Holding

The notifications imposing a 10% purchase tax on bamboos and standing trees are constitutional, valid, and levy tax on the purchase of goods, without violating the prohibition on double taxation, and supersession does not erase prior tax liability.

Summary

The State of Orissa issued notifications under the Orissa Sales Tax Act, 1947, imposing a 10% purchase tax on bamboos and standing trees agreed to be severed. Petitioners challenged the validity of these notifications, arguing that the transactions were not sales of goods, that the tax amounted to double taxation, and that the superseding notifications wiped out earlier tax liabilities. The Supreme Court held that the notified taxes are levied on the purchase of goods, that bamboos and standing trees qualify as "goods" under the Sale of Goods Act, and that the provisions are within the State's constitutional power under Entry 54 of List II. It further ruled that the notifications do not create double taxation, that "supersession" merely repeals and replaces earlier notifications without erasing accrued liability, and that bamboo contracts constitute a profit a prendre (immovable property) and are therefore outside the scope of the tax, while timber contracts are agreements to sell standing timber, not works contracts. Consequently, the Court reversed the High Court, upheld the notifications, quashed the notice against the paper mill, and modified the assessment against the timber contractor.

Issues considered

The validity of the notifications imposing purchase tax on bamboos and standing trees under the Orissa Sales Tax Act, 1947.
Whether bamboos and standing trees agreed to be severed constitute "goods" within the meaning of the Sale of Goods Act and the Constitution's Entry 54.
If the tax constitutes double taxation in violation of the proviso to section 8 of the Orissa Sales Tax Act.
Whether the December 29, 1977 notifications, described as "superseding" earlier ones, wipe out tax liability accrued under the May 23, 1977 notifications.
The nature of the bamboo contracts – whether they are sales of goods, profit a prendre, or leases – and their taxability.
The character of the timber contracts – whether they are works contracts or agreements to sell standing timber.
The proper interpretation of the terms "timber" and "logs" for tax purposes.

Legislation cited

Constitution of Indias. Article 245, s. Article 246, s. Entry 48 of List II (pre‑Constitution), s. Entry 54 of List II (Seventh Schedule), s. Sixth Amendment (Entry 54)
General Clauses Act, 1897s. 26, s. 36
Government of India Act, 1935s. 100(3)
Orissa Forest Act, 1972s. n, s. o
Orissa Forest Produce (Control of Trade) Act, 1981
Orissa Sales Tax Act, 1947s. 2(c), s. 2(d), s. 2(dd), s. 2(e), s. 2(g), s. 2(i), s. 2(j), s. 3B, s. 5, s. 8
Registration Act, 1908s. 6, s. 9
Sale of Goods Act, 1930s. 18, s. 19, s. 20, s. 21, s. 22, s. 23, s. 24, s. 4
Transfer of Property Act, 1882s. 3

Subjects

purchase taxsales taxOrissa Sales Tax Actbamboo contracttimber contractprofit a prendregoods definitiondouble taxationsupersessionconstitutional validityEntry 54standing timbersale of goods act

Judgment

-A
STATE OF ORISSA & OTHERS

v•
• THE TITAGHUR PAPER MILLS COMPANY LTD.
B
&ANR.

March I, 1985

(V.D. TULZAPURKAR, AMARENDRA NATH SEN AND
c I • - -
- .. D.P. MADON, JJ.]

Ori.1sa Sale~ Tax Act 1947-Sec!ions 38 and 5 (!)-Scope of-Notifications
levying purchase tax on hainboos agreed to be served and standing trees agreed to
be sevred-Whether ultra vires the Act-Whether create new class of goods no(
known to /aw-U'hether atnount lo tax on itnmovable property-And not on
D goods-notifications issued in supersession of all previous notifications on the
subject-Whether wipe out all tax liability accruing under previous .notifications.

"Timber" 'and "logs"-Whether mean the same thing.

Ba1nboo contract-Nature of-Whether an ea},·enienl.

E lnterpretation-Natu1·e and 1n1.11i•1g ;Jj .1 docunient-·Whether can be
detcrn1ined by th.e end·result-Court-1/ co11J,J go inrO policy 1natters.

Constitution of India-Article 141-Co11/lirti11g views of the Supretnc Court
nn same point-View of larger Bench to be ft/lowed in pr<'ference to view of
smaller Bench.

F Scctio:1 3B of the Orissa Sales Tax Act 1947 empowers the State Govern·
ment to declare from time to time any goods or class of goods to be liable to tax
on turnov~r of purchases. The proviso provides that no ta.'!; shall be payable
on the sales ?f such g)Jds or class of g.Jods declared under this section. Section
5(1) prior to its amendrnent by the Orissa Sales Tax (Amendtnent) Ordinance,
1977 provides that the tax payable by a d~aler under the Orissa Act should be
levied on his taxable turnover at such rate not ex:ceeding thirteen percent and '
G subj~ct to such conditions as the State Government might from time to time by
notific:ttion specify.

On May 23, 1977 the State Government issued two notifications. Notifica·
tion No. SRO 372/77 was made under section 3B amending the earlier notifica·
tion dated April 23, 1976. This notification made standing trees and bamboos
H agreed to be severed Jiabli; to tax on the turnover of purchase with effect from
ORISSA v. TITAGHUR .PAPEI!. MILLS 27
June 1, 1977. Notification SRO No. 373/77 issued under the first proviso . . to. A
sec,ion 5(1) of the Orissa Act amende~ with effect fron1.June 1, 1977 the second.
of the two notificatioo.s of April 23, 1976 and direc.ted that. th~ 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 wOuid be at the rate'o~ 10~,- .·

On December 29, 1977 the Orissa Sales Tax (Am~ndm~nt) ()rdlriance,
1977 was promulgated amending the Orissa Act ·with effeCt from Ja,rtuarY, 1978.:
With effect from the sar'ne date two notifications SRO .~o- 900{77 ,and SRb Nq:.~
901/77 were issued; the first notification which was issued under the provision·s
of section 3B ana in supersession of all previous· notificUtions on 'the subject: -
declared that the goods mentioned in ColumO. (2) ·of th~ sch_edule to the·n.~tifi~ •·
cation were liable to be taxCd on the turnover' of Pu'rchase with ~ffec~ frO~ ~
~·· January 1, 1978. Entries 2 and 17 in the schedule of this notification spc9ified
c
"bamb:-os agreed to be severed" and "standing trees agreed tO be severed" ,
respectively. Notification No. 901/77 issued under section 5 (1) wls in super-
ses~ion of all previous notifications in that regard. The State GOvcrnm~nt, by
this notification, directed that with effect fronl January 1, 19?8 the tax pay'ab!e
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 sPeciti'ed · D
against it in colu1nn (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 ~as repealed and replaced by Orissa Sales Tax ·(AmendmeOt)
Act of 1978.

A large: number of writ petitions were filed before the High Cou_rt impugn~
ing the notifica1ions dated May 23, 1977 and December 29, · 1977. One. grotip E
of petitioners consisled of those who had entered into agreements with the
State for the felling, cutting, obtaining and re1noving bamboos from forest areas
for the manufacture of paper· (blmboo contracts), and thci other' group -consisted
of those who had entered into agreements for the purchase of 'standiOg trees
(Timber Co'ntracts). - ·

The bamboo conlracts were a grant of exclusive right and licence to fell, - F
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 ·calICd ·the "grantof~· ! ·.
·of the licence. The bamboo contracts were in respect of different areas for: ·
"periods ranging from 11to14 years with an option to renew the agree'ments for· t
further periods. '

The respondent in-CA No. 219/82 contended before· the High CoUtf that ,
the subject matter of the .Bamboo· contract was not a sale or poi-chase of ioods ·
but was a lease of immovable property or in any event was a creation of an inte·
rest in i-omovable property by Way of-grant profit a jJrendre which amou~tcd to
an cas~ment under the Indian Basements Act 1882 and that for that reason· the
royalty payable under the bamboo contracts could not be made exigib!e·to either·
sales tax or purchase tax and that the impugned provisions Or the n-otfric~tions
were ultra vire-s t-he Act. It was also contended that the bamboo contract was 1 :
stiPREJ.IE COuRt REPORT~ (19S5] ~ S.C.k
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
s~bject, the liability to sales tax under the said notifications of May 23, 1977 was
"'Ped out.

B In Civil Appeal No. 220/82 the bids of the respondent firm at auctions
Reid by the Government in respect of trees standing in forest areas were accept-
ed aod on confirmation of the ·bids by the competent authority it antered into
aareements with the Government for felling and removing such trees. The
f~5pondent, in turn,, sold the trees felled by it in the form of Jog5 to others. At
th.e relevant time the respondent was successful at five auction sales and on
ratification or the bids entered into five separate agreements (timber contracts)
for fellina and removing the trees standing in the forest areas.

After the issue of the notifications of May 23, 1977 the respondent filed
a writ petiti'?n in the High Court against the State and the Sales Tax and Forest
Authorities contending (l) that the levy of purchase tax on standing timber
D agreed to be severed was beyond the legislative competence of the Stat~ Legis-
lature 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
tat.

The High Court a11ow~d all the ·writ petitions and quashed the impugned
E
notifications.

In appeal to the Supreme Court the State contended that the subject
matter of the impugned provisions is "goods" within the n1eaning of the tenn in
the Sale£of Goods Acfaod the Orissa Act, and that what was made exigible to
tax under the impugned provisions notifications, was a completed purchase of
ll<>ods.

HELD : (I) Notification SRO Nos. 372/77 and 373/77 dated May 23,
1977, (2) entries Nos. 2 and 17 in the schedule to notification No. 900/77 and
(3) entries Nos. 2 and 17 in the schedule to notification No. 901/77 dated
December 29, 1971 levying purchase tax at the rate of ten per cent on the pur-
chase 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
G Constitution of India or the Orissa Sales Tax Act 1947 but are constitutional
aml >ah<l. [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
H
' 0Ri~SA v. TITAGHUR PAPER MiLLS 29
purchase of goods." The addition of the word "purchase" in Entry 54 permits A
the State Legislature t.o levy a purchase tax and does not confine its taxing
power merely to levying sales.tax. [62F ·;HJ '

(b) A cantena of decisions of this Court had held that the expression
..sale of goods" had been used in the Goverqment of India Act; 193~ in the
same sense in which it is used in the Sale of Goods Act, 1930 and that it B
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 th,: c0n5titution interpretation was adopted and
any attempt by th~ State Leghlature 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 c
vires. [631' ; 64G-H ; 63G)

State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. [1959] SCR
379; The Sales Tax Officer, Pilibhit v. Messrs Budh Prakash Jai Prakash [1955]
I SCR 243, 247.

Bhopal Sug~r Industries Ltd., M.P. & A11r. 11. D P. Dube, Sales Tax Officer,
D
Bhopal Region, Bhopal & Anr., AIR 1964 SC 1037; KL. Johar & Co, v. Deputy
Co1nmercial Tax Officer [1965] 2 SCR 112; Joi11t Co1nnierciOl -Tax Officer,
Harbour Div. II Madras v. Young Men's Indian Associall'on (Reg.) Madras &
Anr. [1970] 3 SCR 680; State of Maharashtra .& Anr. v. Champa/al Kishanlal
Mohta [1971) 1 SCR 46, followed.
E
(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
3B 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
o( 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 F
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 !!Ilother point in th;same series. (65C-EJ.

(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 Sale of Goods Act, 1930 is unconstitutional,
G
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 notifica.
tion issued thereunder cannot travel beyond the scope of such Act, rule or
notification." Thus, the sales 'ta11: authoritie~ under the Orissa Act cannot assess·
to sales tax or purchase tax, a transaction which is not a sale or purchase of
H
SUPREME COURT RE~PORTS [1985] :i s.c.R.
goods or assess to sales tax any goods or class of goods which are liable to
purchase tax or a~sess to tax, whether sales tax or purchase tax, goods at
another point in the same series o.f 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]

B (2) Thfre is no substance in the argun1ent 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 Sale of Goods Act 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]
c
(a) An examination of the definitions of movable property and inunov~
able 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 "attached to earth" means "rooted in the earth as in the
case of trees and shrubs." Thus, while tre::s rooted in the earth arc irnmovable
property as being things attached to the earth,by reason of the definition of the
D term "imovable property" in variolls statutes namely- the General Clauses Act
and the Orissa General Clau.;;cs Act and the RegistratiJn 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 th~ tern1 "movable property" given in the
E Registration Act. [67E ; 68F ; 68G-H ; 69A]

(b) Theiterm "standing timber.. · ha'i been judicially recognised as "a
tr(.!e which h 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'',
thal is, a tre~ m~ant 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 stand·
F ing. 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 1novable 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. Shantabal ·v. State of Bombay & Ors. [1959] SCR, 265, 275-6,
G followed.

(c) The distinction which existed in English Jaw between /ructus naturales
(natural growth of soil regarded as part of the soil until severance) and fructus
industriales (which are chattels considered as representing the Jabour 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 conside·
ration in Indian law is whether a transaction relates to "goods" or "movable
u-
1) ORISSA V. TITACHUR PAPER MILLS 31
PL'Operty". If it is sa1e of immovable property, a document of the kind A
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 II of the Seventh
Schedule the State cannot levy a tax on the sale or purchase of any property
other than goods. [71C-D]
B
3. The respondent's contention that the impugned provisions levied a
purcha~e tax on immovable property and not on goods and that the State
Government has t'ravelle_d 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 c
purchase, th1t staading tr~es being unascerrained goods continued to be the
property of the State Government until felled and therefore the title to such
tree~ or b1mboo3 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
tligh Court read merely th:! descriptio1 of th(! goo.ds given in the impugned
provision~ by itself and n1t in conjunction with their governing words. D
[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 38.and 5(1) ~s a whole makes it clear that
the taxable ev.!nt is not an agreement to sever standing trees or bamboos but
the purchase of bamboos or standing trees agreed to be severed. [72C-DJ
E
(c) The use of the terms "agreed" in- the description of goods showed
that there mnst be an agreement between the buyer and the seller and under
this agreement standing trees as also bamboos mu5t 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 Sale of Goods Act makes a distinction
between sale and agreement to sell and provides that where there is a transfer F
from the buyer to the seller of property in the goods which nre 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 fulfiled. In the first case the
coptract is "executed contract" while in the second it is "executory."
[72E ; 7JC-DJ-

(d) A conspectus of the relevant sections o, the Sale of Goods Act shows
that a purchase would be con:iplete 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 ihe case, the property in
such goods would pa<;s from the seller to the buyer when the contract is made
an<.l it is immaterial whether the time of payment of the price or the time of ff
32 SUPREME COURT REPORTS [1985] 3 S.C.R.

taking their delivery (of standing trees agreed to be severed or bamboos agreed
A 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
B
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 "be_fore sale
or under the contract of sale" thus made no di~erence. The subject matter of
c the impugned provisions was ·goods and the - tax levied thereunder was on the
completed 'purchase of goods. 76F-H ; 77 A-CJ

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
D 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 thereunaer contrary to the terms of that notifica~
tion 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 ta,.ed under the impugned provisions and any attempt
E or action by the State to do so w )uld 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 unconstitu·
tiona!ity. [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,
E
taxation of the same goods at the purchase point amounted to double taxation
a~d that this was contrary to the provisions of the Orisaa Act. [78CJ

(b) Not only does the Orissa Act· expressly forbid double taxation but
it aJ<;o 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
tions 3B and 8. Under the proviso to section 3B no tax is payable sales
G s~c oods or class of goods declared under that section to be liable to tax on
~egturnover 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 De~ember 29, 1977 were issued as a result
of the Orissa Sales Tax (Amendment) Ordinance 1977 which later became lbe
. ff
ORJSSA v. TITAGHUR PAPER MiLLS 33
Orissa Sales Tax (~mendment) Act, 1978, while the two notifications of A"
May 23, 1977 were issued prior to the amendment. [79A]

(d) Prior to January I, 1978 under section 5(1) tax was payable by a
dealer on his taxable turnover o"f sales as also purchases at a certain fixed per-
centage. This rate applied both to sales tax and purchase tax. But the pur·
chase tax was payable only on the turnover of purchases of goods declared· B
under section 38. 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 5(1) the State Government was required to issue a notification only
when it wanted to fix a rate of tax hia:her or lower than that specified in this·
section. If no .such notification.was is'3ued then the tax payable, be it sales tax c
or purchase tax. was to be at the rate mentioned in section S(l). Wher~. how·
ever, 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 5(1) 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 D
unless it wanted to fix a rate higher or Jower than that specified in section 5(.1).
Where no such notific1tion was issued, the rate of purchase tax would be the
on.e which was mentioned in section 5(1). [79C-H]

(e) After January 1, 1978 no rate of tax was specified in the Orissa Act.
Under section 5(1) the State Government is given powef to notify from time to
time the rate of tax-sales tax or purchase tax by issuing notifications. The E
notification dated December 29, 1977 issued under section 5(1) does not contain
any entry in respect of ba1nboos 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 b~ 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
F
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 aoy necessity to delete that particular
entry or to amend the residuary entry by excluding those goods thereform. It
would be necessary for the State Government to issue a notification sPecifying
the ra"te of purchase tax on those goods because unlike what the position was
' prior to January 1, 1978, on and after that date toe new sub~section 5(1) does
not specify any rate of tax but leaves it to the State Government to notify it G
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 rro substance in the contention that the two notifications
of December 29, 1977 having been made in supcrsession of all previous notific-
ations issued on the subject their effect was to wipe out all tax liability which
fJCcrued under the earlier notifications of May 23, 1977. (800-HJ H
34 SUPREME COURT REPORTS [1985] 3 S.C.R.

A (b) The word "supersession" in the notifications of December. 29, 1977
was used in the same sense as the words "repeal a!ld raplacement" and, there-
fore, d_oes not have the effect of wiping out the tax liability under the previous
notifications. AU that was done by using the words "in supersession of all
previous notifications" in the Notifications of December 29, 1977, was to repeal
and replace the· previous notifications and not to. wipe out any liability incurred
B under the previous notifications. [146C-D]

(c) Both sections 3B and 5(1) in express terms conferred power upon the
State Government to issue notificaiions from time to time. .Under these provi-
sions the State Government can issue a notification and repeal and replace it
by another not.ification. [SIC]
c (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
Jtinuary 1. 1978 unless a notification was issued specifying the rate of tax no
dealer would be liable to pay any tax under the O~issa Act. Under the amen,ded
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 tax was specified in the new section but was left to the State
D 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; DJ

7. (a) Timber contracts were not works contracts but were agreements to
sell standing timber. [146D]

E (b) Timber contracts were not transsactions of sale or purchase of stanO·
ing trees agreed to be severed. They were mc1ely 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 exa1nined and checl-.ed and removed
from the contract area. The impugned provisions, therefore, did not apply to
the transactions covered by the Timber Contracts. [98 A-B]
F
(c) A conspectus of the terms of the Sale Notice, the Special Condilions
of Contract, the General Conditions of Contracr and the various statuto1 y
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 con·
G tracts for the sale of goods in a deliverable state and the property in the trees
specified in Schedule I of the Contract did not pas<; 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 conditiona·I upon the
State Government ratifying the acceptance of the bid, the ratification order did
not becon1e 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
H away before complying with the other conditions of the contract, namely, furni·
ORISSA V. TITAGHUR PAPER MiLLS 35
shing a Coupe Declaration Certificate within the prescribed time, registering the A
property mark or trade mark, making the security deposit and so on. Tois
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, fi~m was not entitled to any compensation B
for loss ~ustained by reason of fire, tempe!lt, 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 1ection 26 of the
.Sale of Goods Act when the property is transferred to the buyer, the goods are
nt the buyer's risk whether delivery had been made or ~not; but this section is
qualified by the phrase uunless otherwise agreed." The limber Contr&cts in
this case were subject to contract to the contrary. This is made clear by rule c
44 which states that "al! 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 samething in commercial ipartance the no material had been
produced by the partie!. Where a term has not been statutorily defined or D
judicially interpreted and there is insufficient material on record as to the mean-
ing of the words1 the Court must seek to ascertain its meaning in common
parla ·1ce 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 dontext in which it has to interpret that word. [104E; lOSB~C; 146G~HJ E
'
(b) The Orissa Act does not define the term ''timber" or "Jogs.'' 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." T.he
Madras Forest Act, 1882 and the Indian Forest Act 1927,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 F
apparent from these definilioni 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
1
G
"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 tre,es 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 lo¥s will be nothing more than wood cut up or
ff
36 SUPREME COURT REPORTS (1985] 3 s.C.R·
sawn and would be timber. Similarly, a beam is timber sawn in a particular
A way. So too ratters would be timber logs put to a particular use. In ordinary
parlaiice a plauk would be flattened and smoothed timber.
[105C; F; l06C; 107A-D; Fl
Mohanlal Vishram v. Commissioner of Sales Tax, Madhya Pradesh,
Indore [1969] 24 STC JO] ; G. Ramaswamy and others v. The State of Andhra
B Pradesh and others [1973] 32 STC 309, approved and

Krupasindhu Sahu & Sons v. State of Orissa [1975] 35 STC 270,
overruled.
j
9. (a) Sales of dressed or sized logs having been assessed to sales tax, sales
c to .the respondent Firm of timber by the State Government fro,11 which logs were 1---
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
D and December 31. 1977 would be liable to tax at the rate of ten percent. Assum-
ing 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 12(8) of the Orissa
\ . Act, the respOndent-firms assessment for the relevant period cannot be re-opened
to reassess such sales at ten per cent. [1470-E]

JO. (a) The Bamboo Contract is not a lease of the contract area to the
E respondent company in CA 219/82. Nor is it a grant of an easement to the
-->-.::-
respondent Company, as it was not a grant of any right for the beneficial equip- ·-
ment 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 Indjan 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 3(26) of the General Clauses Act, it is "immovable
F property" within. the meaning of the Transfer of Property Act. [147F-H]

(b) T.here are countervailing factors which go to show that a Bamboo
contract is hot a contract of sale of goods. It is a grant of exclusive right and
licence to fell, cut, obtain and remove ban1boos. The person giving the grant
the Governor of the State, is referred to as "granter"; 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 th~: contract area with
G the accessary licence to enter upon such area for the purpose of felling and
removing bamboos nor is it for a particular felling se.ason only. It is an agree-
ment 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
H areas. The Bamboo contract conferred uron the respondent-company a
"
ORiSSA v. TITAGHUR PAPER MiLLS

. benefit to arise out of land, na~ely, 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 ~nly be ultra vires the Orissa Act
but also unconstitutional as being beyond the State's taxio~ power under Entry
54 in List II in the Seventh Schedule to the Constitution of.India.
[119C; E; 120B-D; 121<;)-H]

11. The decision of Firm Chhotabhai Jethahhai Patel & Co. v. The State
of Madhya Pradesh [1963] SCR 476 on which the appellant relied is not good
law and hlls been overruled by decisions of larger Benches of this Court. (State
of Madhya Pradesh v. Yakinuddin [1963] 3 SCR 13) [148Al c
Mis Mohan/al flargovind of Jubbulpore v. CommiS.rioner pf Income Tqx
C.P. & Berar Nagpur L.R. [1949] 76 !,A. 235; !LR 1949 Nagpur 892; AIR
1449 PC 311 · Ananda Behra and another v. The ~State of Orissa and another
[1955] 2 SCR• 919 and Smt. Shantabai v. State of Bombay, & Orissa [1959] SCR
265, 275-6 referred to; and 'i

Board of Revenue Etc. v. A.M. Ansari Etc.[1916] 3 SCR 661, held D
inapplicable.

12. (a) The case of State of M.P. v. Orient Paper Mills Ltd. [1977] 2
SCR 1219 on which the appellant relied is not good 1aw as that decision was
given per incurium and had laid down principles of interpretatiOn Which arc
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 v. State E
of Bonibay and the Court was not justified in not adverting to that case arid the
other cases referred to on the ground that these cases dealt with the general Jaw
of real property. [142 H ; 143A] ·

(b} The enunciation of law made by the Court in·the Orient· Paper Mills
case that a document should be so construed as t0 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 ]ook at only such of the ·clius'es of the
do, ument as also to just one or more ~of the consequences flowing from he
document which would fit in with the interpretation which the court want"d
to.put on the document to make that. stalute applicable, is fraught with. consider-
F
•

able danger and mischief as it may expose documents to the personal .Prcdilic..
tions and philosophies of individual judges depending upon wheiher aCco~ciin'g
to them it would be desirable that documents of the type.they have to construe G
should be ma, e subject to a particular statute or not. [t39E-G]. . ,
. .. J /

(c) Secondly, in observing that the St.:>te Government, for reasons best
known to it had "left the exploitation of the forest resources ·in part to the
private sector" the court h d overlooked that it wa; a matter of policy for the
State to decide whether such tran~actions should be entered ·into or not, whether
the transactio11s entered iiltO by th'! State was for the industrial developmen'f-df
. suPl!.BMB"ciouu REPORTS [1985] 3 s.c.tl. .

A the State' and whether the transaction ensured employment for the people of the
area and so on.
(d) Thirdly, the n ture 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 agreem:~nt the court overlooked a firmly esta-
B blished 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 r<gards another. [141C-D]

(e) .In coming to the conclusion that the term ''royalty" used in the
document before it was merely a '·feudalistic cuphimism" for the ''price of
c timber", the court ov rlooked 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
felled. [141H ; 142AJ

13. Where there are two or more conflicting views of this court on the
sa1ne point the proper course for the High Court or even for s1naller Benches of
D this court is to find out and follow the views expressed by larger Beaches of this
court in preference to those expressed by smaller benches. This practice has
crystallise.d into a rule of law declared by this Court. [142E..F]

U.O.I. v. K.S. Subramanian [1977] I SCR 87, 92, followed.

14. A works contract is a compendious term to describe conveniently a
E contract for the performance of work or services in which the supply of mate-
rials or some other goods is incidenlal. lo 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 bas not undertaken to do any
\VOrk 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.
F [144H ; 145A]

Con1n1issio11er of Sa/el Tax, M.P. v. Purshotta1n Preniji [1970] 26 STC 38, ' )

41 S.C., referred to. -~

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 219- '
220 of 1982.
G
From the Judgment and Order datedJl9.9.1979 of the High
Court of Orissa in D.J C. Nos. 811 & 1048/77.
Anil B. Divan and R. K. Mehta for the Appellants.

S.,T. Desai, S.R. Banerjee and Vinoo. Bhagat, B.R. Aggarwal,
II Miss Vijaylakshmi Menon Vinod Bob de for the Respondents.
6RiSSA v. TiTAGHUR PAPER MILLS (Madon, J.) :\9
Th·e Judgment of the Court was delivered by A

MADON J. These two Appeals by Special Leave g.ranted
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. B

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 c
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 S.R.O. 372/77 and Notification S.R, 0 No. 373/
77. Notification S.R.O. No. 372/77 was made in exercise of the
powres conferred by section .3-B of the Orissa Act and Notification
S.R.O. No. 373/77 was made in exercise of the powers conferred by
the first proviso to sub-section (I) of section 5 of the Orissa Act. We
will refer to these Notifications in detail in the course of this judg-
ment but for the present suffice it to say that notification S.R.O. No.
372/77 amended notification no. 20209-CTA-J 4/76-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 E
effect from June I, 1977, while Noification S.R.O. No 373/77 amen-
ded with effect from June l, 1977, Notification :itii. 20212-CTA
-14/76-F dated April 23, 1979, and directed that the tax pa}-
able 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 teu per cent. After the promulgation on F
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-C.T.A. l 35/77 (Pt.) F(S.R.O. No 900/77) and
Notification No. 67181-C.T.A. 135/77-F (S.R.O. No. 901/77). The G
first Notification was expressed to be made in exercise of the pqwers
conferred by section 3-B of the Orissa Act and in supersession of
all previous notifications issued on that subject. By the said notifi-
cation the State Governmer,t declared that the goods set out in the
Schedule to the saicj Notification were liable to be taxed on the turn-
over of purchase with effect from January L 1978. Entries Nos. 2
H
SU~REMll COURT REPORTS [1985] 3 s.c.a.

A and 17 in the Schedule to the said Notification specified bomboos
agreed to be severed and standing trees agreed to be severed respec-
tively. The second Notifcation was expressed to be made in exercise
of the powers conferred by sub-section (I) 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
B
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 (2) of the Schedule to the said Notification would be at the
rate specified against it in column (3) thereof. In the said
0 Schedule the rate of purchase tax for bamboos agreed to be severed J
and standing trees agreed to be severed was Prescribed as ten per
cent. The relevant entries in the Schedule in that behalf are Ent-
ries Nos. 2 and 17. The Orissa Tax (Amendment) Ordinance,
1977, was repealed and placed by the Orissa Sale's Tax (Amend-
me·nt) Act, 1978 (Orissa Act No. 4 of 1978).
D
As many as 209 writ petitions under Article 226 of the Consti-
tution 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 notifica-
tions dated December 29, 1977 (hereinafter colleclively referred to
E as "the impugned provisions"). The petitioners before the High
Court fell into two categories. The first category consisted of those
·who has entere! into agreements with the State of Orissa for the pur-
pose 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
F
conneetion 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 stand-
ing trees. We will hereinafter refer to this agreement as "The
Timber Contract". All the Bamboo Contracts before the High
G Court were in the same terms except with respect to the contract
area, the period of the agreement and the amount of royalty paya-
ble; 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 v. Stale oj
Orissa and other (and other cases) 1 , the High Court allowed all the

(!) (1980) 45 S.T.C. 170.
-H
ORiSSA v. TITAGHUR PAPER MiLLS (Madon, I.) 4i
said writ petitions and qauashed the impugned provisions. The A
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 Olli·
cer concerned in the matter, challenging the correctnesslof the said B
judgment of the High Court. The Respondents in Civil Appeal No.
219 of 1982 are the Titaghur Paper Mills Company Limited (herein-
after 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 Maogalji Mulji c
Khara, a partner of the firm of Messrs M.M. Khara, and the said
firm. The Chief Conservator of Forests, Orissa, the Divsional Forest
Officer, Rairkhol Division. and the Divisional Forest Officer, Deo-
garh Division have also been joined as pro Jonna Respondents to
the said Appeal.
Facts of C. A. No. 219 of 1985 D

The Resspondent 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, E
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 F
Octber 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. S. of Bonai Division; and for a period of
eleven years with effect from October 1, 1969, in respect of Gurun-
dia Rusinath P. S. of Bonai Division, with an option to the Respon·
dent Company to renew the agreement for a further period of G
twelve years from October l, 1980. For the present it is not neces-
sary 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 A ''ff
(the Third Appellant in Civil Appeal No. 219 of 1982) issused to
42 SUPREME COURT REPORTS (1985] ~ s.c.k.

A the manager of the Respondent Company's mill at P. O. Choudwar
a notice dated August 18, 1977, under Rules 22 and 28(2) 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.25,000; it had without sufficient cause
B 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, show-
ing the particulars of "turnover for the quarter ending 76-77 &
6/77". By the said notice the said manager was required to attend
c 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 pcn:ilty not
exceeding one and half times that amount should not be imposed
under section 12(5) of the Orissa Act that is, for carrying on busi-
D ness 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 Co mis-
E sion er 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 O.J .C 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.
F
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 O.J.C. 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
G
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
H
ORiSSA-v. TiTAGllUR PAPER MiLLS (Madon, j,) 43
purchase of goods but was lease of immovable property or in any event
A
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 Indian Easements
Act, 1882 (Act V of 1882), and that for the said reason the amounts
of royalty payable under the Bamboo Contract could not be made
B
exigible to either sales tax or purchase tax in the exercise of the
legislative competence of the State, and, therefore, the impugned
provisions were unc0nstitutional 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 c
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 thejimpugned provisions and for writ of mandamus against D
the respondents to ihe said petitions, namely, the State of Orissa,
the Commissioner of Sales Tax, Orissa, and the said Sales Tax
Offieer, restraining them from giving any effect or taking any
further steps or proceedings vgainst the Respondent Company on
the asis of the impugned provisions or the said notice.
E

In addition to the said t~o writ petitions filed by the Respon-
dent Company and the said Kanak Ghosh, three other writ Peti-
tions were also filed by other parties who had entered into Bamboo
Contracts with the State of Orissa in which similar contentions
were raised and reliefs claimed. The record is not clear whether F
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 G
provisions it ought to have also quashed)he 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 wrii petitions together it
did not ascertain the facts of each individual petition or the exact H
consequenthl reliefs to be given to the petitioner therein.
44 SUPREME COURT REPORTS (!985) 3 s.C.Il.

A Facts of C. A. No. 220 of 1982

Messrs. M.M. Khara, Second Respondent to Civil Appeal No.
220 of 1982 (hereinafter referred to as "the Respond1:nt Firm"), is
a partnership firm of which the first Respondent to the said Appeal,
B 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 Central Sales Tax Act, 1956 (Act LXXlV of 1956), with
the Sales Tax Officer, Sambalpur I Circle. The business of the
C 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, enter-
ing into an agreement with the Government for felling and removing x
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
D 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
E respect of the forest produce govered by the agreement.

During the relevant period, the Respondent Firm was success-
ful 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
F "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 l, 1977 to December 31, 1978, and the fifth
was for the period October 28, 1977 to July 31, 1979 .

.G 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 O.J.C.
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
H Officer, Deogarth Division. Two main grounds were taken in the
ORiSSA v. TITAGHUR.PAPER MILLS (Madon, J.) 45

said writ petition, namely, (I) the levy of a purchase tax on stand· A
ing timber agreed to be severed was beyond the legislative compe-
tence ofthe 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 conten-
ded that the power conferred upon the State Government under B
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 Governament 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 c
State Government and that too without prescribing any guidelines
in respect thereof. It w is further contended that the Timber Cont·
racts 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 Re,pondent Firm to tax under the
Orissa Act for the period April I, 1977, to March 31, 1978. He held
that the Respondent Firm had paid royalty to the Forest Depart· E
ment in the agreggate sum of Rs .. 11,52,175 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 Resoondent Firm had not shown
this amount in its gross turnover. Accordingly, the Sales Tex Officer
enhanced the gross turnover to include this amount. The amount
of purchase tax assessed on the Respondent Firm amounted tq F
Rs. 1,16,217.SOp. Thereupon, the Respondent Firm and its partner
amended the said writ petition No. O.J.C. 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 G
hearing and final disposal of the said writ petition.

Apart from the Re•pondent Firm, 203 other forest contractors
who had entered into similar agreements with the State Govern-
ment also filed writ petitions in the High Court challenging the
validity of the impu!;lned provisions. By. its .judgment under appeal,
"
.
46 SUPREME COURT REPORTS [1985] 3 S.C.R.

A the High Court allowed the said petition filed by the Respon-
dent Firm. As in the case of the writ petition filed by the Respon-
dent Company and very probably for th.c same reason, the High
Court did not pass any order quashing the sard assessment order
consequent upon it holding that the impugned provisions were
B 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 S.K.Ray, C.J., and N.K. Das,
c J. The main judgment was delivered by Das. J., while Ray, C.J.,
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 23,1977, remained in force
D until the Notifications dated December 29, 1977, came into opera-
tion. 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 20 of J1is judgment as follows:

"19. For the reasons stated above, we hold as follows:
E
(I) That the bamboos an J 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 purd,ase point amounts to double taxation and, as
F such, the notifications arc ultra J1ires 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

G (3) In the case of bamboo exploitation contracts, the
impugned notifications amount also to impost of tax on
profit-a-prendre and, as such, are against the provisions
of the Orissa Sales Tax Act.

"20. In view of the aforesaid findings, we do not
H consider it necessary to go into the other questions raised
ORISSA v. TITAGHUR PAPER MILLS (Madon, J.) 47
by the petitioners, namely, whether it is a works contract
A
and whether the notifications amount to excessive delega-
tion or whether there has been-business of purchase by the
petitioners or whether there has been restriction on trade
and bussines"
B
In his concnrring 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 Division\ 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 c
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; D

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
E
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 ,pf the High Court as also of the rival
contentions of the parties, it is necessary to sec first the relevant
provisions of the Constitution of]nclia as also of the Orissa Act
and of the various notifications issued thereunder.
F
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 !(13) of the Orissa Act, section 1
was to come into force at once and the rest of the Orissa Act on G
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 I, 1947. The Orissa Act is thus a pre-Consti-
tution Act. At the date when it was enacted as also when it came
into force, the constitutional law of India w&s the Government of
48 SUPREME COURT REPORTS [1985] 3 S.C.R.

A. India Act, 1935, prior to its amendment by the Indian Independence
Act, 194.7. Under section 100(3) of the Government of India Act
1935, the Legisalature 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 II in the Seventh Schedule to that Act, namely
B the Provincial Legislatvc List. Entry 48 in the provincial Legisla-
tive List provided for "Taxes on the sale of goods and on advertise-
ments". 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 100(3) of the Government of India Act, I935,
c 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 advertise-
ments published therein" was excluively a Union subject in respect
of which under Article 245(1) read with Article 246(1) parliament
D 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
E of which under Article 245(1) read with Article 246(3) 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 Enlries.54 and55 in List II in the Seventh sd1edule
to the Constitution, namely, the State List' By the constitution
(Sixth Amendment ) Act, 1956, a' new Entry, namely Entry 92A,
F was inserted in the Unioo 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
G in the course of inter-State tcade or commerce."

The amended Entry 54 in List II reads as follows:

"54. Taxes on the sale or purchase of goods other
than newspapers, subject to the provisions of Entry_.92A of
H List!.''
OIUSSA v. T!TAGl!UR PAPER MiLLS (Madon, J.) 49

We are not concerned in these Appeals with the amendment A.
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 giveri
to the expression "tax on the sale or purdhase of goods" by the
new clause (29A) inserted in Article 366 of the Constitution wheteby B
that expression inter a/ia 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 c.
Constitution on a State's power to levy a tax on certain classes of
sales and purchases of goods.

The Orlssa Act

In keeping with the legislative history of fiscal measures in D
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.
-d. E
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 No.28 of 1958),
a purchase tax was for the first time introduced in the State of Orissa ·
with effect from December I, 1958.
F
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 4(2) 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 G
exceed the limit specified in that sub-section which during the rel~
vant period was Rs. 25,000. Under section 4(3) a dealer who has
become liable to pay tax under the Orlssa 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 liniit
and· such further period after the date of the said. expiry as may be
so SUPREME COURT REPORTS [1985] 3 S.C.R.

A 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.
B
·Section 2 is the definition section. ·Clause (c) of that section "t--
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 deliverd (omitting what is not relevant) read as follows:
c
"(c)'Dealer' means any person who carries on the
business of purchasing or selling or supplying goods
in Orissa, whether for commission, remuneration or
otherwise and includes a Department of the Government
D which carries on such business and any firm ......

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 deemed to be a dealer for the
purposes of this Act".
E
ff was on the basis of the above Explanation to section 2(c)
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 Notifica-
tions dated May 23, 1977.
F
Under the aforesaid definition of the term "dealer" before a
person can be a dealer, he must be carrying on the business of pur-
chasing 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
G 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 dafined the term "contract" having been omitted by the
Orissa Sales Tax (Amendment) Act, 1959. after the decision of this
Court in The State:oJ Madras v. Gannon Dunker!ty & Co. (Madras)
ff
ORISSA v. TITAGHUR PAPER MiLLS (Madon, J.) 51

Ltd.' The effect of this definition of the term "business" was to do A
away with the requirement of profit motive. As a consequence of
the decision of the Orlssa High Court in Straw Products Ltmlttd v.
State of Ortssa and others', 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
--4-
of 1979), which was replaced by the Orissa Sales Tax (Amendment) B
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 com- c
pany 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 D
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 1.n 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 dis-
charge of its administrative business or at its volition to name an E
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 "busi-
F
ness" as defined by the said claus.e (b) of section 2, whether a
person carried on business in a particular commodity depended
upon the volume, frequency, continuity and regularity of. transac-
tions of purchase and sales in a class of goods, and as these ingre-
dients were not satisfied in the cases before it, the transactions were G
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,

(!) [1949] S.C.R. 379.
(2) (1978) 42 S.T.C. 302·(1977) I C.W.R. 455, H
52 SUPREME COURT REPORTS (1985) 3 S.C.R.

A Orissa, h_ave come in appeal by Special Leave in this Court against
the.said j!!dgment and these appeals are still pending, being Civil
Appeals Nos. 1237-1238 of 1979 State of Orissa and others v. Straw
Products Limited arid others and Civil Appeals Nos. 1420-1421 of
979 Gommissioner of Sales Tax, Orissa and anothu v. Straw Pro-
dt!CI Limited and others. However, to get over the judgment of the
B High Court, the State Government issued the two impugned Noti·
fications 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. 11 of 1979), substit1.1ting with retrospective effect from th.e date
c 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 promul-
gation of the said Ordinance. Section 3 of the said amending Act
D validated assessments or re-assessments, levy or collection of any
" tax or imp<;>sition of any penalty made or purporting tq 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, notwith·
standing 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
E 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 defer-
red payment. or for commission, remuneration or other
F
valuable consideration and includes-

: (i} ... a company, ... firm or association which carries
on such business;
G
x x x x
Explanation I - ... 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.
011.iSSA v. TiTAGHU11. PAPEl1. MILLS (Madon, J.) 53·

Explanation II-The Central Government or .a. State. A
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 payinent or for commission, remuneration or for :•
other valuable consideration, shall, except in relation to B
any sale, supply or distribution of surplus, unserviceable or
old stores or materials or waste products, or ob_solete 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" c
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 carryin'g on
the business of purchasing, selling, supplying or distributing goods.
D
Writ petitions challenging the validity of this amending and vali-
dating 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 v. Siate of Orissa and others and Writ Petition No. 966
of 1979 Straw Products Limited and another v. State ·of Orissa and
others. E

We are concerned in these Appeals only wiih 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 : F

"(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 considera- G
tion, but does not include a mortgage, hypothecation,
charge or pledge and the words ','buy" and "purchase"
shall be construed accordingly;
x
54 SUPREME COURT RBPOll.TS [1985] ~ s.c.ll.
A The expressions "goods''. "purchase price" and "sale price"
are defined in clause (d), (ee) and (h) of secrion 2 as follows :

·" (d) 'Goods' means all kinds of movable property other
than .actionable claims, stocks, shares or securities and in-
cludes all growing crops, grass and things attached to or
B
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 valuble consideration for the purchase or supply
c 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;
D
"(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 be-
E fore 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 4(2), it is necessary to see the definition of the expression
"gross turnover", "Gross turnover" is defined by clause (dd) of
F 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 purcha-
ses" 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 receiv-
H able by a dealer in respect of sale or supply of goods other
OR!SSA v. TITAGHtlR PAPER MILLS (Madon, J.) SS
than those declared under section 3-B effected or made A
during a given period;

x x
"(j) 'Turnover of purchases' means the aggregate of the
amounts of purchase prices paid and payable by a dealer B
-l
in respect of tbe purchase or supply of goods or classes of
goods. declared under section 3-B; ·

_/ So far as is material for our purpose, section 5(1) provides
for the rates at wbicb the tax under the Orissa Act is payable.
Sub-section (I) of section 5 and the first proviso thereto as !bey c.
stood prior to tbe Orissa Sales Tax (Amendment) Ordinance, !977,
read as follows :

"5. Rate of Tax:-

(I) The tax payable by a dealer tind.er ibis Act shall be
levied at tbe rate of six per cent on bis taxable turnover; D

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 E
goods specified in such notification;

The words "at the rate of six per cent" in the main sub-
section (I) were substituted for the words "at the rate of five per
cent" and the words "not exceeding thirteen per cent" were. substi-
tuted for the words "not exceeding ten per cent" in the first proviso 11
thereto by the Orissa Sales T~x (Amendment) Act, 1967 (Orissa
Act No. 7 of 1976), with effect from May 1,.1976.

G.
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 (!) of section 5 and the first proviso thereto by a new
sub-section(!). Thus, with effect from January 1,1978 sub-section
(!) reads as follows :
H.
56 SUPREMB COURT REPOl\ts [1985] 3 S.C.R.

A "5. Rate of Tax

(I) 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,
B specify;

K x x x
The other proviso to the said sub-section (I} are not relevant
for our purpose. Sub-section (2) (A) of section 5 defines the
c expression "taxable turnover" as meaning that part of a dealer's
gross rurnover during any period which ·remains after deducting .
therefrom the turnover of sales and purchases specified in that snb-
section.

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 follows :

"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:
E
Provided that no tax shall be payable on the sales of
such goods or class of goods de.dared under this section."

This section was inserted in the Orissa Act with effect from
December 1, 1!158, by the Orissa Sales Tax (Amendment) Act, 1958.
F
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,
G Section 8 provides as follows :

·•s. 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
H
ORISSA. v. TITA.G!IUR PA.PER MILLS (Madon, J;) 51

of sales ·or purchases by successive dealers at which any A
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 B
more than one point in the same series of sales or pur-
chases by successive dealers.

Explanation-Where in a series of sales, tax is
prescribed to be fovied at the first point, such point, in
respect of goods despatched from outside the State of Orissa c
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 D
.

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
E
In exercise of the powers conferred by section 3-B of the
Orissa Act the State Government from time to time issued notifica-
tions 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) F
Act 1976, with effect from May 1,1976, all these notifications were
superseded and a fresh list of goods declared under section 3-B b)'
Notification No. 20209C.T.A.L.-14/76- F, dated April 23,1976.
All the notifications issued from time to time under the first proviso G
to sub-section (l) of section 5 specifying the rates of purchase tax on
goods declared under section 3-B were al so superseded and new
rates of purchase tax in respect of the goods declared in the said
new list were specified with effect from May 1.1976, by Notification
No. 20212-C.T.A.-14/76-F, dated April 23,1976. But is these
two Notifications which were amended by the impugned .Notifica- H
58 SuPREMB COURT REPORTS [i98SJ 3 s.c.Jl..
A tions dated May 23, 1977. The said two impugned Notifications
are as follows:

"Notification S.R .. O.No. 372/77 dated the !23rd May 1977-

In exercise of the powers conferred by section 3-B
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
c Department No. 20209-CTA-14/76-F., dated 23rd
April 1976.

AMENDMENT

In the schedule to the said notification after serial
numbers 2 and 16, the following aew serial and entry shall
D be inserted .under appropriate heading, namely:-

Serial No. Description of goods

(1) (2)

2-A Bamboos agreed to be severed.
E
16-A Standing trees agreed to be
Severed.

"Notification S.R.O. No; 373/77 dated the 23rd May 1977-

In exercise of the powers conferred by the first proviso to
F
sub-section (I) 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
G in the notification of the Government of Orissa, Finance
Department No. 20212-CTA-14/76-F., dated the 23rd
April 1976 and that the said amendment shall take effect
from the first day of June, 1977•

AMENDMENT
H
In the schedule to the said notification after serial ,
. 6RiSSA v. TlTAGHUR PAPER MILLS (Madon, i.)

numbers 2 and 16, the following new serial and entry shall
59
A
be .inserted under appropriate heading, namely:

Serial No. Description of goods Rate of Tax

(1) (2) (3) .
B
16-A Bamboos agreed. to be Ten per cent
severed

2-A Standing trees agreed Ten per cent."
to be severed
c
~· 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 (I) of section 5 prescribing a rate of tax D
different from the rate specified in section 5(1) so far as sales of
certain goods were concerned. As a result of the amendments
made by the Orissa Sales Tax (Amendment) Act, 1976, all these
notifications were superseded and new rates specified with effect
from May l, 1976, by Notification No. 20215-C-T.A.-14176 F.
dated April 23, 1976. By Notification No. S.R.A. 374/77 dated
May 23, 1977, made in exercise of the· powers conferred by the E
first proviso to sub-section (I) of section 5, the Stat~ Government
directed that with effect from June 1, 1977, the said Notification
No. 20215-C.T.A. -14/76-F. dated April 23, 1976, should
inter a/ia 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 F
to ten per .cent, In view of the amendment made in sub-section
(I) of section 5 by the Orissa Sales Tax (Amendment) Ordinance,
1977 (replaced by the Orissa Sales Tax (Amendment) Act, i 978),
the State Government issued three Notifications, (I) declaring the G
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-C.T.A. 135/77 (Pt. )-F dated H
the 29th December 1977.
60 SUPREME COURT REPORTS tl985] 3 s.c.k.

A S.R.O.No.900/77 -In exercise of powers conferred by
section 3-B of the Orissa Sales Tax Act, 1947 (Orissa Act 14
of l 947), 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
B purchase, with effect from the first day of January, 1978.

SCHEDULE

Serial No. Description of goods
0
(!) (2)

x x x x
2. Bamboos agreed to be severed
x x x x
D
17. Standing trees agreod to be severed

x x x x .
The rel event portions of the Notification specifying the,
rates of purchase tax read as follows:
E

Notification No.67181-C.T.A. 135/77-F. dated the 29th
December 1977

S.R.O. NO. 901/77- In exercise of the powers
F conferred by sub-section (!) of section 5 of the Orissa
Sales Tax Act, 1947(0rissa Act 14 of 1947), as amended by
the Orissa Sales Tax (Amendment) Ordinance, 1977 (Orissa
G Ordinance No. 10 of 1977) and in supersession of all

- previous notifications in this regard, State Government do
hereby direct that with effect from th~ 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 sc~edule given below, shall be at the rate specified
against each in column (3) thereof;
H
ORiSSA v. TITAGHUR PAPER MILLS (Madon, J.) 61
SCHEDUJ,E A
Serial No. Description of goods Rate of Tax

(!) (2) (3)

x x x x B
2. Bamboos agreed to be Ten per cent
severed
x x x x
17. Standing trees agreed to Ten per cent
be served c
K x x x:
The relevant portions of the Notification specifying
the rates of sales tax read as follows_ :

"Notification No. 67184-C.T.A.-135/77-F., dated the D
29th December 1977.

S.R.0. No. 902/77 - Jn 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. JO of 1977) and in supersession of all E
previous Notifications on the subject, the State Govern-
ment 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
F
rate specified against each in column (3) thereof.
SCHEDULE

SI.No. Description of goods Rate of Tax G

(1) (2) (3)

~it··
x x x x
.I 101 All other articles Seven percent" .

Enteries Nos. 2 and 17 in the schedule to each of the said ·H
•
62 SUPREME COURT REPORTS (1985] 3 S.C.R.

A Notifications Nos. 67178-C.T.A.-135/77 (Pt.)-F and 67181-C.T.A
135/77-F were also struck down by the High Court by its judgment
nnder appeal.

The ambit of the.Orissa State's taxing power-

B 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, nnconstitutional, and (2) assuming the
subject-matter of the impugned provisions is a sak or purchase of
goods, tbey levy a tax on the same goods both at the sale· point
and purchase-point and are therefore, ultra vires the Orissa Act.
C 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 Contitutional ; and the other, statutory. The Con-
stitutional restriction on the legislative comptence 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
D 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
E Legislature to enact ihe Orissa Act 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. After the coming into force
of the Constitution of India the power of the Orissa State Legis-
lature to enact law imposing a tax on the sale or purchase of goods
(other than newspapers) is to be found in Articles 245(1) and
F 246(3) of the Constitiution 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
G entry to Entry 48 in the Provincial Legislative List in the Govern-
ment of India Act, 1935.

While Entry 48 spoke of "taxes on the sale of goods", Entry 54
speakes of "taxes on the sale or purchase of goods". The addition
of. the word "purchase" permits the State Legislature to levy a
ff purchase tax and does not confine its taxing power merely to levying
OR!SS,\ v. TIT,\GHUR PAPER MILLS (Madon, J.) 63
a sales tax. Sale and purchase are merely two ways of looking at A·
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 transacation is a purchase.

Entry 48 in List II of the Seventh Schedule of the Govern-
ment of India Act, 1935, came up for interpretation by this Court in .B
The Sales Tax officer, Pilibhit v. 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-establised distinction between a sale and an agree-
ment 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 c
both in England and India and to hold that it authorized the impo-
sition 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 con tracts in the
definition of 'sale' and to provide that forward contracts should be
deemed to have been completed on the date originally agreed upon' D
for delivery. These. aroend.ments were held by this Court to be
ultra vires.

In State of Madras v. Gannon Dunkerly .& Co., (Madras) Ltd.,
'another Constitution Bench of this Court held that at the time when.
the Government of India Act, 1935, was enacted. the expression.
"sale of goods" was a term of well-recognized import in the general E
law relating to sale of goods and the legislative practice relating to
that topic and, thetefore, that expression roust 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, there-
fore, to give to the expressions-i"sale", ''goods" or usale of goods"
F
an artificial meaning or an enlarged meaning or to bring within
their scope what would not be comprehended within it would be
ultra >ires and uncostitutional. The court further observed (at page
413-4): G
" both under the common law and the statute law
relating to sale of goods in England and i~ India; to
constitute a transaction of sale there should· be an agree- .
ment, express or implied, relating to goods to be completed

(I) [1955) I S.C,R. 243, 246.
64 SUPREME COU.RT REPORTS [1985] 3 s.c.11.
A by passing of title in those goods. It is of the essence
of this coneept 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
B 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 thi: parties
for the sale of the very goods in which eventually property
c passes."
In that case the definition of term "sale" in the Madras Gene-
ral Sales Tax Act, 1939, was enlarged by an amendment so as to
include "a transfer of property in goods involved in the exection of
a works contract" and the definition of "turnover" was expanped
to include within it the amount payable for carrying out a works
D contract less such portion as may be prescribed. A new definition
of "works contract" inserted in the said amendments ircluded
within its meaning inter alia the construction, fitting but, improve-
ment 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
E
and indivisible, the agreement between the parties was that the
contractor should construct the building according to the specifica-
tion 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
F construction nor any property passed in such materials as movables.
The same interp relation as was placed on Entry 48 in the
Provincial Legislative List in State of Madras v. Gannon Dunkerley
G & 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 :
11 cc, for instance, Bhopal Sugar Industries Ltd. M.P. and another v.
D.P. Dube, Sales Tax Officer, Bhopal Region, Bnopal and another'
H
(!) A.LR. 1964 SC 1037.
OR!SSA v. TiTAGHUR PAPBR·MlLLS (Madon, J.) 6S
K.L. Johar and Company v. Deputy Commucia/ Tax Officer' Joint A
Commercial Tax Officer. Harbour Div ll. Madras v. Young Men'J
Indian A.ssaciation (Reg.) Madras and others;' and State of Maha•
rashtra and another v. Champa/a/ Kishanla/ Mohta.•

In Addition to the above Constitutional limitations on the
Orissa State's power to tax sales or purchases of goods, there are B
other restrictions imposed. by sections 3-B and 8 of ths 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 sespect is
not uniform. Some States have adopted a single-point ·levy,
c
others, a two-point levy ; and yet others, a multi-point levy. The
State of Orissa has adopted a single-p<Jint levy. It has don'e this
by enacting the proviso 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 tax on the turnover of purchases. The proviso to section 8 D
states that "the &ame goods shall not be taxed at more than one
point in the same series of &ales 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 where goods have been made liable
to purchas tax, no sales tax can be levied in respect of the same E
transaction or any other transaction of sale of the same goods.

As any attempt on the part of the State to impose by legis-
lation sales tax or purchase tax in respect of what would not be
a sale or a sale of goods or goods under the Sale of Goods Act, F
1930, is unconstitutional, any attempt by it to do so in the exer-
cise 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 G
Tax Act purporting to be done in the exercise of powers conferred

(I) [1965] 2 S.C.R. 112.
(2) [1970] 3 S.C.R. 680.

(3) [1971] l S.C.R. 46. ff·
66 SUPREME COURT REPons [1985] 3 S.C.R.

A by that Act or a~y rule. m1de or notification issued thereunder.
Similarly, where any ruk 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
B authorities under the Orissa Act cannot assess to sales tax or
purchase tax a transcation 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 ~f sales or pur-
chase of those goods by successive dealers when those goods are
c 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 Sale of Goods Act, 1930, and in the Orissa
D
Act, it was submitted on behalf of the Appellant State that the
subject-matter of the impugned provisions is goods and that
what fs made exigible to tax under the impugned provisions is a
completed purchase of goods. 011 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
E. exigible to purchase tax and that this attempt on the part of the
State Government was unconstitutional as being beyond its legis-
lative·· 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

F
Bamboo Contracts, the impugned provisions also amounted to
lcvy.ing a tax on a profit a prendre.
\
-
The term "goods" is defined in clause (7) of section 2 of
the Sale of Goods Act as follows:

G "(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 ;"
H
'l
ORISSA v. TITAGHUR PAPER MILLS (Madon, I.) 67

We have already reproduced earlier the definition of "goods" A
given in clause (d) of section 2 of thelOrissa Act. However for
the purposes of ready reference and comparison, we are repro·
ducing the same here again. That definition is as 'follows I

"(d) 'Goods' means all kinds of movable property
other than actionable claims, stocks, shares or securities B
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 c
(except the classes of movable property specifically excluded) and
includes growing crops, grass and things attached to ·or forming
part af the land which are agreed to be sei•ered before sale or under
the contract of sale. The Transfer of Property Act, 1882 (Act IV
of 1882), does not give any definition of the term "movable
property", but ·clauses (36) of section 3 of the General Clauses
D
Act, 1897 (Act X of 1897), clause (27) of the Orissa General Clauses
Act, 1937 (Orissa Act I of 1937), and clause (9) of sectjon 2
of the Registration Act, 1908 (Act XVI) of (1908) do. Clause
(36) of section 3 of the Genernl Clauses Act provides as follows :

"(36) 'movable property, shall mean property of
every description, except immovable property." E

The definition in the Orissa General Clauses Act is in iden-
tical terms. The definition in the Registration Act 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 F
property."
The Transfer of Property Act does not give any exhaustive
definition of "immovable property." The only definition given G
therein is in section 3 which states :

"immoveable property' does not include standing timber,
growing crops, or grass."
a
This is 'strictly speaking not definition of the term "immo-
vable property" for it does not tell us what immovable property is
b11t merely tells us what it does not include. We must, therefore, ff
68 SUPREME COUl\T REPOl\TS (1985] 3 S.C.R.
A turn to other Acts where that term is defined. Clause (26) of sec-
tion. 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,
B
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 .
.C A more elaborate definition is given in clause (6) of section 2 of the'
·) Registration Acfwhich 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
D 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 Transfer of
Property Act as follows :
E
" '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 build·
F . ings .; or

(c) attached to what is so imbedded for the permanent
beneficial enjoyment of that to which it is attached."

G 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 Registration Act,
read with the definition of the expression "attached to the earth"
given in the Transfer of Property Act, standing timber is movable
ll property by reason of its bein$ exclucdecl fro!D the definition of
i>iuSSA v. TirAGHUR PAPER MiLLS (Madon, i.) 69
l "immovable property" in tbe Transfer of Property Act.and tbe A.
Registration Act and by being expressly included within the mean-
ing of the term "movable property" given in the Registration Act.
The distinction between a tree and standing timber has been poin-
ted out by Vivian Bose, J., in his separate but con curing judgment
in the case of Shrimati Shantabai v. State of Bombay and others1 as
follows : B
"Now, what is the difference between standing timber
and a tree ? It is clear that ihere must be a distinc'
tion because the Transfer of Property Act draws one in the
definitions of 'immovable property and 'attached to the
earth' ; and it seems to me that'the distinction must lie in c
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). D
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. E

"Now, of course, a tree will continue to draw sus-
tenance 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 F
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
a)ld another, if the, drawing of nourishment from the soil
is the basis of the rule, as I hold it to be, the law is groun-
ded, 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

(I) [1959] S.C.R. 265, 27S-6.
H
70 SUPllEMll COURT llEPOllTS [1985] 3 s.c.a.
A 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,
B material for our purpose is that while trees (including bamboos)
rooted in the earth being things attached to the earth are immov·
able 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
0 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 natura/es are natural growth of the
soil, such as; grass. timber and fruit on trees, which were regarded
D
at common law as part of the soil. Fructus industriales are fruits or
crops produc.ed "in the year, by the labour of the year" in sowing
and reaping, planting, and gathering e.g. corn and potatoes. Fruc-
tus 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
E 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. n c. 3). If
they were severed before sale, section 17 of that Statute applied
(I (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.
. I
· Under the definition of 'goods' given in section 62 (1) of the old
English Sale of Goods Act of 1893, "goods" included inter alia all
industrial growing crops and things attached to or forming part of
G the land which were agreed to be severed before sale or under the
contract of s.ale. The formalities required for a con tract for the
sale· of goods of the value of £10 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
H section 61 (1) of the new Sale of Goods Act, 1979, is the same as in
ORISSA v. TITAGHUR PAPER MILLS (Madon, j.) 11
the earlier Sale of Goods Act. Thus, the position now in English
law is that crops and other produce whether fructus naturales or
fructus industria/es (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 agree:
ment between the parties must be that they shall be severed either
"before sale" or "under the contract of sale" (see Benjamin's Sale B
of Goods, Second Edition, para 91, p.63).

As pointed out in Mahadeo v. The State of Bombay' the distinc-
tion which prevailed in English law between fructus natura/es and
fruc111, industria/es does not exist in Indian law, and the only ques-
tion which would fall to be considered in India is whether a trail- C
saction 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 Registration Act 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 docu-.
D
ment 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 op. the sale or purchase· of
any property other than "goods" . J.

The subm.ission of the Respondent that, the impugned provisfons E
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 impu-
gned 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 F
"goods" within the meaning of the definition of that term in tlie
Sale of goods Act and the Orissa Act. The High Court held that
the impugned provisions amounted to levying a tax on an agree;
G
ment of sale and not on actual sale or purchase. According to the
High Court, on tax can be imposed unless the taxable event (name-
ly, the transfer of property in the goods from the seller to the
buyer) takes place ; and .standing trees (including bamboos) b~ing

(1) (1959) Supp. 2 S.C,R. 339, 349.
72 stiPROO cduar REPORTS [19~5] 3s.c.a.

A unascertained goods, under the forest contracts entered into by the
State Government, they continue to be the property of the State
Government untill felled and, therefore, the title to such trees or
bamboos is transferred in favour of the forest contractor only when the
B trees or bamoos are felled and severed after complying with the con-
ditions 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
conjuctions with the governing words of the said provision. These
c impugned provisions declare that standing trees agreed to be severed
and bamboos agreed to be severed shall be liable to tax on the
turnover or purchases. The tax that is levied under section 3-B
is not on goods declared under that sectioµ but on the turnover of
purchases or such goods. It one reads the Notifications issued
under section 3-B and S (1) as a whole. it is clear that the taxable
event is not an agreement to sever st•nding trees or bamboos but
D
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
E agreement between the buyer and the seller and under this agree ..
ment standing trees must be agreed to be severed and so) also bam-
boos. 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
F trees agreed to be severed before sale or bamboos and standing
trees agreed tobe 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
G of the Sale of Goods Act, 1930, 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
ff' of sale between one part-owner and another.
ORiSIA v. TITAGHUR PAPER MILLS (Madon, i.)

(2) A contract of sale may be absolute or conditional. A

(3) Where unJ,r a contract of sale the property in
the goods is transferre.d 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 B
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."
c
Thus, where th~re is a transfer from the buyer to the seller of
property in the goods which are the subject-matter of the agreem_ent
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 condi- D
tions are fulfilled. In the first case the contract is executed, w hilc
in the second case it is executory.

The distinction between an agreement to sell and sale and
the legal consequenc.es flowing from each have been succinctly
stated in Benjamin's Sale of Goods, paras 25-26 at page 23, as
follows : E

"Agreement to sel/ ...... 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 F
seller, they are his to deal •with as he chooses (except that
he may be in breach of hi; contract with the buyer); they
are liable to seizure in distress or ~xecution as his property; G
and they pass to the trustee in the event of his bankruptcy.

Sale. 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 H.
74 SUPREME couar REPORTS [1985] 3 s.c.R.

A 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 in one
of two ways: either by a contract whi.ch itself operates to
transfer the goods from the ownership of the seller to that
of the buyer, the property passing when the contract is
B 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
c 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 dctermil)c
whether for the impugned provision> 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
D
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
E 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
F' 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 :
G'
"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
H' or the time of delivery of the goods; or both, is postponed."
ORISSA v. :riTAGHUR PAPER MILLS (Madon, J.)

"21. Specific goods to be put into a deliverable state. A
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 does not pass until such thing is done and the
buyer has notice thereof."
B
"22. Specific goods zn 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
c
weigh, measure, test or do s·ome 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 unasccrtained goods and appropriation.

(I) 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 uncondition·
ally 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 E
the buyer. Such assent may be expressed or implied, and
may be given either before or after the appropriation is
made.

(2) Delirery to the Carrier.
F
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 G
transmission to the buyer, and does not reserve the right of
disposal, he is deemed to have unconditionally appropria-
ted 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
SUPREME COuRT REPORtS [1985] ? s.c.Il,

A 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
B 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
c "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 exigible 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
D 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 are 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
are 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
E remove the trees or bamboos, as the case may be, without any let
or hindrance. If these factors exist, then unless a different inten-
tion 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
F from seller to the buyer when the contract is made and it is im-
material whether the time of payment of the price or the time of
1'
taking delivery of standing trees agreed to be severed or bamboos
agreed to be severed or both is postponed. If, however, there is an
.G 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
,H sale and purchase would be completed before severance as under
ORISSA v. TITAGHUR PAPER MILLS (Madon, J.) 77
the impugned provisions there has to be a completed purchase of A
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 B
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 differ-
ence. The subject-matter of the impugned provisions is goods and
the tax that is levied thereunder is on the completed purchase of
goods.
c
The fallacy underlying the reasoning of the High Court is
that it has confused the question of the interpretation of the impug-
ned provisions with the iqterpretation 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 D
standing trees passed only after severance and after complying
with the conditions of that contract and, therefore, the impugned
I. 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 E
levy of purchase tax on a profit a prendre. This approach adopted
-'·~. by the High Court was erroneous in law. The question of the. vali-
dity of the impugned provisions had nothing to do with the legality
ofany action taken thereunder to ·make exigible to tax a particular
transaction. If a notification is invalid, all actions taken under it
F
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 G
in any maimer the validity of the notification. Were the
interpretation placed by the High Court on the Bamboo Con-
tract and the Timber Contracts correct, the transactions covered
by them would not be liable to be taxed under ,the impugned provi-
sions and any attempt or action by the State to do so would be
illegal but the validity of the impugned provisions would not be
ff
78 SUPREME COURT REPORTS [1985] 3 S.C.R.

A affected thereby. The challenge to the validity of the impugned
provi>ions on the ground of their unconstitutionality must, therefore,
fail.
Double taxation
Another ground on which the High Court invalidated the
B 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 provi-
sions of the Orissa Act. The general rule of construction is that a
c taxing >tatute 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 enac-
ting 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
D but the same transaction is being taxed twice though in different
hands, tint is, the seller in a tra111action of sale is being subjected
to sales tax and the purchaser in the s1mc transaction is being sub-
jected to purcluse tax. Not oaly d0es the Orissa Act expressly
forbid this but it also forbids the levying of tax at more than one
point in the same sedes of sales or purchases by successive dealers.
The provisions in this behalf arc to be found in the proviso lo
E 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
F sales or purchases by successive dealers. According fo 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
G tax is leviable in respect of the same goods unless the State Govern,
men! 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 purchas~
tax instead of sales tax,
ORISSA v. TITAGHUR PAPER MI.LLS (Madon, J.) 79

We find that the High Court has misunderstood the scheme A
of taxation under the Orissa Act. As the Notifications dated
December 29, 1977, were issued as a result of the amendments made
by the Orissa Sales Tax (Amendment) Ordinance, 197.7, replaced by
.the Orissa Sales Tax (Amendment) Act, 1978, while the Notificatioris
dated May 23, 1977, were issued prior to these amendments, it is
· necessary to consider the scheme of taxation under the Orissa Act B.
both prior to and after January 1, 1978, being the· date on which
the relevant provisions of.the said Ordinance came into force.

~f Prior to January 1, 1978, under section 5 (!)·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 ti me the rate was
c
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 js liable to
pay tax on his turnover of sales as also on his turnover of purc]Jases
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 pro- D.
viso 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 of
such goods. Prior to January l, 1978, a notification was to be
issued by the State Government under the first proviso to section 5
(1) only when it wanted to fix a r>te of tax higher or lower than that
specified in section 5(1). If no such notification was issued, then
E
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 5(1) the State Government had notified a
rate of tax different from that mentioned in section 5(1). Where,
however, any goods were declared under section 3-B to be liable to F
tax on the turnover of purchases, the notification prescribing a high,
er or lower rate of sales tax issued under the first proviso to section
5(1) would there upon cease to be operative by reason of the opera,
tion of the proviso to section 3-B and it was not necessary to repeal G
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 i~
section 5 (!). Where no such notification was issued, the rate
of. purchase tax would be the one which was mentioned in
section 5(1), lJ
80 SUPREME COURT REPORTS (1985] 3 •.C.R

After January 1, 1978,"the scheme of taxation is that no.rate
A of tax is specified in the Orissa Act but under section 5(1) 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 (I) fixing the rate of sales
tax, namely, Notification No. 67184-C.T.A.-135/77-F dated Decem·
B ber 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
c declared under section 3-B to be liable to tax on the turnover of
purchases, the residuary entry or that particular entry would auto·
matically cease to operate in respect of those goods by reason of the
proviso to section 3-B without there being any necessity to delete that
particular entry or to amend th~ 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
D
tax on those goods because unlike what the position was prior to
January 1, 1978, on and after that date the new sub section 5(1) 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
E impugned provisions were invalid and ultra 1•ires 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 Notifica-
F
tions dated December 29, 1977, having been made in "supersession"
of all previous Notifications issued on the subject, the effect wits 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
G
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 woulq
be to render the said Notification void. The High Court re:forred
to a number of decisions on the question of the power to make
subordinate le$islation havin$ retrospective effect.
H
ORISSA v. TiTAGHUR PAPER MILLS (Madon, J.) 81
L
We find it unnecessary for the purpose of deciding this point A
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, 1978. They do not at all puport
to have any retrospective effect and, therefore, they conld 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. Band section 5(1) 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,

~r declare ... "goods liable to purchase tax. Prior to Jannary l, 1978,
the proviso. to sub-section (I) of section 5 provided that "The State
c
Government may, from ti11w to time by notification ... fix a higher
rate not exceeding thirteen per cent or any lower rate of tax ... "
Section 5 (1) 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 notifi-
cation, specify." Thus, the power of the State Government to issue no-
tifica lion under these two sections is to be exercised by it "from time
to time" and, therefore, the State Government can under section
5(1) issue a notification and repeal and replace it by another noti-
fication 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
E
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 . F_
'supersession' as meaning "The action of superseding or condition
of being superseded." Some of the meanings given to the word
'supersede' on the sam: p1go in that Dictionary which are relevant
for our purpose are "to put a stop to; to render superfluous or un- 'G
necessary; to make of no effect; to annul; to take the place of (some-
thing 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" .s "the
state of being ~superseded; removal and replacement". Thus,
by usin(l in •. \he Notjficatio11s <;fated l)ecemb;r 2'J, 1977,
82 SUPREME COURT REP OR TS (l985] 3 S.C.R.
J
A the expression 'in snersssion of all previous notification'
all 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
B would be startling. It would mean, for example, that when a noti~
fication has been issued under section 5 ( l) 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
c
when the earlier notification wa·s 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-C.T.A.-135/77-F, directing that with
D effect from January I, 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
E
rate of tax was as specified in sub-section (I) of section 5 with power
conferred up~n the State G~vernment 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
F or purchase of any goods or class of goods specified in such notifica-
tion. 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
G sub-section (I) of section 5 which at the relevant time was six per
cent. 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 5(1)
did not specify any rate of tax but what was done was to confer
ll upon the State Government the pow't by notific1tion to specify
)
oRiSSA v. 'l'ITAGHUR PAPER MILLS (Madon, J.) 83

from time to time the rate of tax subject to a maximum of thirteen A
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 rea-
son that the Notification No. 67184-C.T.A-135/77-F dated Decem-
ber 29, 1977, was issued specifying the rates of sales tax with effect
from January l, 1978. As under section 3-B the State Government II
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 5(1). Where, however,
the State Government wanted that the turnover of purchase of c
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 5(1) 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 I, 1978, it was D
necessary to Issue a notification consolidating all previous notifica-
tions on the subject in respect of goods liable to purchase tax
which the State Government did by the impugned Notification No.
_)._
67178-C.T.A.-135/77-(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 5(1) E
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-C.T.A.-135/77-F. dated ~December 29, 1977; specifying
the rates of purchase tax with effect from January l, 1978.
F
Exigibility to tax-Preliminary Contenion-

The question which now remains to be considered is as regards
the exigibi!ity to purchase tax of the amounts payable under the G
Bamboo Contract and the Timber Contracts. Before we address
ourselves to this question, it is necessary to dispo>e 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
8.4 SUPREME-COURT REPOR1S (1985] 3 S.C.R,

A 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, •-,md that too only with
B 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 exigibiiity
to purchase tax of the transactions covered by the Bamboo Contract
and the Timber Contracts were inextricably linked together as if
c 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 ascertvin the facts and to interpret the documents
in question, if there be any, and to decide whether a particular
D 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 transac-
tions covered by these Contracts. Wc Jrnve also heard the parties
at length on the merits of this questi'on. Even though the judgment
of the High Court with respect to the validity of the impugned
E 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
authol'ities 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 ha( challenged the notice issued to it to
file a return and the Respondent Firm had challenged the assess-
G
ment order made against it and, therefore, feel free to determine
the question afresh. Jn 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.
ORISS,\ v. TIT.\GHUR PAPER MILLS (Madon, J.) SS

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 hini after
complying with all the conditions of the forest contract and as
the impugned provisions applied only to standing trees, that is, to
l
trees before their severance, purchase tax was not attracted and any
__ j attempt to levy purchase tax on the amounts payable under the
Timber Contracts would amount to taxing an agreement of sale c
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 Jogs 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.
E
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 F ,
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 mattter of the Timber Contracts were goods
G ;·;
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
SUPREME COURT REPORTS [1985) 3 s.c.li..

A submission that for the reason set out above the amounts payable
under the Timber Contract were e~igible 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 Orfasa Forest Contract
Rule, 1966 (hereinafter referred to as "The Forest Contract
B 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,
c 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'''
D 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
E
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

F
promulgated under the Orissa Forest Act, 1972.

Under condition I of the Special Conditions of Sale set out
in Part II of the Sale Notico, 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
--
'

G months mentioned in the sale notice a·gainst each lot. Condition
2 stated the time and manner of "payment of purchase price" in
full or by instalments. Under condition 8, the intending bidders
were asked to inspect the coupes and lots before bidding in the auc-
tion and their act of bidding was to be deemed as sufficient proof
of their having inspected the coupes the coupes and satisfied them-
selves about the correctness of the quality and quantity of the
H
Ol!.issA v. TITAGHiiR PAPER MILLS (Madon, J.) si
produce and ·the area of the contract. Condition 9 provided that A
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 in·
structions of the higher authority and local rules were to be binding B
on the contractors as regards felling of trees in coupes. Under con-
dition 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 ~ame was to be adjusted from the earnest
money deposit or the security deposit, as the case niay be, and the
purchaser was bound to replenish the same forthwith. Condition c
· 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 instal-
ment of consideration money and non-payment of sales tax or non-
subniission of appropriate declaration under the Sales Tax Rules
was to amount to incomplete payment of instalm,ent and thereupon
Rule 9-A of the Forest Contract Rules was to be applicable.

Under condition 1 of the General Conditions of Sale Pub-
lished in Part III of the Sale Notice, the bid was to be accepted by
_)._ -
the Divisional Forest Officer subject to the approval of the com-
petent authority and the right to take contract fQ( exploiting
forest produce in the lots advertised in Part I of the Sale Notice
was to be granted when the competent authority approved' the E
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 con·
F
dition 1O, 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
G
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 quasb the sale and forfeit the
H
88 SUPREME COURT REPORTS [1985] 3 s.c.R. J

A earnest money or the security deposit, as the case may be, and
resell the lot and recover from tbe 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
B successful bidder by the Divisional Forest Officer specifying
ther.::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 considera-
tion money if it was payable in one instalment and before furnish-
c - ing the coupe declaration certificate or intimatiou 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 o·n 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 Sche-
dule 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
E 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 eacb of the
Timber Contracts mentioned that the forest produce "sold and
purchase.d 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 4-1/2',from the ground level, · witb the hammer mark of
-"-
'--

G: 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 s:.id area during the
period of the contract and it was further provided that the said
forest produce was to be extracted by the forest contractor ollly
H
ORISSA v. TIT/\GHUR PAPER MILLS (Madon, J.) 89

during the aforesaid period. That part of clause 2 which. spoke of A
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 -B
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 Ill. Under dause 5, it was agreed
that the Timber Contract was to be subject to the Forest Con-
c
tract 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 JV. 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 inslalments and the dates of payment of
the instalments.

The bids given by the Respondent Firm were ratified in due E
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 ratification letters specified the
number and amounts of the instalments payable by the Respondent
Firm and the dates when eacb instalment was payable. Each of F-
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 G
Divisional Forest 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 inte11ded to commence work from a
particular date, as the case may be, as required under Rule 12 of H
90 SUPREME COURT REPORTS tt985] 3 S.C.R.
the Forest Contract Rules. By the said letters the Respondent
A
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
B 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
c J972), 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 wh~n found in or brought
from a forest. Clause (n) defines "timber" as including "trees
D 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 •ihe Orissa Forest Act confers powers upon the State
Government to make rules inter u/ia for the cutting, sawing, conver-
sion and removal of trees and timber, and the collection,
manufacture and removal of forest produce, from protected forests.
E 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 45(1) 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
F 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
G
may be imported, exported or moved into, from or within the
State, and to providC for punishment of imprisonment which may
extend to one year or fine which may extend to Rs. 1,000 or both
for any breach of such rules.

Under rule .2 of the Forest Contract Rules, all contracts whereby
H
ORiSSA v. TltAGHUR PAPER MILLS (Madon, J.) 91
the Government sells forest produce to a purchaser are, subject to A
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 contract is,
however, given the power to vary the rules by express provision in
such contract. A "forest contract' is defined in clause (1) of
Rule 3 as.meaning '·a contract whereby Government agrees to sell B
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 c
extraction of the forest produce purchases under the contract.
Uuder Rule 6. where a period is specified iu 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 D
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 E
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 con·
tract 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
F

already paid. Further removal is to be permitted only after the
contractor has paid such further sum as in the opinion of the G
Divisional Forest Officer or the Range Officer is sufficient to cover
such excess. Under Rule 9-A, it is open to tlie Divisional· Forest
Officer or the Range Officer of the concerned . range to stop
extraction .if the contractor fails 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 H.
92 SUPREME COURT REPORTS [1985] 3 .s.c.a

A 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 L

the concerned Range Officer a written declaration to the effect that
he or his authorized agent or both have been shown the boundaries
B 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
c 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
D 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 tile Range Officer. Further, the Divisional Forest
E
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

F
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
·-
1.

Forest Officer and the forest contractor is not to cart any produce
G over forest roads between such periods as the Divisional Forest
Officer might appoint without the previous permission in writinl( 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
H for nrgent or special repairs should this in his opinion become
ORJSSA v. TJTAGHUR PAPER MILLS (Madon, J.) 93
necessary. Further, the forest contractor is prohibited from A
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 produ.ce
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 specifieCI by rules made under the Orissa Forest Act or ·by B
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 c
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 D
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 surreµdered all his rights to standing trees
in section No. I. 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
F
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 an.d get it registered by paying
the registration fee in respect thereof. No timber is to be con- G
veyed 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 ha1nmer mark
pef9re it is rem9ved fro!ll the stump-side beyond the limits of such
JL
94 SuPREME COURT REPORTS [1985] 3 S.C.R.

A 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 a11thority competent to do so. The
B 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
c 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 1he Government.
Further, the Government becomes entitled to keep ~11 sums
D 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 forfoit the security
deposit of the contractor. Under Rule 35, if the forest contractor
commits any breach of conditions of the contract other than those
E mentioned in Rule 34(1), the contract is liable to be terminated
and thereupon all the contractor's rights under the contract includ-
ing 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 ·\
F
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
G 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 noturrtl calamity
or by reason of any wronsful act committcJ by any third party or
ORISSA v. TITAGHUR PAPER MILLS (Madon, J.) 95
by reason of the unsoundness or breakage of any forest produce A
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 Forest Department or any other department
are insufficient 'or in bad order or remain closed under any special B
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 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 c
the forest contractor.

B~aring in mind the terim and conditions of the Timber Con-
tracts-not only those expressly ·set out therein but also those incor-
porated therein by reference, namely, the terms of the Sale Notice, D
the Special Conditions of Contract, the General Conditions of
Contract and the various statutory provisions-we have now to
determine wheth.er the property in the trees which were the subject.
matter of the Timbor Contracts passed to the Respondent Firm
while the trees wore still standing or after they were severed. In
the first case the impugned provisions would apply and the amounts 'E
payable under the Timber Contracts would become exigible to pur-
chase tax, while in the second case the impugned provisions would
not apply and no purchase tax would be payable. The above cons-
pectus 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 F
~uction" are not determinative of the matter. Though clause 1 of
the Timber Contracts speaks of "the forest produce sold and pur-
chased", the other terms and conditions of the contract make it
clear that the Timoer Contracts were not unconditional contracts
for the sale of goods in a deliverable state and the property in the G
trees specified in Schedule 1 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 (I) of Rule 3 of the ff·
96 SUPREME COURT REPORTS (1985) 3 S.C.R.

A Forest Contract Rules deflnes 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. des·
cribes these contracts as "an agreement for the sale and purchase
of forest produce." In fact, the signing of the Timber Contracts
B 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 uncon-.
ditional contract for the sale of specific goods in a deliverable state
for the Respondent Firm had no right to severe the trees and take
c 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
D
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
E 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
Fo. est Officer or the conc1:rncd 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
F of the felled trees removed over the amount of the instalments
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
G 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
ff would forfeit its ri~ht to all ftirther trees to be severed by it if it
ORiSSA v. TITAGHUR PAPER MILLS (Madon J.). 97

committed a breach of any of the other conditions of the contract. A
The mode of felling the trees was also not of the choice of the Res-
pondent 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 B
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 C
to ascertain that they were felled in the manner prescribed in Rule
20 and were the trees which were the subject matter of the con-
tract 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 c ~ntract within the period of the contract, on
the expiry of such period it would lose all rights to the trees not so D
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 E
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 pro-
perty in the goods is transferred to the buyer and when the property F
is transferred to the buyer, the goods are at the buyer's risk whe-
ther 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 G
under them the dsk passed to the Respondent Firm before the
property passed to it. This is made ahundantly 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 (on tracts were not ff
98 SUPREME COURT REPORTS (1985] 3 S.C.R.

A_ transactions of sale or purchase of standing trees agreed to be
severed. They were merely agreements to sell such trees. As po in.
ted 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
B timber, after all the conditions of the contract bad been complied
with and after such timber was examined and checked and removed
from the Rcontract area. The impugned provisions, therefore, did
not apply to th'e transactions covered by the Timber Contracts.

It will be useful in the context of the conclusion which we \

c have reached to refer to the decision of this Court in Badri Prasad \_.
v. Slate of Madhya Pradesh & Anr. fhe 'question in that case was
whether there was a contract of sale of standing timber and whe-
ther 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
D State Government before the trees were felled by reason of the
provisions of the Madhya Pradesh Abolition of Proprietary Rights
(Estates, Mabals, Alienated Lands) Act, 1950 (M.P. Act No. I of
1951). The Court held that under the terms of the contract the trees
had to be felled before they be co me the property of the appellant.
The Court observed (at pages 390· l) :
E
"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
F were not 'ascertained goods' within s. 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 the whole of the
trees. In these circumstances property in the cut timber
would only pass tq the plaintiff under the contract at the
G earliest when the trees are felled. But before that happe-
ned 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

H (I) (196912 S,C.R. 380.
OlUSSA v. TiTAGHUR PAPER MILLS (Madon, J.) 99

prescribe the girth of the trees which are to be felled and the height A
above the ground level at which they are to be felled,
Timber a11d 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 B
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. The question.whether'the Division a
c
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 retros-
pective effect by the Orissa Sales Tax (Amendment and Validation)
Act, 1979, which repealed and replaced the Ordinance with the same
title, is pending before this Court in Civil Appeals Nos. 1237-1238
of 1979 and 1420-142l of 1979. Whatever be the position under the
D
old definition, after the substitution of that definition with retros-
pective effect by the said Amendment and Vali:lation Act, the
Divi3ional Forest Oflbor would be a dealer. The validity of this
amendment is, however, also under challenge in this Court in Writ
Petitions Nos. 958 of 1979 and 966of1979. W' therefore, express
no opinion on eithJr of tho>e questions. It w1s, however, submitted E
on beh~lf 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 bad made sized and dressed
logs from the timber which it had purchased under the Timber
Contracts and had sold such logs and paid sales tax on· these sales F
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 commoaity. This contention was
G
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 Goveniment ])as the power to H
100 SUPREME COURT REPORfS [l 985] 3 S.C.\\.
.J
A 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 Respon-
B dent 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
Governmept 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
c this question. Tn Saw Bros. aiid Co. v. The Stale of West Benga/1
al learned Single Judge of the Calcutta High Court held that
planks sawed out oflogs are different things from logs and timber in
its nascent state. No reasons are given in that Judgment for reaching
this conclusion,

D In Bachha Tewari and another v. Divisional Forest Officer, West
Midnapore Division, and others' 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
E make the assessee liable to pay sales ta' 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
F does not mean that they are different commercial commodities if in
fact they are n,erely different forms of the same commodity. Thus,
in Tungabhadra Industries Ltd. Kumool v. Commercial Tax Officer,
G Kurnoo/3, hydrogenated groundnut oil, commonly called 'Vanaspati'
was held by this Court to be groundnut oil within the meaning of
Rules 5 (I) (k) and 18 (2) of the Madras General Sales Tax (Turn-

(I) [1963] 14 S.T.C. 878.
(2) [1963] 14 S.T.C. 1067.
H (3) \19601 11 S.T.C. 827; (1961) 2 S.C R. 14.
ORISSA, v. TITAGHUR PAPERS MILLS (Madon, J.) JOi
over and Assessement) Rules, 1939. The Court further held that A•
the processing of groundnut oil to render it more acceptable to the
customer by improving its quality would not render the oil a com-
modity other than groundnut oil. Similarly, in the State of Gujarat
v. Sakanvala Bros.(1) this Court held that 'patassa', 'harda' and
'alchidana' were ~ugar in different forms and fell within the defini-
tion of sugar in Entry 47 of Schedule A to tha Bombay Sales Tax B
,
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 Mohan/al Vishram v.- Commissioner of
Sales Tax Madhya Pradesh, Indore('). In that case the Madhya
c
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 manufuc·
ture of other goods within the meaning of section 8(1) of the
Madhya Pradesh Sales Tax Act, 1958. Another decision equally
relevant for our purpose is that of a Division Bench of the Andhra D
Pradesh High Court in G. Ramaswamy and others v. The State of
A11dhra Pradesh and others(') in which the question was very much
the same as the one which we have to decide. The assessees in
that case purchased nascent timbor, 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.
E
Under section 5(2)(a) 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 5(1) of that Act on their
sales of, planks, rafters, out sizes, etc. treating them as general F
goods. The contention of assessees was that these goods were
timber which was taxable at the first point of sa.le 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, G
etc., sold by them could not again be made liable to sales tax

--.;-· (I) [1967] 19 S. T.C.24 (S.C.)
(2) [1969] 24 S,T.C. IOI.
(3) [1973] 32 S.T.C. 309.

H
\02 SUPREME COURT REPORTS t1985] 3 5.C.il

A 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 popu-
lar 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
B 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-
c fore, sent for instruction to the dictionaries in the absence of any
legislative or judicial guidance. The Division Bench then refer-
red to the meaning given to the word "timber" in different dic-
tionaries. The Division Bench also considered the meaning in
commercial parlance of the term "timber". In that case the
the assessees in their affidavits had asserted that timber in
D
the commercial field also meant planks, cut sizes, etc. There
was no convincing denial by the Government of that asser-
tion. The Division Bench then, turned to the "Rules for grad-
ation of cut sizes of timber" prepared and issued in October,
1960, by the Indian Standards Institution which showed the
E word "timber" was freely used for kinds of standanl 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 thereaft.er. The Division Bench also referred to the other
documentry evidence produced in that case and held that the
F documents and affidavits before it clearly made out that even the
cut sizes of timber were commonly known as timber in commer-
cial field and that, therefore, both in the popular sense and in the
c.om1nercial sense, the word "timber" had the san1e meaning. The
Division Beach also laid emphasis on the interpretation given to •
the term "timber" by the sales tax Administration. For all these
G reasons tbe Division Bench beld that merely because plan ks,
rafters, cut sizes, etc., were sawn or cut from logs of wood, they
did not alter their character and still continued to be raw mater-
ials which by themselves and in the same form could not be di-
rectly put to use for construction purposes and the Jogs of wood
H purchased by the assessees were merely cut or sawn to sizes
ORiSSA v. TiTAGHUR PAPER MILLS (Madon, i.) 103

for the sake of convenience and to make them acceptable to the A
customers and that by reason of this process they did not lose
their character as timber.

We will n iw turn to the decisions of the Orissa High Court on
'( this point. In State of Orissa v. Rajani Timber traders(') a Division
Bench of that High Court held that timber logs and sized timber B
were different commodities in the commercial sense though
sized timbers were brought out only from timber logs by a parti-
cular 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 c
sized timber woulJ not be satisfied if timber logs were supplied.
In Krupasindhu Sahu & Sons v. State of Orissa( 2) another Division
Bench of the same High Court hdd that the dictum in the Rajani
Timber Traders' case was too widely stated and it did not indi-
cate the meaning of the word "timber" as used in common parlance
in commercial circles and it also did not purport to specify the D
meaning of the expression "sized timber" as used in that judg-
ment. 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, raf-
ters. and other wood products like tables and chairs or cut into E
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 F
the word "timber" had in common parlance in Orissa the mean-
ing 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 deli-
vered by the other learned judge.
G
Having seen how the different High Courts have dealt with
this question, we will now ascertain the true position for our-

(1) (1974] 34 S.T.C. 374.
(2) [1975] 35 S.T.C. 270.
H
104 SUPREME COURT REPORTS [ 1985] 3 s.C.R.

A selves. In Ganesh Trading Co., Karna/ v. State of Haryana and ano-
ther(') 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 mean-
ing, but how those entries are understood in common parlance,
specially in commercial circles'.'. Applying this principle, the 'y
B 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
c before the court to show how "paddy" and "rice" were under-
stood in commercial circles or what these words meant in com-
mercial or trade parla.nce and th at 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
D 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 words "timber" and "logs"
mean in commercial or trade parlance nor do the pleadings of
E the parties filed in the Orissa High Court throw any light oa 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 servered" and after savering the timber while effecting
F 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
G after being cut, sized and shaped, and, therefore, there was no legal
obstruction to tax an altogether different commercial commodity
at sale-point.

(I) [19731 32 S.T .C. 623, 625 (S.C.)
H

•
Oil.ISSA v. TITAGHUR PAPER MILLS (Madon, J.) 105

In view of this state of the record we must seek to ascertain A
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 ll
parlance. In doing so the cpurt 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, thetefore have to
seloct the particular meaning which would be relevant to the con-
~·
text in which it has to interpret that word. The Orissa Act does
not define the term ''timber" or "logs". Orissa is, however, a c
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 provi- D
sions was to levy purchase tax on standing trees agreed to be
severed and bamboos agreed to be servered in view of the judg-
ment of the Orissa High Court in Straw Products Ltd, v. 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 E
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." F

Prior to the enactment of tbe 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 G
Indian Forest Act, 1927 (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 Indian Forest Act applied to the rest of the State. Both
these Acts were repealed in their application to the State of H
i06 SUPltEME COURT REPORTS (1985] 3 S.C.R.

A 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 S.tate 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,
B and all wood, whether cut up or fashioned or hollowed out for
any purpose or not". Clause (6) of section 2 of the Indian
Forest Act 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 if identity in these definitions and it will be
c 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,
D 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 spcies specified in clause (j) of that section. Clause
(j) of section 2 defines "timber " as meaning "marketable wood,
round, s1wn or fashioned, straight piece of and above two metres
in length, standing or felled (excluding fuel) of the following
E
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 defi'1ition 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.
'
G
Ou 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 occur-
H ring in the passage from the judgment of Vivian Bose, J, in
ORISSA v. TITAGUUR PAPER MILLS (Madon, J.) 107

Shrimati Sliantabai v State of Bombay. The relevant meanings of A
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". B
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 er joinery". A "Jog" according c
to the Shorter Oxford English Dictionary means "a bulky mass of
wood; now csually an unhewn portion of a felled tree, or a length
cut off for firewood" and according to the Concise Oxford Dictio-
nary it means "unhewn piece of felled tree, or similar rough mass
of wood especially cnt for firewood". Thus, logs will' be nothing
more than wood cut up or sawn and would be timber. D
A question which remains is whether beams, rafters and
planks would also be logs or timber. The Shorters Oxford English
Dictionary defines "beam" inter CJ/ia as "a large piece of squared
timber, long in proportion 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." E
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 Dictio-
nary 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." F
Tim Concise Oxford Dictionary and Webster's New International
• Dictionary define "refter" 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 wou1d also, therefore, be timber or Jog put to G
a particular use. A ''plank" is defined in Shorter Oxford English
Dictionary as "a long fiat 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 SUPRBMB COURT RBPOR1'S [1985] 3 s.c.li..

A upwards in length." According to the Concise Oxford Dictionary
it is a "long wide piece of timber, a few inches thick" and accord-
ing 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 th(ck·
ness and width of a plank may be of importance in technical specifi-
B cations but in ordinary parlance planks would be flattened and
smoothed timber. Such flatness and smoothness can only be achie·
ved 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
c would show that the conclusion reached by the Madhya Pradesh
High Court in Mohan/al Visliram v. Commissioner of Sales Tax,
Madhya Pradesh, Indore, and by the Andhra Pradesh High Court
in G. RamaswA,my and others v. 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
D "timber" in the relevant statutes. The observations of the Orissa
High Court in the case of Krupasindhu Sahu & Sons v. State of
Orissa that timber in common µarlance in Orissa takes within its
ambit only long and big sized logs of wood ordinarily used in
house construction as beam; 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
E and rafters are concerned. In our opinion, planks and rafters would
also be timber.

The result is that sales of dressed or sized Jogs by the Respond·
ent Firm having already been assessed to sales tax, the sales to the
F 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
G 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 consi·
deration. During the period from June I, 1977, to December 31,
H 1977, by reason of Notification No. S.R.O. 374/77 dated May 23,
ORISSA v. TI.TAGHUR PAPER MILLS (Madon, J.) 109

1977 the rate of sales tax on timber was fixed at ten per cent by the A
'
State Government. Since it was the contention of the State Govern-
ment 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
y 5(1) of the Orissa Act. If such was the case, on the findings given B
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 b~en 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
c
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 sepa-
rately 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 pa id by the Respondent Firm under the Timber Contracts D
are not exigible 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 concern-
-"'- ed?" Under sub-section (8) of section 12 of the Orissa Act, the E
Commissioner of Sales Tax or those sales tax authorities to whom
such power is delegated hav.e the power to reopen an assessment .
but under section 12(8) 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 .F
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-open-
ing jJie assessment, to reopen the Respondent Firm's assessment and
tax the turnover of sales of dressed or sized logs at the rate often
per cent instead of six per cent. This question, of course, would not
arise for any period on or after January I, 1978, on which date the G
substituted sub-section (I) of section 5 ca'rne into force, as under the
notification issued under the substituted sub-section (!), 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 SUPREME COURT REPORTS [1 985] 3 S.C.R.

A EntryNo. IOI of the Notification No. 67184-C.T.A. 135/77/F dated
December 29, 1977, and would be liable to sales tax at the rate of
seven per cent and there would thus be no under-assessment or
escapement of assessment.

Bamboo Contr:J ct
B
We will now ascertain the nature of the Bamboo Contract.
Unlike the Timber Contracts, the Bamboo Contract is not in a pre-
scribed 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
c period of the contract and th' amJuut of royalty. The parties io the
Bamboo Contract were the Governor of the State of Orissa referred
to in the said Contract as "the Grantor" and the Respondent Com-
pany. The Bamboo Contract is headed "Agreement of Bamboo
Are1s in Bonai Forest Division to the Titaghur Paper Mills Com-
p.my Limited." The second 1nd the third recitals of the Bamboo
D Contract arc as follows :

·"AND WHERAER the Company is desirous of obtain-
ing grant from the Grant or 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
E
the State of Orissa for the purpose of converting the bam-
boos into paper pulp or for purposes connected with
the nianufactnrc of paper or in any connection incidental.
therewith.

AND WHEREAS the Grantor has agreed to grant the
F
said licence to the Company subject to the restrictions,
terms and conditions hereinafter appearing."

Clause I ofthc Bamboo Contract is headed "Area 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
G
contract areas. Under Sub-clause (bl of clause I, the forest produce
"sold and purchased" is stated to be as specified in Schedule I and
to be situated i.n the areas ini:licated in Schedule V. Under the said
sub-clause, the grantor understood to render at all times to the
Respondent Company all possible facilities to enable it to extract
H and obtain its requirements of banihoos upto the limit imposed by
ORISSA l'. 1!TAGHUR PAPER MILLS (Madon, J.) 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 cantract
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 B
No. 219 of 1982, have been set out. Clause III provides that the
Bamboo Contract can be terminated in accordance with the provi-
sions 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 c
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
D
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. 58, 190 as security for the due performance and observance by it
of the terms of the Bamboo Contract, which sum was to be return-
ed to it on the expiry of six months after the termination or expiry
of the Bamboo Contract. The Granter was to be entitled to for- E
feit the said deposit and to appropriate the whole or part thereof
in the event of the Respon1ent Comp.my committing a breach of
the terms of the Bamboo Contract such as would entitle the Gran-
ter to terminace 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 F
out in the said clause which are not material for our purpose.
Clause Vlll 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 Xlll deal with the payment of royalty. What is
pertinent (o note about these clauses is that under clause XI fl, the G
Respondent Company was to pay an annual minimum royalty in
the sums mentioned therein and was not to be entitled to the refui1d
of the whole or any part of such minimum royalty should it fail to
cut the minimum quantity- of b11nboos in any year except on the
ground that the yield of the area fell below the quantity required to
ff
112 SUPREME COURT REPORTS [1985] 3 s.c.R.

A make up the minimum royalty payable for the year owing to gre-
garious 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
B would cut from the contract area, whether such bamboos were
r,i:moved 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 upo i between the parties from time to time and
c 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 con-
D
tract 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
E 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 rputes by which the
bamboos were to be removed as also the depots at which they were
to be presented for examination, Under clause XVll,[at every naka
F 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
G
the Bamboo Contract to use any lands, roads or streams outside •
the licensed areas which belonged to or were under the control of
the Gran tor 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 XIX, the Respondent Company
was bound to meet the local demands of b1mboos in which event r
H the royalty on such bamboos was not to be paid by the Respondent
ORISSA v. TITAGHUR PAPER MILLS (Madon, J,) 113
Company but was to be paid by the local people. Under clause XX, A
subject to obtaining prior written consent of the Grantor, the
Respondent Company was to be at liberty to make dams across
streams, cut canais, m::ike water courses, irrigation works, roads,
bridges, buildings, tramways and any other work useful or necessary
"for the purpose of th.: said business" in or upon the licensed areas
and also with the like consent to widen or deepen existing streams, B
· 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 Com-
pany within six months from the expiry of or ·earlier termination of 0
the contract were to become the property of the Grantor. Clause
XXI prohibited the Respondent Company from interferring 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 D
fo the Respondent Company (I) the possession and beneficial owner-
ship in the soil and all mines and minerals upon, in or under the
contract area and the right to make .such nse of the soil, to erect
such buildings or structures and install such plant upon it and sub-
ject it to such operations for the purpose of ext!'1lction of minerals
or otherwise as the Qrantor might deem proper, (2) the surface of
, .
the licensed areas and all grazing, cultivating and other surface
.
nghts other than those expressly granted to the Respondent Com-
. E
pany by the Bamboo Contract, (3) the right to all trees other than
trees made over to the Respondent Company and the natural pro-
ducts of the soil other than bamboos, (4) the right of the Grantor to
destroy bamboos in any portion of the contract areas for silvicul- F
tural 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 G
bamboos from any portion in the contract areas for departmental
works in Bonai Forest Division subject to a limit of 5,000 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 SUPREME COURT REPORTS [1985) 3 s.c.~.

A 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
B 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 Gran tor within
the licensed areas for the erection of store houses, sheds,. depots,
c bungalows, staff offices, agencies and other buildings of a like nature
bonafide Frequired 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
D Company as long a notice as possible of the commencement of such
· operations and it was the Respondent Company which was to be
re.sponsible for safeguarding the forest produce which was the subject
matter of the Bamboo Contract. Under clause XX!X, 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.
E

It was submitted on behalf of tho Appellant that the Bamboo
Contract was a composite contract of sale, in that it was an agree-
ment 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
F
existence in the future. According lo the Appellant the property
in the existing l!amboos would pass after they were ripe for cutting
and under Rule 12 of the Forest Cm1tract Rules the Divisional
Forest Officer had delineated the boundaries and limits of the annual
coupe from which hamboos were to be cut for the Respondent
Company to take delivery of them in as much as the bamboos then
G 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 y,
Contract but were to come into existence thereafter were concerned,
H it was submitted that as they were future goods, once they came.
ORISSA v. TITAGHOR PAPER MILLS (Madon, J.) 115
into existence and became ripe for cutting, the property in them .A
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· B
. tract of purchase aud.the property in the goods which are the subject·
matter of the contract passes froni the seller to the buyer when the
contract is made. In oth;r words, the purchase would be complete
when the standing trees or 'bomboos are specific goods, that is, when
they are identified and agreed upon at the time the . contract of sale c
is made~ and the contract is unconditional and further such standing
trees or bamboos arc 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 hin_drance. The
very submission of the Appellant with respect to when the property D
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 !'orest Contract Ruies
and while dealing with Timber Contract we have pointed out that
by reason o,f the operation of those Rules property in the trees E
passed to the forest contractor after the trees were felled and taken
to the depots at.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.
F
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 dclinition of the term "dealer" in clause
(c, of section 2 of the O;·issa Act with retrospective effect, it may be
argued that if the Bamboo Contract was a contract of sale of goods, G
then on the sale taking place to the Respondent Company, sales tax
would become payabb 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
jlamboo Contract to be a ~rant of a pm/it a prendre it becomes
ff
H.6 SUPREME COURT REPORTS (1985] 3 S.C.R.

;A .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 prei;dre.

B 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 115to117:

"24.0. Meaning of'pr0 fit a prendre'

c 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 itseif, for the use of the owner of
the right. The term 'profit a prendre' is used in contradis-
tinction to the term 'profit a prendre', which signified a
benefit which had' to be rendered by the possessor of land
D
after it had come into his possession. A profit a prendre
·is a servitude.

"241. Profit a prendre as an interest in land.

A profit a prendre is an interest in land and for this
E reason any disposition of it must be in writing. A profit a
prendre which gives a right to paiticipate in a portion only
of some specified produce of the land is jmt as much an
interest in the land as a right to take the whole of that
produce ...
"242. What ma.v be taken as a profit a prendre.
F 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
G
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,
H
\

bidssA v. TITAGHUR PAPER MILLS (Madon, J.) i 17
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 B
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 tbe rest c
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
D
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
. E'
to utilise the servicnt 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 F ·,-
capable of ownership, for otherwise the right amounts to a
mere easement'~.

In Inilian 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 laud possesses, as such: for the
G
beneficial enjoyment of that land, to do and continue to do some·
thing, 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. H
118 SUPREME COURT REPORTS {1985] 3 s.c.R.

A Clause (26) of section 3 of the General Clauses Act, 1897,
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 Registration Act 1908, illustrates a
benefit to arise out of land by stating that immovable property
"includes ... rights to ways, lights ferries, fisheries or any other benefit
B to arise out of land". As we have seen earlier, the Transfer of Pro-
perty Act, 1882, does not give any definition of "immovable pro-
perty" except negatively by stating that immovable property does
not include standing timber, growing crops, or grass. The Transfer
of Propety Act was enacted about fifteen years prior to the General \_
c Clauses Act, However, by section 4 of the General Clauses Act, the
lleliaitions 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
D when they occur in the Transfer of Property Act. In Ananda Behra
and another v. The State of Orissa and a11other(') 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 General Clauses Act, it is
immovable property within the meaning of the Transfer of Property
Act.
E
The earlier decisions showing what constitutes benefits arising
out of land have been summarized ill Mulla on The Transfer
of Property Act, 1882", and it wonld be pertinent to· reproduce the
whole of that passage. That passage (at pages 16-17 of the Fifth
Edition) is as follows:
F "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 bad
'abstained from the almost impracticable task of defining
the various kinds of interests in immovable things which
are considered immovable property. The Registration
G Act, however, expressly includes as immovable property
benefits to arise out of land, herediary allowances, rights
of way lights, ferries and fisheries'. The definition of
immovable property in the General Clauses Act applies to r
this Act. The following have been held to be immovable

H (1) (1955] 2 S. c. R. 919
/

ORIS SA. v. TITA.GIIUR PA.PER MiLLS (Madon, J.) 119
property:-varashasan or annual allowance charged on land; A
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 c
Contracts ipeak 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 goo.ds.
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 pur- D
pose 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 "Gran-
tor." While the Timber Contracts speak of the consideration. pay-
able by .the forest contractor; the Bamboo Contract provides for E
payment of royalty. "Royalty" is not a term used in legal parlance
for the price of goods sold. "Royalty" is defined in Jowites Dic-
tionary of English Law, Fifth Edition, Volume 2, page 1595, as
follows.

"Royalty, a payment reserved by the grantor of a F
patent, lease of a mine or similar right, and payable
proportionately to the use made of right by lhe 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 ofthe
right.
G
Royalty also means a payment which is made to an
author or compos.er by a publisher in respect of each copy
of his work whicl1 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
i2o SUPREME COURT REPORTS [1985} 3 S.C.R.

A "royalty" given in Jowitt. Unlike the Timber Contracts, the Bam-
boo 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 bomboos nor is it, un-
like the Timber Contracts, in respect of a particular felling season
only. It is an agreement for a long period extending to fourteen
B 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 "--
c bas no relation to the actual quantity of bamboos cut and removed.
Further, the Respondent Company is bound to pay a minimum
J
'\

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.
\
D We may pause here to note what the Judicial Committee of
the Privy Council had to sa} in the case of Raja Bahadur Kamkashya
Narain Singh of Ramgarh v. 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
E his hands capital receipt er revenue receipt. The Judicial Committee
held that it was an income flowing from the covenant in the lease.
While discussing this question, the Judicial Commictee said (at
pages 522-3):

F ''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
G 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 and
'
H (I) (1943) 11 I.T.R, 513 P.C.
ORISlA v. TITAGHUR PAPER MILLS (Madon, J.) 121
machinery, coke ovens, furnaces and form railways and A
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."
B
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 feUing, cutting and removing. bamboos with various

c'
other rights and licences ancillary thereto, the above observations
of the Judicial co·mmittee are very pertinent and apposite to what
we have to decide.

Vnder the Bamboo Contract, the Respondent €ompany 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 D
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 pur-
poses connected with the manufacture of paper. For this purpose
it has also the right to use timber and other forest produce to be E
paid for at the current schedule of rates. The Respondent Com-
pany has the right to extract fuel from areas allotted for that pur-
pose in order to meet the fuel requirements of the domestic consum-
ption in the houses and offices of the persons employed by it and
.to pay a fixed royalty for this purpose. Further, the Government
/ , was booud, if required by the Respondent Company, to lease to it a F
'\ suitable site or sites selected by it for the erection of store houses,
sheds, depots, bungalows, staff offices, agencies and other bnildings
of a like nature.

We have highlighted above only the important terms and con-/
ditions which go to show that the Bamboo Contract is not and can- G
not 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 whi ;h would grow from the soil coupled
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 ff
122 SUPREME COURT REPORTS . ( 1985) 3 S.C.R.

A 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 contrJct 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
B Company for its terms clearly show that there is no demise by the
State Government of any area to the Respondent Company. The
Respondent 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 tl;e produce thereof for its own benefit. Further, it is
c also pertine,nt that while this right to enter upon the contract areas
is described as a "licence", under clause XXV of the Bamboo Con-
tract tho Respondent Company has the right to takt on leas• 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 a like nature required for the pur-
D poses of its business.' The terms and conditions of the Bamboo
Contract leave no doubt that it confers upon the Respondent Com-
pany 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 by
E the Government of an interest in land and under section 90 of the
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 a prendre, though the grant of such right not being
for the beneficial enjoyment of any land of the Respondent Com-
pany, it would not be an easement. Being a profit a prendre or a
F benefit to arise out of land any attempt on the part of the State "._
Government to tax the amounts payable under the Bamboo Con- j
tract would not only be ultra l'ires the Orissa Act but also uncon-
stitutional as being beyond the State's taxing power under Entry
54 in List II in the Seventh Schedule to the Constitution of _
India.
G
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 inte-
H rests in land, the question whether a particular document was a
Otl!SSA v. TITAGHUR PAPER MILLS (Madon, J.) ii3
grant of a proprietary interest in land has also fallen for deter- A
mination 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 wh'ch we have to decide. Of the High Court
· decisions the one most in point is that of a Fu'! Bench of the
Madras High Court in Seeni Chettiar v. Santhanathan. Chettiar and B
others.(') 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 docu-
ment was not a lease because it did not transfer to th• defendant
c
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 D
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 furiher 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
E
of Sir Edward Vaughan Williams in the following passage cited
with approval by Lord Coleridge, C.J., in Marshall v.
Green 2) : -

"The principle of these decisions appears to be this,
that wherever at the time of the contract it is contemp- F
lated that the purchaser should derive a bcniftt 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 ; G
but where the process of vegetatiol!. 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·

(I) I.L.R. (1897) 20 Mad. 58 F.B.
(2) [1875) I C.P.D. 35, 39, H
124 SUPREME COURT REPORTS [!985) 3 S.C.R.
A 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) v. The State fo Madhya Prade.'h'.
B
This was one of the two cases strongly relied upon by the Appel-
lant, the other being State of Madhya Pradesh & Ors. v, Orient
Paper Mills Ltd'. 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
c 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 Pyadesh 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
D 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 appro-
ached this Court under Article 32 of the Constitution of India
praying for a writ prohibiting the State of Madhya Pradesh from
E 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 al.so 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 ·
F 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
Moh an/al Hargovind of Jubbulpore v. Commisioner of income-tax,
G C.P. & Berar, Nagpur 3 , In that case the assesses carried on

(1) [1953] S.C.R. 476.
(2) [1977] 2 S.C.R. 149,
ff , (3) L.R. [1949] 76 I.A. 235 ; ILR 1949 Nag. 892; A.I.R. 1949 P.C, 311.
. ORISSA v. TiTAGHUR PAPER MILL' (Madon, J.) 125
business as manufacturers and vendors of bidis composed of A
tobacco contained or rolled in tendu leaves. The contracts en·
tered 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 Judi-· B
cial Committee held that the amounts paid by the assessees under
the said contracts constituted expenditure in order to secure raw
m·aterials for their 'rnsine;s 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 c
approval the following passage from the judgment in Messrs
Mohan/a/ Hargovind's Case (at page 241) : ·

''The contracts grant no interest in land and n<l
interest in the trees or plants themselves. They are simply
and solely contracts giving to the grantees the right to pick D
and carry away leaves, which, of course, implies the right
to appropriate them as .their own property. The small right
of cullivation given in the first of the two contracts is me-
rely ancillary and is of no more significance than, would be,
e.g., 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 E
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
F
existence and there was a 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 inte'ntion
of the parties. This Court, therefore, came to the conclusion that
the State had no right to interfere with the potitioners' rights G
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 pronouncell]ents of this Co\lrt. For the ff
126 SUPREME COURT REPORTS (1985) 3 S.C.R.

A present it will be sufficient for us to point out that the reliance
placed in Chhotabliai's Case on the decision, of the Judicial
Committee in Messrs Mohan/a/ 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
·B 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
c · arise out of land. These features were conspicuously ab3ent 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 v. The State of Orissa and anorher. The
petitioners in that case had obtained oral licenses for catching and
D
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 Actl of 1952). Under the said Act, the estates of the
Raja of Parikud vested in the State of Orissa and the State refused
E 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 funda-
mental rights under Articles 19 (!.) (f) and 31 (I) of the Constitution
of India, filed petitions in this Court under Article 32 of the
Constitiution.. In their petition, the petitioners claimed that the
F transactions entered into by them 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 Acticle 32 was misconceived because until any fish was actually
caught, the petitioners would not acquire any property in it. The
G
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 a pm11/rc and in England it Wc>uld be regarded as an
H interest in lnod bcJu,c It w<1s a right lo take some proftt of the soil
ORISSA v. TITAGHUR PAPER MILLS (Madon, J.) 127
for the use of the owner of" the right in and India it would be· A
regarded as a benefit arising out of the land and as such would be
immovable pcoperty. 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 vafue, the document creating such B
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 eoforce, Ananda c
Behera's Case was the first decision in which Chhotabhai's Case was
distinguished. The relevant passage in the judgment (at pages 923·
4) is as follows :

"It is necessary to advert to Firm Chhotabhai Jethabai
Patel & Co .. v. The State of Madhya Pradesh and explain it D
because it was held there that a right to pluck, collect and
carry away' tendu leaves does not give the owner of th~
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' E
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 prop and a growing crop is
expressly exempted from the definition of 'immovable
property' in the Transfer of Property Act. That case is
F
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 Shantabai v. State of
Bombay & Others. The facts in that case were· that by an unregistered
document the petitioner's husband had granted to her in consideration G
of a sum of Rs. 20,000 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
iu laud vested in the State of Madhya Pradesh and the petitioner H
128 SUPREME COURT R"PORTS [1985] 3 S.C.R.

could no longer cut any wood. She thereupon applied to the Deputy
A 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
B petition under Article 32 of the Constitution of India alleging breach
of her fundamental rights under Article 19 (I) (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 riot necessary to determine
the true meaning and effect thereof for whatever construction be put
c 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
D
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
E 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 19(l)(f) and 31(1) of the Constitution, she
could not complain as the State had not acquired or taken possession
of the contract which remained her property and cs the State was
F 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
G 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 docs not appear to have
ff been brought to the notice of thi> when it decided the case
OIUSSA v. TITAGHUR PAPER MILLS (Madon, J.) 129

of. Chhotobhai Jethabai Patel and Co. v. The State of A
Madhya Psadesh 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
B
separate judgment considered in. detail the nat.ure 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 learq.ed 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 c
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 righ!'to cut
a tree but also to derive a profit from the soil itself; in the shape of
the nourhhment 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 ·Jive till the D
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 Transfer of Property Act and the
Registration Act, the remaining trees that were covered by the grant E
would·be immovable property and as the total value was Rs. 26,000,
I 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 F
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 Sl)bmitted that what the
Court really held in that case was that there' was no breach of any G
fundamental right of the petitioner which would entitle her to appr-
oach 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 l~arned Counsel H
130 SUPREME COURT REPORTS (1985] 3 S.C.R.

A 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
B 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 v.
c 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 reorgani-
zation of States traµsferred to the erstwhile State of Bombay,
granted to the petitioners right to take forest produce, mainly tendu
D leaves, .from forests included in their Zamindaris. The agreements
conveyed to the petitioners in addition to the tendu leaves other
forest produce like timber, bomboos, etc., the soil for making
bricks, and the right to build on and occupy land for the purpose of
their buisness. In a number of cases, these rights were spread over ,'
many years. Some of the agreements were registered and the
E others unregistered. After the coming into force of the Madhya-
Pradesh Abolition of Propreitary Rights (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
F
the Government on the ground that it was an invasion of their funda-
mental 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 agree-
ments 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 dicision in Chhotabhai's case. The
Court examined the terms of the agreements in question and conclu- r
ded that under none of them was there a naked right to take
H leaves of tendu trees together with a right of ingress and of regress
' ORISSA v. TITAGHUR PAPER MILLS (Madon, J.) 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 convey~d thereunder
and that if the right conveyed comprised more than the leaves of B
the trees, it would not be correct to refer to it as being in respect of
growing crops simp/iciter. On an examination of the terms of the
documents and the rights conveyed thereunder the Court came to
the conclusion that wh1t 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. c
With reference to C 1ih-1tab 1ui C.He relied upJn 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 D
in Chhotabhai's Case that on a canst•uction of the docu-
ments there under consideration an adopting . a principle
enunciated by the privy Council in Mohan/al Hargovind of
Jubbalpure v. Com•nissioner of Income tax Central Pro-
)'- vinces and Berar and relying upon a passage each in Benja-
min on Sale and the well-known treatise of Baden-Powell, E
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 propreitary 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'. F
-.
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
G
Ananda Behera v. 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 111erc Jicensces, then also, as pointed out
jn \he second of the two <;ases cited, the licences came to ff
i32 SUPREME COURT REPORTS [1985] 3 S.C.R.

A an end on the extinction of the title of the Iicensors. In
either case there was no question of the breach of any
fundamental right of the petitioners which could support
the petitions which were presented under Art. 32 of the
B Constituion. It is this aspect ~f 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 completly
nullified, the effect and weight of the decis'on in Chhotabhai's
case as a precedent."

c 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 for~sts and trees be-
longed to th~ proprietors, and they were items of. proprie-
tary rights ... "

"If then the forest and the trees belonged to the pro-
D
prietors as items in their 'proprietary rights', it is quite
clear that these items of proprietary rights have been trans-
ferred to the petitioners ... Being a 'proprietary right', it
vests in the State under ss. 3 and 4 of the Act. The decision
in Chhotabhai's case treated these rights as bare licences,
.and it was apparently given per hcu ·iam and cannot; there-
E fore; 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 agree-.
ments in that case were different from the terms of the Bamboo
Contract. We are unable to accept this submission. It is unnecessary
·~·
F to set out in detail the terms of the agreements in M1hadeo's Case. .,
·' ."'t-
The differences sought to be pointed out by learned Counsel for
the Appellant are unsubstantial and make no difforence. The yssen-
tial and basic features are the same and the same interpretation as
was placed upon the agreeemonts in M 1had9o's Case must, there-
fore, apply to the Bamboo Contract.
G In State of Madhya Pradesh v. Yakinuddin(1 ) the respondents
had entered into agreements with the form or 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

H (l) [1963] 3 S.C.R. 13.
ORISSA v. TITAGHUR PAPER MILLS (Madon, I.) 133
unregiste1ed. 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 thereupo~
filed petitions under Article 226 of the Constitution in the High B
•
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 v. State of
Bombay and others and Mahadeo v. The State of Bombay and. obse- c
ved as follows (at page 21):

"In view of these cpnsiderations, it must be held
thaf these cases are equally governed by the decisions afore-
said of this Court, which have overruled the earliest deci-
sion in the case of Chhotabhai Jethabai Patel and Co. v.
The State of Madhya Pradesh.

In Board of Reven.ue Etc. v. A.M. Ansari Etc.(1) the respondents
were the highest bidders at an auction of forest produce, namely,
timber, fuel, bamboos, minor forest produce, bidi leaves, tanning E
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 F
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 !~id emphasis upon three salient G
features of those agreements for reaching its conclusion,· namely,
{I) that these were agreements of short duration of nine to ten
months, (2) that they did not create any estate or interest in the

(I) (1976] 3 S.C.R. 661.
134 SUPREME COURT REPORTS (1985] 3 S.C.R.
/

A 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
B 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 obsarved as follows (at page 667) :

" ... Thus the acquisition by the respondents not being
c 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 clo.araotori•tics of licences and
did not amount to lease~ so as to attract the applicability
of Article 31(c) of the Stamp Act".

"The conclusion arrived "at by us gains strength from
D ·the judgment of this Court i:i Firm Chhotabhai Jethabai
Patel and Co. d Ors. v. 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,
E 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."
"Thete is, of course, a Judgment of this Court in
Mahadeo v. State of Bombay where seemingly a somewhat
F different view was expressed but the facts of that case 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
G 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
ff while, as we have seen ·above, most of the contracts in Chhotabhai's
ORiSSA v. TITAGHUR PAPER MILLS (Madon, J.) i:B
Case were of far greater duration extending even to fifteen years, A
nor was the Court's attention drawn to the case of State of Madhya
Pradesh v. 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 B
not raised and, therefore, not considered in Ansari's Case and the
only point which fell for decision by the Court was whether th.e
agreements were licences or leases. In fact, another question
which arose in that case was whether the respondents were liabl.e
to pay the amounts demanded from them as reimbursement of
sales tax. Affirming the decision of the High Court on this point, c
tht Court held that the Forest Department did not carry on. any
busines 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. D

We now come to the case of State of Madhya .Pradesh and
others v. 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 Bambo~ 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. v. State of E
Madhya Pradesh and Others(') were that the Pr<sident of India acting
on behalf of the former Part C State ofVindhya 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 •F
"the leased area" to fell, cut or extract bamboos and salai wood and
to remove, store and utilize the same for meeting the fuel require-
ment of its paper ·mill; A copy of the said agree.men! 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 v. The State of Bombay. The ·said agreement
provided for payment of royalty in~luding a minimum royalty. It
also ~onferred upon the respondent the right to take on .Jease such

(I) [1972] 28 S.T.C. 532. H
136 SUPREME COURT REPORTS (1985] 3 S.C.R.

A suitable site or sites as were at the disposl 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 bona fide required for the purposes of its business connected
with the said agreement as also a right to make dams acrosss reams,
cut canals, make water-course, irrigation works, construct roads,
B 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
c when the said agreement was entered into the C. P. and Berar
Sales Tax Act, 1947, wa5 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 forest contracts that gave a right
D 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 terrn "dealer" as defined in the 1958 Act
included the Central Government and the State Government or any
E of its departments. The Forest Department of the State Govern-
ment was, however, exempted from the payment of sales tax for ·the
period Aprill, 1959, to November 2, 1962. After the period of the
said exemption expired, the Forest Departmant 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,
F 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. Jn 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
G
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 Goverment was a "dealer" and that even if tbe saler
tax was payable, it was not recoverable as arrears of land
H
ORISSA v. TITAGHUR PAPER MILLS (Madon, J.) 137
revenue. The High Court held that the transaction was one A
of sale of goods and that if sales tax was payable it would be
recoverable under secti0n 64A of the Sale of Goods Act, 1939, but
the State Government o.r 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 B
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 c
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 find-
ing 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. D
The appeals were heard in the Court by a Division Bench of two
teamed Judges. At the hearing of the appeals, the respondent
desired to challenge the vi res of the amending Act, but in view of
the Presdential 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 ·
F
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 tci
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 Iha t once the trees were sovered, the property
/ in them passed to the respondent. The Court further observed that
the term used in tbe said agreement, namely, "royalty", was "a
feudalistic euphemism for the 'price' of the timber".
H
138 SUPREME COURT REPORTS (198)] 3 S.C.it

A We arc unable to agree with the interpretation placed by the
Court on the document in the Orient Paper Mills' 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 b~ construed as a whole.
This rule is stated in Halsbury's Laws of England, Fourth Edilion,
·B Volume 12, paragraph 1469 at page 602, as follows:

"Instrun;ent construed as whole.
<
It is a rule of construction applicable to all written
instruments that the instrument must be construed as a \__
c whole in order to ascertain th1 tn1e meaning of its _..J.
several clauses, and the words of each clauso mast
be so interpreted as to bring them into harmony with
the other provisions of the instrument, if that interpretation
does no violence to the meaning of which they are naturally
D 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 v. State of Bombay a five-Judge Bench of this Court .....
E 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 decidod the Orient Paper Mills' Case
F held (at page· 538) that ''we have to consider the stage when bamboos .
and salai wood have already been foiled and appropriated", wJiile
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:
G
.' "The meat of the matter is the judicial determination
of the true character of the transaction of 'lease' from the
angle of the MPG ST 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
H
ORISSA v. TITAGHUR PAPER MiLLS (Madon, i.) 139
decide an issue arising under the specific statute by c.onfining .A
the focus to that statutary 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 B
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 st~ted (at page 157) as C
>-· 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". D

The above rule enunciated by this Court in that case falls into
two parts, namely,(!) 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 E
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
Jaw. It. is fraught with considerable danger and mischief as it may
expose documents to the personal predilections and philosophies of F
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 G
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 H
i40 . SUPREME COURT REPORTS [1985) 3 s.c.R .
)

A. · 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 disappro-
val of the transactions of the type represent by the document before
it. That sentence is as follows (at page 150) ~
B
"The State of Madhya Pradesh, blessed with abundant
forest wealth, whose exvloitation, for reasons best known to
that goverement, was left in part to the private sector. viz.,
the respondent, Orient Paper Mills ... "

c We may point out here that in making this observation the
Court overlooked three important aspects of the m~tter, namely,
(I) it was a matter of policy for the State to decide whether such
transatctions 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
D State as shown by the various terms of the said agreement and thus
was an encouragement to settmg 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.
E
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 connot 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 releting to immovable
F
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 givin3
him accommodation in the new building, according to this rule of
G 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: d.rainage 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
H lessee would be entitled to the fruits already in existence as also to
ORISSA v. T!TAGHUR PAPER MILLS (Madon, J.) 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 with 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 in the
B.
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 c.
bad been firmly established by the decision of the five-Judge Bench·
of this Court in State of Madras v. Gannon Dunker/y 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 \::ind of property and a sale as regards another. This principle
bas been consistently followed and applied by this Court (see; for D'
instance. Commissioner of Sales Tax. M. P. v. Purshottam Premji).( 1)
Incidentally, we may also point out that in the Orient Paper Mills
Case this Court itself had reservations as regards what it ·was decid-
ing as is shown '>Y its statement that "in the jural cosmos of
relativity, our observations here may not be good currency beyond
the factual legal bou·1daries of sales-tax situations under a specific
E
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 fransactionlthereu~der. These, however, have to be determined
~ \.
from all the terms and clauses of the document and all the rights F
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 G
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] 46 S.T.C. 38, 41 s.c. H
142 SUPREME COURT REPORTS [\985] 3 S.C.R.

A of the bamboos felted, 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 a~ interpretation pbced by the court on a
document is not binding up~n. it when another document comes to
B' be interpreted by it but that is so w:10re the two dJcuments 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 ·Mills' 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
c Pradesh High Court under app~a\ 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 Couri per in-
curium because it did not take into consideration decisions of larger
Benches of this Court •. In Union of India and another v. K. S.
D. Subramanian<'> 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
E 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 foll wed by this
Court itself. The practice has now crystallized in to rule of
law declared by this Court."

F Ha;,f 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 imma-
G terial wheth_er the possession of the land is given to the grant.ee 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.JlfohaJco State of Bnmbay and this Cour\ was not

tt (I) (1977) I S.C.R. 871 92,

'
ORISSA v. TITAGHUR PAPER MILLS (Madon, J.) 143

justified in not adverting to that case and the other cases referred to A
by us earlier on the ground that these cases dealr 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 B
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 .
c
and legal in eye of the law.
·~
The authorities discussed above show that the case of Firm
Chhotabhai Jethabai Patel & Co. v. 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 D
Madhya Pradesh v. 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
bat is a grant of a Pnfit a prmdre, that is, of a benefit to arise out
E
·of la~d and that it is n)t p>nibb to bifurc1te the Bamb)) 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 F
and all the rights conferred ~y it and not with reference to only a
few terms or with just one of the rights flowing therefrom. On a
proper interpretation, the Bomboo Contract dose not confer upon
the Respondent Company merely a right to enter upon the !arid 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 G'
have already summarized earlier and which make in clear that what
the Bamboo C'lntract 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 ·or ··its Sales Tax
. Department to brinil to tax the amounts payable un<Ier the Bmboo
144 SUPREME COURT REPORTS. · [1985] 3 S.C.R.

A' Contract was, therefore, not only unconstitutional but ultra vires· ·
the Orissa Act.
Works Contract
•
The.only point which now remains to be considered fs the
B
one canvassed by the. contesting Respondents namely, that the : . ..,
Bamboo Contract as also the Timber Contracts arc works contracts
and the amount• payable thereunder ·cannot, therefore, be .made •
exigible to any tax under the Orissa Act. A . works contract is a· .
compendiou.s...t.erni t<> describe conveniently a contract for the per- .\
formance of .work or services in which the supply of materials or .
c 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 se< vies 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
D a potrait, it would be a contract of work ahd 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
ofSale Tax, M.P. v. Pushottam Premji, this Court pointed out the
distinction between a works contract and a contract for the sale of
·goods as follows (at page 41) :
"E
" 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 hay.e beeri 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
•
G thereto
.
to the other party for price.".
As pointed out above. the Timber Centrals are agreement~
relating to movabl.s while lhc Bamboo Contract fa a grant of an
interest in immovable property. The question, therefore, whether
there is a works ccntract or a contract of sale of go.ods can arise
R only with respect tc;> the Timber C9ntrac\s but the very meanin!J.

'
ORISSA v. TITAGHUR PAPER MILLS (Madon, J.) 145
of a works contract would show that the Timber Contracts cannot be A
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 ihe 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 B
• 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
c
To summuize our conchisions :

(1) The impugned provisions, '!amely,

(I) Notification S.R.O. No. 372/77 dated May 23,
1977, (2) Notification S.R.O. No. 373/77 dated May 23, D,
1977, (3) Entries Nos. 2 and 17 in the Schedule to Notifi·
cation No. 67178-C.T.A. 135/77 (Pt.)·F <S.R.O. No.900/77)
dated December 29, 1977, and (4) Entries Nos. 2 and 17
in the Schedule to Notification No, 67181-C.T.A. 135/77-F .
(S.R.0. No.901/77) .dated . December 29, 1977, levying
purchase tax at the rate of ten per cent on the purchase of E
bamboos agreed to be severed and standing ·trees agreed to
be severed, are not ul.tra vires either Entry 54 in List II.in
the Sevrnth Schedule to the Constitution of India or the
Orissa Sales Tax Act, 1947, but are ·constitutional and
valid.
F
(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 barn boos agreed to
be severed.

(3) The absence in the impugned provisions of the G'
words "before sale or under the contract of sale" is im-
material for theimpugned provisions read as a whole clea·
( rly show that the severance of standing trees or bamboos
\
has to be under the contract of sale and. before• !lie pur-
chase thereof has been completed . and not. before sale of
such trees or bamboos. H
'
146 SUPREME COURT REPORTS \ (1985] 3 S.C.R •.
)
· (4) The subject-matter of the impugned provisions is
A goods and the tax that is levied thereunder is on a comp-
leted 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
B
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
c have the effect of wiping out the tax liability under the
previous notifications. All that was done by .using the
wo-rds "in supersession of all previous notifications" in
the Notifications dated December 29, _1977, >yas to repeal
and replace previous notifications and not to wipe out any ·
· liability incurred under th~ 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
E the Respondent Firm, Messn M.M. Khara, only in the
trees v. hich 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 provision·s, there-
F fore, did not apply to the transactions covered by the
• Timber Contracts. '

(9) The dictionary meaning of a word cannot befooked
at where that word has been- statutorily defined or judi-
cially interpreted but wher.e there is no such definition or
interpretation, the court may take the aid of dictionaries to
G
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; the_refore, to select
particular meaning which is r~levant to the content in which
H it has to interpret that word. ·

'
OIRSSA v. TITAGHUR PAPER MILLS (Madon, J.) 147

(LO) Timber and sized or dressed logs are one and the
A
same commercial commodity. Beams, rafters and planks
would also be timber.

(11) As the sales of dressed or sized. logs by the Res-
pondent Firm have already been assessed to sales tax, the
salesto the First Respondent Firm of timber by the State B
Government from which logs were made by the Respondent
Firm cannot be made liable to sales tax as it would
amount to levying ta.x at two points in the saRJe series of
sales by successive dealers, assuming without decidi•g
that the retrospectively substituted definition of "dealer"
in clause (c} of section 2 of the Orissa Sales Tax Act, 1947, c
is valid.

(12) During the period June l, 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 sales have been assessed to tax at the D
rate of six per cent, by reason of the period of limitation
prescribed by section 12(8) 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
E
(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 cf an F
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.
6
(16) Being a benefit to arise out of land, any attempt
on tl_ie 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 texing power under Entry 54 in List II
i!l the seventh Schedule to the ConstihJtion of India. ff
148 .Sl!PRBME COURT REPORTS (1985] 3 s.c.R .

(17) The case of Firm Chh1tabha{ Jethabai Patel & Co.
v. 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 v.

Yakinuddin.
B
(18) The case of State of Madhya Pradesh & Ors v.
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
c 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
D 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 prayed for quashing the
E notice dated August 18, 1977, issued against it under Rules 22 and
28(2) of the Orissa Sales Tax Rules, 194 7, and the Respondent
Firm in its writ petition had prayed for setting aside the assessment
order dated November 28, 1978, for the priod April !, 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
F 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 consequen-
tial reliefs in view of its findings that the impugned provisions were
G 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 Acticle 142
of the Constitution of India.

In the result, we reverse the judgment of the High Court in so
for as it holds (I} Notification S.R.O. No. 372/77 dated May 23.
H 1977, issued under section 3-B of the Orissa Sales Tax Act, 1947,
f 6iRSSA v. TiTAGHUR PAPER Mir.LS (Madon, j,) 149
(2) Notification S.R.O. No. 373/77 dated May 23, 1977, issued nnder A •
the first proviso to sub-section (I) of section 5 of the sa;d 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-C. T.A. 135/77 (Pt.)·F
(S.R.O. No. 900/77) dated December 29, 1977, issued under the said B
section 3-B and (4) Enteries No. 2 and 17 in the Schedule to Noti-
fication No. 67181-C.T.A. 135/77-F (S.R.O. No. 90li77) dated
December 29, 1977, issued under sub-section (I) of the said section
5 after its amendment by the Orissa Sales Tax (Amendment)
Act, 1978, to be unconstitutional as being ultra vires Entry 54 in
fast II in the Seventh Schedule to the Constitution of India and as c
being ultra vir" tho 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 28(2) of the Orissa Sales Tax Rules
1947, issued against the Respondent Company, The Titaghur Paper
D
Mills Company, Limited, and the assessment order, if any, made in
pursuance thereof. Jn Civil Appeal No. 220 of 1982, we further
modify the assessment order dated November 28, 1978, for the
period April I,. 1977, to March 31, 1978, made against Respondent
Firm; Messrs M.M. Khara, by deleting therefrom the item of purchase
tax on the amounts paid by the Re.spondent Firm under the Timber E
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 F
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.

P.B.R.