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The Central Provinces Manganese Ore Company Ltd., Nagpur Vs. the State of Maharashtra (Sales Tax Department) - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMumbai High Court
Decided On
Case NumberSales Tax Reference Nos. 17, 18, 19 and 20 of 1964
Judge
Reported in1972MhLJ987; [1972]29STC74(Bom)
ActsCentral Provinces and Berar Sales Tax Act, 1947 - Sections 2; Sales Tax (Amendment) Act, 1949; Indian Sale of Goods Act, 1930
AppellantThe Central Provinces Manganese Ore Company Ltd., Nagpur
RespondentThe State of Maharashtra (Sales Tax Department)
Appellant AdvocateA.S. Bobde and ;M.L. Vaidya, Advs.
Respondent AdvocateC.S. Dharmadhikari, Assistant Government Pleader
Excerpt:
sales tax - substitute - section 2 (g) of sales tax (amendment ) act, 1949 and sales tax act, 1947 - explanation (ii) to section 2 (g) as originally embodied in sales tax act substituted with new explanation - on being held that new explanation was unconstitutional whether it should be treated as not having existed at all or old explanation would revive - in this substitution it was only an amendment in which sentences were reformed and put them in separate clause and a new clause added - no intention to repeal old explanation - held, old explanation would revive. - - 1952 nag 378 :the effect of the amended explanation going out would be to rehabilitate the old explanation as it existed because the amendment being unconstitutional, will fail to work any change in the law [see the.....kotval, c.j. 1. this reference arises out of the references made by the sales tax tribunal to this court in four cases. though several questions were raised before the sales tax tribunal and six of them have been referred for decision before the division bench in the sales tax references made to this court, the present reference by the division bench to the full bench is only upon one question, and that question is question no. (2) involved in all the references before the division bench. that question is as follows : 'was the tribunal right in holding that explanation (ii) to section 2(g), as was originally embodied in the sales tax act, 1947, got restored on the statute-book because of the unconstitutionality of the substituted explanation enacted in the sales tax (amendment) act, 1949.....
Judgment:

Kotval, C.J.

1. This reference arises out of the references made by the Sales Tax Tribunal to this court in four cases. Though several questions were raised before the Sales Tax Tribunal and six of them have been referred for decision before the Division Bench in the sales tax references made to this court, the present reference by the Division Bench to the Full Bench is only upon one question, and that question is question No. (2) involved in all the references before the Division Bench. That question is as follows :

'Was the Tribunal right in holding that Explanation (II) to section 2(g), as was originally embodied in the Sales Tax Act, 1947, got restored on the statute-book because of the unconstitutionality of the substituted explanation enacted in the Sales Tax (Amendment) Act, 1949 ?'

2. Though one common question has been referred in all the references, each reference involves a different period of assessment as shown below :

Reference No. Period involved. 17 of 1964. 1-1-1947 to 30-9-1947. 18 of 1964. 1-10-1947 to 31-12-1948. 19 of 1964. 1-1-1949 to 31-12-1949. 20 of 1964. 1-1-1950 to 25-1-1950.

Two things may be noted here. Firstly, the last period mentioned above ends only a day before the Constitution of India came into force on 26th January, 1950. Therefore, the assessments involved in this reference are not governed by any provision of the Constitution. We say this because different considerations may arise after the Constitution because of the enactment of article 286 of the Constitution. Secondly, the Amending Act, namely, the C.P. and Berar Sales Tax (Amendment) Act, 1949 (No. 16 of 1949), came into force on 11th April, 1949. Therefore, only the periods involved in References Nos. 19 and 20 of 1964 would be governed by the Amending Act, whereas the periods involved in References Nos. 17 and 18 of 1964 would be governed by the C.P. and Berar Sales Tax Act, 1947 (No. 21 of 1947) as originally enacted.

3. The question arises upon a certain background which may here be mentioned. Messrs C.P. Manganese Ore Company Limited was a private limited company with its head office in London, but it carried on very extensive business in the former Central Provinces and Berar and later on partly in Madhya Pradesh and partly in the State of Maharashtra. It owned 22 manganese ore mines in Madhya Pradesh prior to the reorganisation of States, from which it excavated manganese ore and consigned mostly to foreign countries. The company was registered as a dealer under the C.P. and Berar Sales Tax Act, 1947, which came into force on 27th May, 1947. The company also used to prepare a mixture of manganese from its different mines known as the 'oriental mixture' and it is with the sale of this particular mixture that we are concerned in all these references. According to the company, the oriental mixture was formed by mixing manganese at the sidings at the various seaports in India from which it was to be consigned. The railway wagons were filled with ore from different mines, and when the wagons reached the seaport, they were marshalled in a certain set pattern and dumped, so as to produce a heap of oriental mixture. It was alleged that it required certain special specifications of ore to form the oriental mixture.

4. The department sought to tax the company's sales of this oriental mixture and brought to tax the sales under the Explanation (II) to section 2(g) of the C.P. and Berar Sales Tax Act. That explanation defines 'sale' in such a manner as to bring within the ambit of 'sale' the sale of any goods 'which are actually in the Central Provinces and Berar at the time when the contract of sale' as defined in the Sales Tax Act was made, irrespective of the question where the contract of sale was made. The Explanation (II) says that if the goods were in the C.P. and Berar at the time when the contract of sale was made, then wherever the said contract of sale is made, it shall be deemed for the purpose of the sales tax to have taken place in the C.P. and Berar. The company resisted this attempt at taxation on the short ground that the oriental mixture was not within the C.P. and Berar at the time when the contracts of sale pertaining thereto were made and that actually the oriental mixture only came into being at the rail-head siding near the seaport after the wagons had left the C.P. and Berar. As a result of this controversy several questions were raised and considered by the Tribunal. These questions were referred to the High Court for decision under the Sales Tax Act. The Division Bench, which heard the reference, has answered questions Nos. (1) and (3) to (6), but they considered that question No. (2) already quoted above raised an important question which was likely to affect the Sales Tax Act in a very substantial degree and, therefore, referred that question only to a Full Bench.

5. Clause (g) of section 2 of the C.P. and Berar Sales Tax Act originally defined 'sale' as follows :

'(g) 'sale' with all its grammatical variations and cognate expressions means any transfer of property in goods for cash or deferred payment or other valuable consideration, including a transfer of property in goods made in course of the execution of a contract, but does not include a mortgage, hypothecation, charge or pledge :

Explanation (I). - A transfer of goods on hire-purchase or other instalment system of payment shall, notwithstanding that the seller retains a title to any goods as security for payment of the price, be deemed to be a sale.

Explanation (II). - Notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930, the sale of any goods which are actually in the Central Provinces and Berar at the time when the contract of sale as defined in that Act in respect thereof is made, shall, wherever the said contract of sale is made, be deemed for the purpose of this Act to have taken place in the Central Provinces and Berar.'

6. The Explanation (II) by creating a fiction thus brought within the ambit of 'sale' the sale of any goods which were actually in the C.P. and Berar at the time when the contract of sale was made, irrespective of the question where the contract of sale in respect of those goods took place.

7. This clause (g) of section 2, however, came to be amended by the C.P. and Berar Sales Tax (Amendment) Act, 1949. For the purposes of the points raised, it is not merely necessary to look to the actual amendment made but also to the manner of its introduction. We therefore reproduce below section 2 of the Amending Act of 1949 :

'2. In section 2 of the Central Provinces and Berar Sales Tax Act, 1947 (hereinafter referred to as the said Act), -

(a) in clause (g), for Explanation (II) the following shall be substituted :-

'Explanation (II). - Notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930, the sale or purchase of any goods shall be deemed for the purposes of this Act, to have taken place in this Province, wherever the contract of sale or purchase might have been made -

(a) if the goods were actually in this Province at the time when the contract of sale or purchase in respect thereof was made, or

(b) in case the contract was for the sale or purchase of future goods by description, then, if the goods are actually produced or found in this Province at any time after the contract of sale or purchase in respect thereof was made.' * * * *'

8. Three points may be noted regarding these amendments introduced by the Amending Act. Firstly, section 2 of the Amending Act purports to 'substitute' the newly enacted Explanation (II). It is on the word 'substituted' that the entire argument in the reference hinges. Secondly, while no doubt the new Explanation (II) was introduced by the amendment, the new Explanation (II) substantially re-enacts the whole of the old Explanation (Il) in the opening part and in clause (a) of the new Explanation (II), and it is only clause (b) of the new Explanation (II) which makes a departure from the old Explanation (II). Thirdly, the Amending Act did not receive the assent of the then Governor-General of India but was only assented to by the Governor of the C.P. and Berar.

9. The new Explanation (II) to section 2(g) was challenged before the Nagpur High Court in Shriram Gulabdas v. Board of Revenue [1952] 3 S.T.C. 343; A.I.R. 1952 Nag. 378 on the ground that the Governor-General's assent was necessary under section 107 of the Government of India Act, 1935, and since it was not obtained, the Amending Act was ultra vires and void. A Division Bench consisting of Hidayatullah, J. (as he then was) and Choudhuri, J., held the second explanation to clause (g) of section 2, as amended, ultra vires for the reason that the assent of the Governor-General had not been obtained. They however expressly left open the question whether the explanation was hit by article 286 of the Constitution. As to the earlier Explanation (II) to clause (g) of section 2, the Division Bench held (para. 52, page 387) :

'As regards the fifth question, we have already shown that the second Explanation to clause (g) of section 2, which makes an agreement of sale taxable even though the sale may have taken place outside the Province, is not ultra vires the Provincial Legislature.'

10. Shriram Gulabdas's case [1952] 3 S.T.C. 343; A.I.R. 1952 Nag. 378 was decided along with another case, Himmatlal Harilal Mehta v. The State of Madhya Pradesh [1952] 3 S.T.C. 448.. Himmatlal Mehta's case [1952] 3 S.T.C. 448. was taken in appeal by special leave to the Supreme Court, and was reversed but not on the ground that the new Explanation (II) was ultra vires the State Legislature : Himmatlal Harilal Mehta v. State of Madhya Pradesh [1954] 5 S.T.C. 115 (S.C.). On the other hand, the Supreme Court in appeal held (vide page 119) :

'As pointed out above, the High Court held that the new Explanation II was ultra vires the State Legislature and that the mere production of goods was not enough to make the tax payable unless the goods were appropriated to a particular contract. The correctness of this view can no longer be questioned by reason of the majority decision of this court in the State of Bombay v. The United Motors (India) Ltd. : [1953]4SCR1069 , wherein it was held that article 286(1)(a) of the Constitution read with the explanation thereto and construed in the light of article 301 and article 304 prohibits the taxation of sales or purchases involving inter-State elements, by all States except the State in which the goods are delivered for the purpose of consumption therein ..........'

11. The Supreme Court however upheld the finding that the new Explanation (II) was ultra vires not on the ground mentioned in Shriram Gulabdas's case [1952] 3 S.T.C. 343; A.I.R. 1952 Nag. 378 but because of article 286(1)(a) of the Constitution and other provisions.

12. Now, the question that has been raised before us is that assuming that the new Explanation (II) to clause (g) of section 2 is ultra vires and void as held in Shriram Gulabdas's case [1952] 3 S.T.C. 343; A.I.R. 1952 Nag. 378., what is the consequence The contention on behalf of the petitioner is that the declaration of the new explanation as ultra vires amounts to the explanation being held non est and that the explanation must be treated as not having existed at all. But then it was contended on behalf of the State that if the new explanation is ultra vires, at least the old explanation would revive and should be held to govern the sales in question. In this respect, reliance has been placed on behalf of the State on the following passage in paragraph 52 of the decision in Shriram Gulabdas's case [1952] 3 S.T.C. 343; A.I.R. 1952 Nag 378 :

'The effect of the amended explanation going out would be to rehabilitate the old explanation as it existed because the amendment being unconstitutional, will fail to work any change in the law [See the opinion given by one of us, Hidayatullah, J., in Laxmibai v. State of Madhya Pradesh I.L.R. 1951 Nag. 563.'

13. It is urged that the decision in Shriram Gulabdas's case [1952] 3 S.T.C. 343; A.I.R. 1952 Nag 378. thus in terms held that though the new Explanation (II) was ultra vires and void, the old Explanation (II) was still good law and would continue to operate even in respect of the transactions involved in the present cases.

14. It is this remark in Shriram Gulabdas's case [1952] 3 S.T.C. 343; A.I.R. 1952 Nag 378. which is the subject of the main attack in the present reference. It was urged that this remark must held to be incorrect in law and impliedly overruled by three decisions of the Supreme Court. It was urged that section 2 of the Amending Act of 1949 said in the opening words : '(a) in clause (g), for Explanation (II) the following shall be substituted', and substitution involves a dual process, namely, the process of repealing the old law, and secondly, the process of re-enacting or introducing the new law. Therefore, the effect of section 2 of the Amending Act was that the old Explanation (II) stood repealed, and it was only the new Explanation (II) that was introduced as law; but the new explanation which was introduced as law was declared ultra vires and void, and therefore, that explanation would go out of consideration. As to the old explanation, it stood repealed and nothing can revive it. Therefore, the contention on behalf of the petitioner-company has been that today the new Explanation (II) and the old Explanation (II) have both ceased to exist, and the position has to be judged simply upon the relevant provisions of the Indian Sale of Goods Act, 1930, which is the general law governing the sale of goods.

15. The whole reliance on behalf of the petitioner-company is therefore upon the word 'substituted' used in the opening part of section 2 of the Amending Act. The theory is advanced that 'substituted' means (i) repeal, and (ii) enactment or re-enactment, and, therefore, when the word 'substituted' was used, the old Explanation (II) to clause (g) of section 2 stood repealed and nothing could revive it.

16. This interpretation of the word 'substituted' is sought to be supported by three decisions of the Supreme Court in Firm Mehtab Majid & Co. v. State of Madras : AIR1963SC928 , B. N. Tewari v. Union of India : [1965]2SCR421 and Koteswar v. K.R.B. & Co. : [1969]3SCR40 . In Firm Mehtab Majid & Co. v. State of Madras : AIR1963SC928 , the Supreme Court held as follows in paragraph 20 at page 932 :

'It has been urged for the respondent that if the impugned rule be held to be invalid, old rule 16 gets revived and that the tax assessed on the petitioner will be good. We do not agree. Once the old rule has been substituted by the new rule, it ceases to exist and it does not automatically get revived when the new rule is held to be invalid.'

17. In B. N. Tewari v. Union of India : [1965]2SCR421 , the following passage in paragraph 6 at pages 1432-1433, is relied upon :

'We are therefore of opinion that after the judgment of this court in Devadasan's case : (1965)IILLJ560SC there is no carry forward rule at all, for the carry forward rule of 1955 was struck down by this court while the carry forward rule of 1952 had ceased to exist when the Government of India substituted the carry forward rule of 1955 in its place.'

18. In Koteswar v. K.R.B. & Co. : [1969]3SCR40 , the Supreme Court remarked in paragraph 6 at page 509, column 1 :

'This argument ignores the distinction between supersession of a rule, and substitution of a rule. [Then their Lordships refer to Firm Mehtab Majid & Co. v. State of Madras : AIR1963SC928 and continue.]. The process of substitution consists of two steps. First the old rule is made to cease to exist and next, the new rule is brought into existence in its place.'

19. On the basis of these remarks of the Supreme Court, it is argued that the finding of the Division Bench in Shriram Gulabdas's case [1952] 3 S.T.C. 343; A.I.R. 1952 Nag. 378 that the effect of the amended explanation going out would be to rehabilitate the old explanation was incorrect, because what the Division Bench failed to notice in that case was that substitution involved the repeal of the earlier explanation, and once it was repealed, nothing could revive it.

20. The argument is a very plausible argument, but a closer examination of the decisions of the Supreme Court shows that it is not an argument which can apply in every case and that at any rate the present case upon its facts is very clearly distinguishable. When an amending Act is passed, there are invariably two parts of it - (i) the part which directs the introduction of the new provision, and (ii) the new provision itself. In the present case, for instance, in section 2 of the Amending Act, the words of clause (a) 'in clause (g), for Explanation (II) the following shall be substituted' is the part which directs the introduction of the amendment, and the new Explanation (II) is the new law introduced thereby. It cannot necessarily follow in every case therefore that if the new law itself which is directed to be introduced by the Amending Act is declared ultra vires or void, the effect would be to invalidate that new law and have the effect of repealing the old law at the same time. In two of the three cases above, namely, Firm Mehtab Majid & Co. v. State of Madras : AIR1963SC928 and B. N. Tewari v. Union of India : [1965]2SCR421 , the constitutional flaw, which was found, resulted in invalidating the amended provisions themselves. In other words, the substituted part of the Amending Act whereby the new amendments were introduced alone was invalidated. That part of the Amending Act which directed the introduction of the new law was not invalidated by the constitutional flaw. That part remained. Therefore, the question arose in those cases, what would be the effect of a part of the Amending Act being declared ultra vires and void and a part of it (namely, that part which directs the introduction of the new law) remaining valid It was in that context that the Supreme Court proceeded to construe that part of the amending statute which remained, namely, the part which directed the introduction of the new law. It was in this context that they construed the word 'substituted' as used in those Acts. In Firm Mehtab Majid & Co. v. State of Madras : AIR1963SC928 a new rule 16 was ordered to be substituted for the old rule 16 by a Government notification, and the new rule 16 was held to be discriminatory and therefore offending against the provisions of article 304(a) of the Constitution. This is what their Lordships found in paragraph 19 :

'We are therefore of opinion that the provisions of rule 16(2) discriminate against the imported hides or skins which had been purchased or tanned outside the State and that therefore they contravene the provisions of article 304(a) of the Constitution.'

21. It is of importance to note that it was the new rule and the new rule alone that was struck down as ultra vires and void and that the provision of law which introduced it, namely, the notification which ordered its substitution, was not involved in any controversy in that case. Therefore, the part ordering the substitution remained to be considered and called for interpretation of the word 'substituted' used in that notification.

22. In B. N. Tewari v. Union of India : [1965]2SCR421 , the position was that the carry forward rule as modified in 1955 had been declared invalid in Devadasan's case : (1965)IILLJ560SC . But once again it must be emphasised that it was only the operative part of the law which was newly enacted, namely, the carry forward rule of 1955 which was declared invalid and not that part of the notification which ordered its substitution for old rule of 1952. Therefore, the question arose : what was the effect of the order of substitution which still remained valid and operative It was in that context that the Supreme Court held that substitution meant repeal and re-enactment and therefore the carry forward rule of 1952 ceased to exist when the Government of India substituted the carry forward rule of 1955 in its place.

23. In the present case, the ground of invalidation of the new Explanation (II) was not that the Explanation (II) as introduced was by itself invalid and inoperative because it offended against any provision of the Constitution, but the whole enactment of section 2 of the Amending Act was held invalid upon the particular ground which prevailed, namely, that the assent of the Governor-General to the very enactment of the law had not been obtained as mentioned in section 107(2) of the Government of India Act, 1935. The invalidity in this case extended to invalidating not merely the new law which was introduced but also the law ordering the substitution itself. What the Division Bench in Shriram Gulabdas's case [1952] 3 S.T.C. 343; A.I.R. 1952 Nag. 378. found was that the amended Explanation (II) was not validly enacted. In other words, the entire enactment was without authority of law because it was passed without the assent of the Governor-General. A mere perusal of section 107(2) of the Government of India Act would show the nature of that invalidity. It says 'where a Provincial law with respect to one of the matters enumerated in the Concurrent Legislative List contains any provision repugnant to the provisions of an earlier Dominion law or an existing law with respect to that matter,' then only will the Provincial law prevail in that Province if the assent of the Governor-General is obtained and it was this assent that was missing in Shriram Gulabdas's case [1952] 3 S.T.C. 343; A.I.R. 1952 Nag. 378. Therefore, the entire Provincial law which was made, namely, section 2 of the Amending Act of 1949 itself which required the assent of the Governor-General, was invalidated because it was repugnant to an existing law, namely, the Indian Sale of Goods Act. The very clause therefore which ordered the substitution of the new Explanation (II) was itself affected by the invalidity found in Shriram Gulabdas's case [1952] 3 S.T.C. 343; A.I.R. 1952 Nag. 378 and there would arise in the present case no question of considering what is the effect of the word 'substituted'. The clause in which the word 'substituted' itself occurs would equally be beyond the power of the C.P. and Berar Legislature to enact because it has affected the Sale of Goods Act.

24. There can be no question of considering the interpretation of a clause which is itself void. Of course, because of the nature of the unconstitutionality which they were considering, the Division Bench in Shriram Gulabdas's case [1952] 3 S.T.C. 343; A.I.R. 1952 Nag. 378. had no occasion to consider with any exactitude which precise part they were invalidating. But they said that the Explanation (II) was not validly enacted and when they said that it was not validly enacted, they certainly held that the enactment contained in the opening clause 'in clause (g), for Explanation (II) the following shall be substituted' was also not validly enacted. We think therefore that the present case is distinguishable upon the facts from the two cases which were before the Supreme Court in Firm Mehtab Majid & Co. v. State of Madras : AIR1963SC928 and B. N. Tewari v. Union of India : [1965]2SCR421 .

So far as the decision in Koteswar v. K.R.B. & Co. : [1969]3SCR40 is concerned, that was not a case of substitution at all, and though upon the counsel's argument they were induced to consider what is meant by the word 'substituted' the Supreme Court merely reiterated what was said in the earlier two cases. The Supreme Court itself remarked in the very paragraph (paragraph 6) in which they referred to the principle :

'In the case before us, there was no substitution of the Prohibition Order of 1950 for the Prohibition Order of 1119. The Prohibition Order of 1950 was promulgated independently of the Prohibition Order of 1119, and because of the provisions of law it would have had the effect of making the Prohibition Order of 1119 inoperative if it had been a valid Order. If the Prohibition Order of 1950 is found to be void ab initio, it could never make the Prohibition Order of 1119 inoperative.'

25. That case therefore is distinguishable upon the facts. As to the observations of their Lordships, all that can be said is that the principle in the earlier cases was reiterated, and as to that principle, we have shown above that it cannot apply in the present case.

26. Another decision of the Supreme Court in Municipal Council, Achalpur City v. Nandkishore (Civil Appeal No. 2590 of 1966 decided on 5-1-1968 (S.C.).) was brought to our notice. Only the following remark in that judgment is relied upon :

'Again, the earlier 'notifications' having been expressly superseded, the right to levy terminal tax under the notifications superseded could not be revised, merely because the notification dated May 11, 1962, was in so far as it sanctions imposition of terminal tax declared invalid : Firm A.T.B. Mehtab Majid and Co. v. State of Madras and Another : AIR1963SC928 .'

27. The case merely reiterates the principle laid down in the case of Firm Mehtab Majid : AIR1963SC928 , and for the reasons which we have already given in distinguishing that case, we think that this case is also distinguishable.

28. It was next contended on behalf of the company that the Provincial law would, under section 107(1) of the Government of India Act, 1935, be void only 'to the extent of the repugnancy' and that in Shriram Gulabdas's case [1952] 3 S.T.C. 343; A.I.R. 1952 Nag. 378 the repugnancy existed only upon the language of the new Explanation (II) and not upon the language used in the opening words of clause (a) of section 2 of the Amending Act. Therefore, even though the new Explanation (II) be repugnant, still the portion ordering the substitution was not repugnant and would continue to have effect. In this respect, the two shades of the meaning of the word 'substituted' were again emphasised and counsel argued that since substitution means (i) the repeal of the old explanation, and (ii) the re-enactment of the explanation and partial enactment of a new clause, to the extent of the re-enactment, the invalidity will prevail but not to the extent of the repeal involved by the word 'substituted'. Therefore, it must be held that in so far as the word 'substituted' means repealed, it will continue to have force. It was urged that in order to repeal, the Provincial Legislature did not require the assent of the Governor-General and that therefore to the extent of the repeal, the legislation was good and continued to operate, and therefore it must be held that the old Explanation (II) stood repealed.

29. We are in the present case called upon to construe the meaning of the word used in a statute, namely, the word 'substituted' in clause (a) of section 2 of the Amending Act in order to see what was its effect upon the earlier statute. Now, the effect upon the earlier statute, as also the effect upon the new statute, are both contained in one word 'substituted', and the argument advanced requires us first to dissect the word 'substituted' and give it two meanings as interpreted by the Supreme Court and then to hold that one meaning of that word makes it valid, though the other meaning would make it invalid. In so far as it directs 're-enactment' it would be valid (because of the decision in Shriram Gulabdas's case [1952] 3 S.T.C. 343; A.I.R. 1952 Nag. 378.; but in so far as it directs 'repeal', it would not be affected with invalidity and should be given effect to.

30. We cannot accept these contentions. The word used is one, viz., 'substituted'. It may have two shades of meaning as has been pointed out in the authorities, but the validity of a statute cannot be adjudged upon one shade of meaning and not the other. If the same word results in invalidity as well as validity, the whole of it must be declared invalid, and that is what, it seems to us, the decision in Shriram Gulabdas's case [1952] 3 S.T.C. 343; A.I.R. 1952 Nag. 378 also does. It said that the law itself was not validly enacted; in other words, that the substitution was bad and it did not matter that the substitution had another sense in which it may be good.

31. In this connection, another contention advanced by the learned Assistant Government Pleader and which appears to us a valid contention, may also be stated here. He pointed out that in the present case the nature of the amendment speaks for itself. In the amendment the whole of the old Explanation (II) to section 2(g) was practically reproduced verbatim in the new explanation. This is contained in the opening part plus clause (a) and it was only in clause (b) that the Legislature introduced anything new. A mere comparison of the old Explanation (II) and the new Explanation (II) would show that clause (a) read with the opening part is identical in terms with the old Explanation (II). Therefore, the statute itself indicates the intention of the Legislature not to repeal the old Explanation. We find much substance in this contention. It seems to us that unlike the amendments or substitutions made in the Supreme Court cases where one rule was substituted by another entirely new rule, in the present case all that the Legislature in substance intended to do was to add clause (b) of the new explanation. But since it could not fit into the language of the old explanation and since the draftsman had to express the contents of clause (b) separately, he split up the explanation into two parts - (a) and (b) - leaving the old in clause (a) and confining the new to clause (b). In the clearest possible language, therefore, the Legislature indicated its intention not to repeal the old explanation. In fact, they have re-enacted it. It can hardly be said therefore under these circumstances that though they said that 'in clause (g), for Explanation (II) the following shall be substituted' there was any substitution of the old explanation. What was substituted merely was the same old explanation and clause (b). In the context of the present case, therefore, there was no intention to repeal the old explanation though there was an intention to re-enact the new clause (b). A case such as this was not before the Supreme Court in any of the decisions referred to.

32. Another clue to the interpretation of the provisions of the Amending Act is furnished by the headings of the sections which in case of doubt or difficulty we may legitimately look to. In sections 4 and 8 of the Amending Act, the heading of the section is 'Substitution for section 5, Act XXI of 1947' or 'Substitution of new Schedules, Act XXI of 1947'. But by contrast the heading of section 2 of the Amending Act is 'Amendment of section 2, Act XXI of 1947'. It is therefore clear that though the word 'substituted' is used in clause (a) possibly for want of a better word, it was not truly and in essence a substitution but only a mere amendment, and the amendment in Explanation (II) was to re-form the sentences of the old explanation, put them in a separate clause (a) and add clause (b) which alone was new. The re-formation of the clauses of the old Explanation (II) was necessitated because the provisions of clause (b) had to be introduced and no more. There never was any intention to repeal the old Explanation (II).

33. One instance where the word 'substituted' was found not to convey the meaning of repeal or cancel is to be found in N. N. Chakravarthy v. State A.I.R. 1960 Ass 11.. In that case, Government had issued two notifications under the provisions of section 10 of the Industrial Disputes Act, 1947. In the first notification they referred two issues to the Industrial Tribunal for its decision. In the second notification, they referred four issues after saying :

'Please substitute the following issues in place of the issues framed in this Department's Notification No. G.L.R. 1/51 dated 11-6-1957, published in Assam Gazette, dated 19-6-1957.'

34. It was urged before the court that the Tribunal had no jurisdiction to try the amplified issues in the second notification because the word used was substituted, and the court answered the point by saying (see para. 13, page 15) :

'It is submitted that the word 'substitute' is equivalent to the word 'cancellation'. I am unable to accept this contention. In some cases I agree that the word 'substitute' may be employed to mean replacement by cancellation of the previous one. It might also mean the replacement of one by another, which might be equal to it, but differently expressed, as mentioned in the Chambers's Twentieth Century Dictionary. In the present case, the substitution is by adding to the previous issues, the previous issues remaining the same.'

35. In answer to this contention of the learned Assistant Government Pleader, counsel on behalf of the company slightly changed his stand. He urged that his case was not that the Legislature had an intention to repeal the old Explanation (II) but that whether or not they entertained such an intention, the new law which they made misfired in carrying out their intention, and so far as the new law and its language is concerned, it must be held that the old Explanation (II) was repealed. This is a purely technical argument, and in our opinion, there is no divergence between the words used in the statute and the patent intention of the Legislature, indicated by re-enacting the whole of the Explanation (II). We cannot accept this argument.

36. It now remains to notice one additional point which the learned Assistant Government Pleader sought to raise. He urged that no assent of the Governor-General was at all necessary when the provisions of section 2 of the Amending Act were brought into force and that Shriram Gulabdas's case [1952] 3 S.T.C. 343; A.I.R. 1952 Nag. 378 was incorrectly decided. He referred to the provisions of section 107 of the Government of India Act, 1935, and urged that it is only confined to repugnancy arising by the enactment of any law with respect to one of the matters enumerated in the Concurrent Legislative List only and not otherwise; and in this respect he referred to a decision of the Supreme Court in Madras State v. G. Dunkerley & Co. : [1959]1SCR379 . He also relied upon a decision of the Andhra Pradesh High Court in Kameswara Rao v. State of Madras : AIR1955AP129 . We stopped the learned Assistant Government Pleader from fully arguing this point because we are satisfied that upon the reference to us this point does not and cannot arise. Moreover, it was not a point raised before the Division Bench or before the Sales Tax Tribunal or any of the authorities below, and it seems to us too late in the day to urge it when the matter is before a Full Bench for decision of a particular stated question. The question framed assumes the unconstitutionality of the substituted Explanation (II) enacted in the Amending Act of 1949. Therefore, it assumes that Shriram Gulabdas's case [1952] 3 S.T.C. 343; A.I.R. 1952 Nag. 378 was correctly decided. Of course, it could have been challenged before a Full Bench because it was the decision of a Division Bench, but it could have been so challenged only if the point had been raised and considered by the Sales Tax Authorities or the Tribunal or the Division Bench. We can only answer the question referred to us and leave it to the Division Bench to consider the point if raised before it.

37. It was also urged on behalf of the State that even after the decisions of the Supreme Court in Firm Mehtab Majid & Co. v. State of Madras : AIR1963SC928 and B. N. Tewari v. Union of India : [1965]2SCR421 , and after the interpretation given by those pronouncements on the word 'substituted', the old Explanation (II) to clause (g) of section 2 of the C.P. and Berar Sales Tax Act was considered and applied by the Supreme Court itself in Anwar Khan Co. v. Commissioner, Sales Tax, M.P. : AIR1970SC1756 , and that therefore it must be held that the old Explanation (II) is still extant and valid, and on that short ground the question should be answered in favour of the State. Another decision to the same effect in M/s. Anwar Khan v. Commissioner of Sales Tax 1966 M.P.L.J. 1164 was also referred to. In neither of these two cases was the question which arises for our consideration raised as such. Merely because the court applied the old Explanation (II) in certain cases without advertence to the point now urged cannot justify our holding without full consideration (as the argument suggests) upon those authorities that the old Explanation (II) was valid. Upon a full consideration of the question, however, we think that the old Explanation (II) continues to operate after the new Explanation (II) was held unconstitutional.

38. In the result, we answer the question referred in the affirmative. The papers will now be sent back to the Division Bench for disposal of the Sales Tax References Nos. 18 to 20 of 1964. Costs of this reference to the Full Bench will abide the result of the decision of the Division Bench.

39. Reference answered in the affirmative.


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