 2(g), as was originally embodied in the Sales Tax Act, 1947, got restored on the statute book because of the unconstitutionality of the substituted explanation enacted in the Sales Tax (Amendment) Act, 1949 - Held that - There is no question of restoration of unamended explanation (11) to section 2(g) as the purported amendment itself did not take effect.Hence, the unamended provision stood as it was before the attempted amendment. The question framed rests on a misconception that there was something to be restored. As nothing was taken away, nothing was there to be restored. And, there was nothing added or substituted. Does the Tribunal s decision not contradict the true meaning of the language sale of any goods which are actually in the Central Provinces and Berar at the time when the contract of sale as defined in that Act in respect thereof is made , as occurring in explanation (11) to section 2(g) of the Sales Tax Act, with reference to in respect thereof is reference to specified or earmarked goods which are actually present in the taxing State when the contracts are made - Held that - This is a question of fact as to what contracts specify and whether those goods were taxed, on which the findings already recorded are enough to dispose it off against the assessee. Was the Tribunal right in its interpretation, application and use of the provisions of original explanation (11) to section 2(g) of the Sales Tax Act even as they were? - Held that - Yes. Was the Tribunal right in assuming the law to be that the existence of ingredients of ores in the taxing State in question, which were sufficient if and when mixed in due proportion for yielding different varieties of standard mixtures contracted for by the overseas buyers, was in law enough to attract the tax? - Held that - There is no question of assuming anything. The process which was revealed and findings of fact given on it show that it did not result in the production of a new commodity at the port. It was only manganese ore of different grades which was unloaded at the port and given the name of oriental mixture because the ingredients got mixed up automatically in transportation and satisfied certain specifications. No new commodity was produced in this process. Was the Tribunal right in holding that the sales tax authorities had found as a fact that the goods consisting of oriental mixture were in the Madhya Pradesh State when the contracts in respect of these goods were made? - Held that - Yes. Thus Assessee s appeals dismissed.

Issues Involved:
1. Applicability of Article 286 of the Constitution.
2. Validity and effect of the amendment to Section 2(g) of the Central Provinces and Berar Sales Tax Act, 1947.
3. Interpretation of Explanation (II) to Section 2(g) regarding the location of goods at the time of the contract.
4. Whether the process of mixing manganese ore constitutes "manufacture."
5. Taxability of "oriental mixture" as a new commodity.
6. Factual determination of the existence of goods in Madhya Pradesh at the time of the contracts.

Detailed Analysis:

1. Applicability of Article 286 of the Constitution:
The court agreed with the High Court's view that Article 286 of the Constitution, which is not retrospective, could not help the assessee merely because it was there at the time of assessment. The periods involved were before the Constitution came into force.

2. Validity and Effect of the Amendment to Section 2(g):
The amendment to Section 2(g) of the Act, which was supposed to substitute Explanation (II), was deemed invalid as it did not receive the assent of the Governor-General required under Section 107 of the Government of India Act. The court held that the unamended provision stood as it was before the attempted amendment. The argument that the repeal of the old provision was valid but the substitution was not was rejected. The court emphasized that the legislative process termed "substitution" was abortive and did not take effect, leaving the pre-existing provision intact.

3. Interpretation of Explanation (II) to Section 2(g):
The court found that the High Court had correctly interpreted that the goods must be in the taxing state at the time of the contract. The Tribunal's decision that the goods were in Madhya Pradesh when the contracts were made was upheld. The court clarified that the term "in respect thereof" in Explanation (II) refers to goods specified or earmarked in the contracts.

4. Whether the Process of Mixing Manganese Ore Constitutes "Manufacture":
The court disagreed with the High Court's reasoning that the mixing of different grades of manganese ore at the port constituted "manufacture." The court held that no new commercial product was created through the mere process of mixing during transportation and unloading. The term "oriental mixture" was merely a name given by the company to the goods, and no mechanical or chemical process of manufacture was involved.

5. Taxability of "Oriental Mixture" as a New Commodity:
The court held that the "oriental mixture" was not a new commodity but merely a mixture of different grades of manganese ore. The goods were in Madhya Pradesh at the time of the contracts, and the mixing process at the port did not result in the production of a new commodity. Therefore, the goods were taxable in Madhya Pradesh.

6. Factual Determination of the Existence of Goods in Madhya Pradesh:
The court upheld the Tribunal's finding that the goods, in the form of the "oriental mixture," were in Madhya Pradesh when the contracts were made. The High Court's observation that the ingredients existed in Madhya Pradesh and got mixed up at the port was noted, but the court concluded that this did not change the taxability of the goods in Madhya Pradesh.

Conclusion:
The appeals of the assessee-company against the Full Bench decision were dismissed, and the appeals of the State of Maharashtra against the Division Bench judgment were allowed. The court held that the "oriental mixture" was not a new commodity and was taxable in Madhya Pradesh. The unamended provision of Section 2(g) stood as it was before the attempted amendment. The court emphasized that the questions could have been more lucidly and simply stated. Parties were ordered to bear their own costs.

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