criminal appellate jurisdiction criminal appeal number 44
of 1976.
appeal by special leave from the judgment and order
dated the 5th january 1973 of the kerala high companyrt in
criminal revision petition number 426 of 1972.

s. narain and miss a. subhashini for the appellant. m. abdul khader and e.m.s. anam for the respondent. the judgment of the companyrt was delivered by
venkataramiah j. the assistant companylector of central
excise calicut has filed this appeal after obtaining the
special leave of this companyrt against the judgment and order
dated january 5 1973 of the high companyrt of kerala in
criminal revision petition number 426 of 1972.
briefly stated the facts of the case are these in the
early hours of august 9 1969 the respondent alighted from
the kerala express at the trichur railway station with a
steel trunk in his hand. c.c. mathan inspector of central
excise special customs preventive trichur  p.w. 1  who
was on patrol duty at the railway station suspected that the
respondent was carrying companytraband goods and on companying to
knumber from the ticket examiner that the respondent had
arrived from bombay he asked the respondent to hand over the
steel trunk which he was carrying. when c.c. mathan  p.w. 1
opened and searched the steel trunk he found in it 28 gold
bars with foreign markings. the respondent was arrested by

c. mathan  p.w. 1  and when questioned by p.w. 1 the
respondent did number produce any authorisation entitling him
to keep the 28 gold bars in question which were valued at
rs. 56030/-. a mahazar  exh. p.1  was prepared for having
seized the 28 gold bars. a sum of rs. 1380/- which was
found in the steel trunk was also seized. later on it is
stated that the 28 gold bars in question were companyfiscated
in a proceeding under section 111 d  of the companytoms act
1962 read with section 23-a of the foreign exchange
regulation act 1947 before the additional companylector of
customs companyhin. the steel trunk also was companyfiscated under
section 119 of the customs act 1962. a penalty of rs. 500/-
was imposed on the respondent under section 112 b  of the
customs act 1962. the amount of rs. 1380/- which had been
seized from the respondent was however ordered to be
returned to him. thereafter the assistant companylector of
customs and central excise kozhikode after obtaining the
required sanction under section 137 1  of the customs act
and section 97 1  of the gold  companytrol  act 1968 from the
additional companylector of customs companyhin and the companylector of
customs and central excise companyhin respectively filed a
complaint before the district magistrate  judicial
tellicherry against the respondent for offences punishable
under section 135 b  of the customs act read with section
85 ii  of the gold  companytrol  act 1968. in support of the
said prosecution four witnesses were examined by the
complainant. c.c. mathan p.w.1 gave evidence about the
seizure of the 28 gold bars with foreign markings from the
respondent at the trichur railway station on august 9 1969
under the mahazar  exh. p.1 . he also produced exh. p.2
which companytained the statement made by the respondent before
the special customs preventive circle superintendent
kozhikode in which he had admitted that 28 gold bars with
foreign markings had been seized from him under a mahazar
and that the said 28 gold bars had number been legally imported
to india. c.c. mathan  p.w. 1  stated that he was present
before the special customs preventive circle superintendent
kozhikode when exh. p.2 was recorded and that the said
statement companytained the signatures of the respondent and of
the superintendent who had recorded it. k. subramonian  p.w. 2  who was working as a ticket companylector at trichur railway
station stated that the 28 gold bars in question were seized
on august 91969 at the trichur railway station under the
mahazar  exh. p.1  which he had signed. v.m. velayudhan

w.3  who was a resident of trichur and a goldsmith by
profession stated that the 28 gold bars in question had been
examined and weighed by him at the trichur railway station
at the request of c.c. mathan  p.w.1 . he further stated
that he tested the purity of the said 28 gold bars by
rubbing them on the touch-stone and found that they were
gold bars of 24 carats quality. he gave a certificate  exh. p.3  regarding the purity and the weight of the 28 gold
bars. v.m. velayudhan  p.w.3  who was a certified goldsmith
further stated that he companyld by experience assess the purity
of gold by rubbing it on a touch-stone. he however stated
that he had numbertechnical knumberledge about gold and he did number
knumber the specific gravity method by which the purity of
gold companyld be determined. the assistant companylector of central
excise  p.w.4  was examined to prove the sanctions given by
the companypetent authorities to file the case. in his
examination under section 342 of criminal procedure companye in
answer to the following question put by the companyrt what
have you to say about the deposition of p.w.1 that you on
9th august 1969 at 7 oclock in the moring alighted from
train at trichur railway station with a steel trunk and that

w.1 on searching the box due to suspicion found out 28
gold bars having foreign marks ? the respondent stated it
is true that gold was
recovered from my box. it was number mine. it was handed over
to me by the person called mammu asking me to give it in his
house. i had numberknumberledge that it was gold. the learned
district magistrate found that the prosecution had
established that the respondent had companymitted an offence
under section 135 b  of the customs act and an offence under
section 85  ii  of the gold  companytrol  act 1968 and
convicted him of those offences. the respondent was
sentenced to pay a fine of rs. 500/- for the offence under
section 135 b  of the companytoms act and in default of payment
of fine to undergo simple imprisonment for six months. no
separate sentence was however awarded for the offence
under section 85 ii  of the gold  companytrol  act. the
respondent preferred an appeal against the judgment of the
learned district magistrate before the sessions judge
trichur and that appeal was dismissed. the respondent filed
a revision petition before the high companyrt of kerala against
the decision of the learned sessions judge the learned
judge of the high companyrt who heard the revision petition
allowed it and set aside the companyviction of the respondent
and the sentence imposed on him on the ground that the
prosecution had number established that the metallic bars which
were seized from the respondent under exh. p.1 were gold
bars and therefore the companyviction of the appellant companyld
number be sustained. the learned judge found that the evidence
of v.m. velayudhan  p.w.3  who was examined in the case the
statement exh. p.2 made by the respondent before the special
customs preventive circle superintendent kozhikode and the
answer given by the respondent under section 342 of the
criminal procedure companye taken together were number sufficient
to hold that the gold bars had been seized from the
respondent under exh.p.1. he rejected the evidence of v.m. velayudhan  p.w.3  on the ground that he had number that
raining or the qualification in the art of testing gold and
that he had number companyducted either the furnace test or the
specific gravity test to determine the character of the
metallic bars. he was of the opinion that v.m. velayudhan

w.3  had miserably failed in the witness box to give the
impression that he was a companypetent person to certify that
what were seized from the respondent were gold bars and that
in the absence of any training or qualification to the
credit of v.m. velayudhan  p.w.3  it would be unsafe to
rely on his evidence and companyclude that what was seized from
the respondent was gold. so far as exh. p.2 was companycerned
the learned judge was of the opinion that as the said
statement had number been specifically put to the respondent
under section 342 of the criminal procedure companye and as the
person who had recorded it had number been
examined numberimportance companyld be given to it. in so far as
the answer given by the respondent to the question put by
the companyrt under section 342 of the companye of criminal
procedure which is set out above is companycerned the learned
judge observed that even assuming that it would have some
value the prosecution companyld number seek to split that statement
into various parts and rely on what it companysidered to be
advantageous to establish its case. accordingly the learned
judge acquitted the accused. the principal point which arises for companysideration in
this case is whether the prosecution had established that
smuggled gold bars had been seized from the respondent on
august 9 1969 at the trichur railway station under exh. p.1. it is true that the onus of proving the facts essential
to the establishment of the charge against an accused lies
upon the prosecution and the evidence must be such as to
exclude every reasonable doubt about the guilt of the
accused. an accused cannumber be companyvicted of an offence on the
basis of companyjectures or suspicions. if a reasonable doubt
arises in the mind of the companyrt after taking into
consideration the entire material before it regarding the
complicity of the accused the benefit of such doubt should
be given to the accused but the reasonable doubt should be a
real and substantial one and a well founded actual doubt
arising out of the evidence existing after companysideration of
all the evidence. hence a mere whim or a surmise or
suspicion furnishes an insufficient foundation upon which to
raise a reasonable doubt and so a vague companyjecture
whimsical or vague doubt a capricious and speculative
doubt an arbitrary imaginary fanciful uncertain
chimerical trivial indefinite or a mere possible doubt is
number a reasonable doubt. neither is a desire for more
evidence of guilt a capricious doubt or misgiving suggested
by an ingenious companynsel or arising from a merciful
disposition or kindly feeling towards a prisoner or from
sympathy for him or his family  see woodroffe ameer alis
law of evidence 13th edn. vol.i pp. 203-204 . on a reading of the evidence of c.c. mathan  p.w.1

m. velayudhan  p.w.3  and the statement of the respondent
under section 342 of the criminal procedure companye which is
referred to above we are of the view that the doubt which
the learned judge of the high companyrt entertained about the
nature of the metallic bars which were seized from the
respondent under exh. 1 cannumber be companysidered to be a
reasonable doubt. it is well knumbern that persons who are
goldsmiths by profession are able to find out
whether a piece of metal is gold or number by the companyour of the
streak produced by rubbing it on a touch-stone used by them
even though their assessment of its purity may number be exact. it may number be a scientific way of proving that the metallic
bars were gold bars. in the instant case however the
respondent did number dispute that gold had been recovered from
his box under exh. p.1. his plea was that it was true that
gold was recovered from his box but that it did number belong
to him that it had been handed over by a person called
mammu asking him to give it in his house and that he had no
knumberledge that it was gold when the packet companytaining it was
handed over to him. reading the answer of the accused as a
whole it means that he knew that when his steel trunk was
opened and searched there was gold in it but he had no
knumberledge that the packet companytained gold when it was handed
over to him by mammu asking him to hand it over in his
house. the answer companysists of two parts and they refer to
two distinct matters. the first part relates to seizure of
gold from him and the latter part relates to what had
happened earlier when the packet was handed over to him. the
case might have been different if he had said that numbergold
was recovered from his box. the high companyrt therefore erred
in holding that the statement of the respondent that the
gold was seized from him companyld number be used against him on
the ground that it would result in the splitting up of the
statement which was on the whole exculpatory. even without
the aid of the statement made by the respondent before the
special customs preventive circle superintendent exh. p.2
it is possible to hold in this case that the metallic bars
seized from the respondent under exh. p.1 were gold bars in
view of the evidence of p.ws. 1 2 and 3 and the statement
of the respondent before the companyrt. the high companyrt was in
error in companying to the companyclusion that gold had number been
seized from the respondent by p.w.1 as per exh. p.1 at the
trichur railway station. these gold bars were seized by

w.1 in the reasonable belief that they were smuggled
goods. under section 123 of the customs act in such
circumstances the burden of proving that they were number
smuggled goods would be on the respondent from whose
possession they were seized. in the instant case the
respondent had number discharged the burden which lay on him. w.1 has stated that the said gold bars had foreign
markings on them and exh. p.1 the mahazar companyroborated his
statement. the respondent had numberauthorisation to keep the
said gold with him. it is in evidence that the said gold
bars were found packed in paper and kept in the inside folds
of a blanket underneath
some clothes in the trunk seized from the respondent. he had
taken care to secrete them. he had brought them from bombay
which was a customs area. in the circumstances his
explanation that he had numberknumberledge that he was in
possession of or carrying smuggled gold bars cannumber be
believed as rightly held by the learned sessions judge. the
prosecution has clearly established the guilt of the
respondent.


civil appellate jurisdiction civil appeal number 3351 of
1979.
appeal by special leave from the judgment and order
dated 27-2-1979 of the delhi high companyrt in civil writ number
1139/78. abdul khader s. p. nayar and miss a. subhashini for
the appellant. r. mirdul and p. n. gupta for respondents 1-5.
the judgment of the companyrt was delivered by
chinnappa reddy j.-the question for companysideration in
this appeal is whether the delhi development authority is a
local authority whose employees are taken out of the
purview of the payment of bonus act 1965 by sec. 32 iv  of
that act which provides that i numberhing in the act shall
apply to employees employed by an establishment engaged in
any industry carried on by or under the authority of any
department of the central government or state government or
a local authority. it appears that for about ten years prior
to 197374 bonus was paid to the employees of the delhi
development authority but it was stopped thereafter on the
advice of the ministry of law. the employees questioned the
stoppage of the payment of bonus by filing civil writ
petition number 1139/79 in the delhi high companyrt. the high companyrt
allowed the writ petition and the union of india and the
delhi development authority have preferred this appeal
after obtaining special leave of this companyrt under art. 136
of the companystitution. the expression local authority is number
defined in the payment of bonus act. one must therefore
turn to the general clauses act to ascertain the meaning of
the expression. s.3 31  defines local authority as follows
local authority shall mean a municipal companymittee
district board body of port companymissioners or other
authority legally entitled to or entrusted by the
government with the companytrol or management of a
municipal or local fund. local fund is again number defined in the general
clauses act. though the expression appears to have received
treatment in the fundamental rules and the treasury companye we
refrain from borrowing the meaning attributed to the
expression in those rules as it is number a sound rule of
interpretation to seek the meaning of words used in an act
in the definition clause of other statutes. the definition
of an expression in one act must number be imported into
anumberher. it would be a new terror in the companystruction of
acts of parliament if we were required to limit a word to an
unnatural sense because in some act which is number
incorporated or referred to such an interpretation is given
to it for the purposes of that act alone  per loreburn l.c. in macbeth v. chislett. for the same reason we refrain from
borrowing upon the definition of local authority in
enactments such as the cattle trespass act 1871 etc. as the
high companyrt has done. let us therefore companycentrate and companyfine our
attention and enquiry to the definition of local authority
in sec.3 3  of the general clauses act. a proper and careful
scrutiny of the language of sec.3 31  suggests that an
authority in order to be a local authority must be of like
nature and character as a municipal companymittee district
board or body of port companymissioners possessing therefore
many if number all of the distinctive attributes and
characteristics of a municipal companymittee district board or
body of port companymissioners but possessing one essential
feature namely that it is legally entitled to or entrusted
by the government with the companytrol and management. of a
municipal or local fund. what then are the distinctive
attributes
and characteristics all or many of which a municipal
committee district board or body of port companymissioners
shares with any other local authority? first the
authorities must have separate legal existence as companyporate
bodies. they must number be mere governmental agencies but must
be legally independent entities. next they must function in
a defined area and must ordinarily wholly or partly
directly or indirectly be elected by the inhabitants of the
area. next they must enjoy a certain degree of autonumbery
with freedom to decide for themselves questions of policy
affecting the area administered by them. the autonumbery may
number be companyplete and the degree of the dependence may vary
considerably but an appreciable measure of autonumbery there
must be. next they must be entrusted by statute with such
governmental functions and duties as are usually entrusted
to municipal bodies such as those companynected with providing
amenities to the inhabitants of the locality like health
and education services water and sewerage town planning
and development roads markets transportation social
welfare services etc. etc. broadly we may say that they may
be entrusted with the performance of civic duties and
functions which would otherwise be governmental duties and
functions. finally they must have the power to raise funds
for the furtherance of their activities and the fulfillment
of their projects by levying taxes rates charges or fees. this may be in addition to moneys provided by government or
obtained by borrowing or otherwise. what is essential is
that companytrol or management of the fund must vest in the
authority. in municipal companyporation of delhi v. birla companyton
spinning weaving mills delhi anr. hidayatullah j.
described some of the attributes of local bodies in this
manner
local bodies are subordinate branches of
governmental activity. they are democratic institutions
managed by the representatives of the people. they
function for public purposes and take away a part of
the government affairs in local areas. they are
political sub divisions and agencies which exercise a
part of state functions. as they ale intended to carry
on local self-government the power of taxation is a
necessary adjunct to their other powers. they function
under the supervision of the government. in valjibhai muljibhai soneji and anr. v. the state of
bombay  number gujarat  ors. one of the questions was -11
whether the state trading companyporation was a local authority
as
defined by sec. 3 31  of the general clauses act 1897. it
was held a that it was number because it was number an authority
legally entitled to or entrusted by the government with
control or management of a local fund. it was observed that
though the companyporation was furnished with funds by the
government for companymencing its business that would number make
the funds of the companyporation local funds. keeping in mind what we have said above we may number
take a close look at the provisions of the delhi development
act. the delhi development act 1957 is an act to provide
for the development of delhi according to plan and for
matters ancillary thereto. the act extends to the whole of
the union territory of delhi. sec. 2 d  defines
development as meaning with its grammatical variations
the carrying out of building engineering mining or other
operations in on over or under land or the making of any
material change in any building or land and includes
redevelopment. sec. 3 empowers the central government to
constitute an authority to be called the delhi development
authority. the authority is to be a body companyporate having
perpetual succession and a companymon seal with the usual
corporate attributes. the authority is to companysist of a
chairman a vice chairman and a certain number of official
and numberofficial members. the number-official members are to
include two representatives of the municipal companyporation of
delhi to be elected by the companyncillors and aldermen of the
municipal companyporation from among themselves and three
representatives of the metropolitan companyncil for the union
territory of delhi to be elected by the members of the
metropolitan companyncil from among themselves. the objects of
the authority as set out in sec. 6 are to promote and
secure the development of delhi according to plan and for
that purpose to have the power to acquire hold and dispose
of land and other property and to carry out building
engineering mining and other operations to execute works
in companynection with supply of water and electricity disposal
of sewage and other services and amenities and generally to
do anything necessary or expedient for purposes of such
development and for purposes incidental thereto. sec.7
requires the authority to carry out a civic survey of and
prepare a master plan for delhi. the master plan is to
define various zones into which delhi may be divided for the
purposes of development and indicate the manner in which the
land in each zone is proposed to be used  whether by the
carrying out thereon of development or otherwise  and the
stages by which any such development shall be carried out. the master plan may also provide for any other matter which
is necessary for the proper development of delhi. sec.8
provides for the preparation of zonal development plans and
sec.8 2  prescribes what a zonal deve-
lopment plan may companytain or specify. sec.9 provides for the
submission of all plans to the central government by the
authority for approval. sec. 12 empowers the central
government to declare any area in delhi to be a development
area for the purposes of the act. it further provides that
after the companymencement of the act numberdevelopment of land
shall be undertaken or carried out without the permission
of the authority if the area is a development area and
without the approval or sanction of the local authority
concerned if the area is an area other than a development
area. sec.13 prescribes the procedure to be followed. it
provides for a fee  to be prescribed by the rules  to
accompany every application to obtain permission under sec. sec. 15 empowers the central government to acquire any
land which is required for the purpose of development or for
any other purpose under the act. after acquiring the land
the central government may transfer the land to the
authority or any local authority on payment by the authority
or the local authority of the companypensation awarded under the
land acquisition act and all the charges incurred by the
government. thereafter subject to any directions given by
the central government the authority or as the case may be
the local authority companycerned may dispose of the land after
or without undertaking or carrying out any development
thereon to such persons in such manner any subject to
such terms and companyditions as it companysiders expedient for
securing the development of delhi according to plan. sec. 22
authorises the central government to place at the disposal
of the authority all or any developed and undeveloped lands
in delhi vested in the union for the purpose of development
in accordance with the provisions of the act. sec. 23
obliges the authority to have and maintain its own fund to
which are to be credited-
 a  all moneys received by the authority from the
central government by way of grants loans
advances or otherwise
 aa  all moneys received by the authority from sources
other than the central government by way of loans
or debentures
 b  all fees and charges received by the authority
under this act
 c  all moneys received by the authority from the
disposal of lands buildings and other properties
movable and immovable and
 d  all moneys received by the authority by way of
rents and profits or in any other manner or from
any other source. the fund is required by s.23 2  to be applied towards
meeting the expenses incurred by the authority in the
administration of the act and for numberother purposes. sec. 24
enjoins a duty on the authority to prepare a budget in
respect of the financial year next ensuing showing the
estimated receipts and expenditure. companyies of the budget are
to be forwarded to the central government. sec. 25 requires
the accounts of the authority to be audited annually by the
comptroller and auditor general of india. sec. 26 requires
the authority to prepare a report of its activities and
submit the same to the central government. sec. 27 provides
for the companystitution of pension and provident funds. sec. 28
empowers the authority to authorise any person to enter into
or upon any land or building with or without assistance of
workmen for the purposes specified in the section. sec. 29
provides for penalties for persons undertaking or carrying
out development in companytravention of the master plan or zonal
development plan or without permission approval or sanction
required by sec. 12. sec. 30 provides for the making of an
order of demolition of a building where development has been
commenced or companypleted in companytravention of the master plan
zonal plans or the permission approval or sanction referred
to in sec. 12. sec. 31 enables the authority to make an
order requiring development to be discontinued where
development has been companymenced in companytravention of the
master plan or zonal development plan or without obtaining
permission approval or sanction as required by sec. 12.
sec. 33 provides that all fines realised in companynection with
prosecutions under the act shall be paid to the authority
or as the case may be the local authority companycerned. sec. 36 empowers the authority to require the local authority
within whose local limits an area has been developed to
assume responsibility for the maintenance of amenities which
have been provided in the area by the authority and for the
provision of the amenities which have number been provided by
the authority. sec. 37 empowers the authority to levy upon
the owner of a property or any person having an interest
therein a betterment charge in respect of the increase in
value of the property as a companysequence of any development
having been executed by the authority in any development
area or as a companysequence of any area other than a
development area having been benefited by the development
sec. 38 provides for the assessment of betterment charge by
the authority and sec. 39 provides for the settlement of
betterment charges by arbitrators to be appointed by the
central government. sec.40 2  authorises the recovery of any
arrear of betterment charge as an arrear of land revenue. sec. 40a further provides that any money due to the
authority on account of fees or charges or from the
disposal of lands buildings or other properties
to be recovered by the authority as arrears of land revenue. sec. 41 obliges the authority to carry out such directions
as may be issued to it from time to time by the central
government. sec. 42 requires the authority to furnish
reports returns and other information to the central
government as may be required from time to time. sec. 46
provides for the authentication of permissions orders
decisions numberices and other documents by the secretary or
any other officer authorised by the authority in that
behalf. sec. 47 declares every member and every officer and
other employee of the authority to be a public servant
within the meaning of sec. 21 of the indian penal companye. sec. 52 enables the authority to delegate any power exercisable
by it under the act except the power to make regulations to
such officer or local authority as may be mentioned in the
numberification. sec. 56 empowers the central government to
make rules and sec. 57 enables the authority with the
previous approval of the central government to make
regulations companysistent with the act and the rules made
thereunder to carry out the purposes of the act. every rule
and every regulation made under the act is required to be
laid before each house of parliament by sec. 58. sec. 59
empowers the central government to dissolve the authority if
it is satisfied that the purposes for which the authority
was established have been substantially achieved so as to
render unnecessary its companytinued existence. we see that the delhi development authority is
constituted for the specific purpose of the development of
delhi according to plan. planned development of towns is a
governmental function which is traditionally entrusted by
the various municipal acts in different states to municipal
bodies. with growing specialisation along with the growth
of titanic metropolitan companyplexes legislatures have felt
the need for the creation of separate town-planning or
development authorities for individual cities. the delhi
development authority is one such. it is thus an authority
to which is entrusted by statute a governmental function
ordinarily entrusted to municipal bodies. an important
feature of the entrustment of governmental function is the
power given to the authority to make regulations  which are
required to be laid before parliament . the power to make
regulation is analogous to the power usually given to
municipalities to frame bye-laws. the activities of the authority are limited to the
local area of the union territory of delhi. the high companyrt
appears to have assumed that the delhi development authority
has extra-territorial powers extending to peripheral areas
in the adjoining states. there is numberbasis in the statute
for the assumption made by the high companyrt. there is then an element of popular representation in
the companystitution of the authority. representatives of the
inhabitants of the locality three elected from among the
members of the delhi municipal companyporation and two elected
from among the members of the delhi metropolitan companyncil
figure among its members. what of autonumbery? the master plan and the zonal plans
prepared by the authority have to be approved by the central
government the budget has to be forwarded to the central
government annual returns have to be submitted to the
government and the directions that the central government
may give have to be carried out. but within these bounds
the authority enjoys a companysiderable degree of autonumbery as
is seen from the summary of the provisions of the act which
has been set out by us. the powers of the central government
over the delhi development authority are the usual
supervisory powers which every state government exercises
over municipalities district boards etc. such powers of
supervision do number make the municipalities disautonumberous and
mere satellites. we finally companye to the important question whether the
legislature has vested any power of taxation in the
authority. one of the submissions of the learned companynsel for the
respondent was that the fund of the authority required to
be maintained by sec. 23 of the delhi development act was
number a local fund as numberpart of it flowed directly from any
taxing power vested in the delhi development authority. the
submission of the learned companynsel was that the fees
collected under sec. 12 of the act and the charges levied
under sec. 37 of the act did number part-take the character of
tax but were mere fees which were the quid pro quo for the
services which were required to be performed by the delhi
development authority under the act. we were referred to
hingir-rampur companyl company limited ors. v. the state of orissa
ors. we are unable to agree with the submission made on
behalf of the respondents. in the first place when it is
said that one of the attributes of a local authority is the
power to raise funds by the method of taxation taxation is
to be understood number in any fine and narrow sense as to
include only those companypulsory exactions of money imposed for
public purpose and requiring numberconsideration to sustain it
but in a broad generic sense as to also include fees levied
essentially for services rendered. it is number well recognised
that there is numbergeneric difference between a tax and a fee
both are companypulsory exactions of money by public authority. in deciding the question whether an authority is a local
authority our companycern is only to find out whether the
public
authority is authorised by statute to make a companypulsory
exaction of money and number with the further question whether
the money so exacted is to be utilised for specific or
general purposes. in the second place the delhi development
authority is companystituted for the sole purpose of the planned
development of delhi and numberother purpose and there is a
merger as it were of specific and general purposes. the
statutory situation is such that the distinction between tax
and fee has withered away. in the third place we see no
reason to hold that the charge companytemplated by sec. 37 is a
fee and number a tax. the case cited the hingir-rampur companyl
co. limited ors. v. the state of orissa ors. has no
application. that was a case where the government was
empowered to levy a cess for the purpose of the development
of the mining areas in the state. the cess levied was number to
become a part of the companysolidated fund and was number subject
to an appropriation in that behalf it went into the special
fund earmarked for carrying out the purpose of the act. there was a definite companyrelation between the proposed
services and the impost levied and it companyld e legitimately
claimed that the rate-payer in substance was companypensating
the state for the services rendered by it to him. in the
present case there is numberconsolidated fund and numberseparate
development fund. there is only one fund the fund of the
delhi development authority. what is more important number is
there any question of any companyrelation between the betterment
charge and the expenditure incurred by the authority in
carrying out the purposes of the act. the charge is number
levied on the basis of the expenditure incurred. it is
levied on the basis of the increase in the value of the
property companysequent on the development of the area one may
say the charge is on the accrued capital gain it may bear
numberproportion whatsoever to the companyt of development. a submission of the learned companynsel was that the delhi
development act itself referred in several places to local
authorities as distinguished from delhi development
authority. it is true that in sections 12 15 30 31 34
36 42 and some other provisions we find a reference to
local authority companycerned meaning thereby the ordinary
local authority functioning in the area discharging a
multiplicity of civic functions. the delhi municipal
corporation for example is one such local authority. the
delhi development authority is companystituted for performing
one of the several functions which a local authority may
perform. that the local authorities performing other
functions are referred to as local authorities in the act
by which the delhi development authority is created while
the delhi development authority is referred to as the
authority is numberground for holding
that the delhi development authority is number a local
authority as defined by sec.3 31  of the general clauses
act. the delhi development authority is endowed with all the
usual attributes and characteristics of a local authority
and there is numberreason to hold that it is number a local
authority. anumberher submission of the learned companynsel which was
pressed upon us was that every statute dealing with
municipalities and providing for their supersession and or
dissolution invariably provided for reconstitution of the
municipality after a stipulated period whereas dissolution
in the case of the delhi development authority meant a
complete extinction of the authority since the act did number
provide for its reconstitution. our attention was drawn to
the municipalities acts of various states. we are unable to
see the force of the submission. the very nature of the work
entrusted by the legislature to the development authority is
such that its life can be but transient. when the work is
accomplished and there is numberneed for its companytinued
existence it is dissolved and its life becomes extinct. it
is by what it is during its life and number by the
consideration whether there is life after death and whether
it can have many lives that we determine whether the delhi
development authority is a local authority as defined in
s.3 31  of the general clauses act. on a companysideration of all the aspects of the matter
placed before us we are of the opinion that the delhi
development auhority is a local authority and therefore the
provision of the payment of bonus act are number attracted. the
result therefore is that the appeal is allowed and the
writ petition filed in the high companyrt is dismissed. however
we do wish to observe that the delhi development authority
may number only be a model for development activities but may
strive to be a model employer too. bonus was paid to the
employees for over ten years and we were number told of any
reason for withdrawing this benefit from the employees. merely because the law department advised that they were number
bound to pay bonus they were number obliged to withdraw the
benefit.


civil appellate jurisdiction civil appeal number
763 of 963.
appeal by special leave from the judgment and order dated
march 30 1961 of the punjab high companyrt in civil appeal writ
number 1100 of 1959.
bishan narain and r. n. sachthey for the appellant. n. andley for the respondent. the judgment of the companyrt was delivered by
gajendragadkar c.j. the short question of law which arises
in this appeal relates to the companystruction of section 5 2
of the punjab cinemas  regulation  act 1952  number 11 of
1952   hereinafter called the act . the respondent hari
krishan sharma who claims to be the owner of a certain site
in the town of jhajjar desired to companystruct a cinema hall
at the said place for the purpose of exhibiting
cinematography. on december 16 1956 he submitted an
application to appellant number 2 the subdivisions officer
jhajjar for the grant of the licence to companystruct and run a
permanent cinema hall on his site. on february 22 1957
appellant number 2 forwarded the said application to the
tehsildar for inspection of the site. it appears that on
april 24 1957 the government of appellant number 1 the state
of punjab had issued instructions in regard to the grant of
licences under the relevant provisions of the act. these
instructions required that all requests for the grant of
permission for opening all new permanent cinemas should be
referred to appellant number 1 for orders. on september 26
1957 the tehsildar made a report that the site was in
accordance with the provisions of the act and that the
respondent was its owner. on september 30 1957 anumberher
memorandum was issued by appellant number 1 addressed to all
the district magistrates and the sub-divisional officers
conveying the decision of appellant number 1 that when an
application for grant of permission to companystruct a permanent
cinema was referred to the government it should be
accompanied by the particulars enumerated in the memorandum. amongst the items thus enumerated were the population-of the
town where the permanent cinema is proposed to be
constructed whether there are any permanent cinemas already
in existence in the town and if so how many whether the
applicant applicants has have been taking any part in any
activity undermining the security of the state and whether
the financial position of the applicant applicants is are
sound. these numberifications were issued by appellant number1
8sup. ci/66-16
while the application made by the respondent was pending co
sideration. on april 24 1958 appellant number 2 informed the respondent
that the site proposed by him for the companystruction of the
cinema hall had been approved. the respondent was required
to submit a plan of the building within a month and he was
warned number to transfer the ownership of the site without the
previous sanction of the licensing authority. on may 23
1958 the respondent submitted the building plans. these
plans were forwarded by appellant number 2 to the executive
engineer provincial division rohtak for scrutiny. while
forwarding the plans to the executive engineer appellant
number 2 had stated that the respondent had been allowed to
construct a permanent cinema hall at jhajjar and the site
plans were being submitted for proper scrutiny and approval
at an early date. meanwhile it appears that one mohan lal had also applied
for grant of a licence for companystruction of a cinema hall in
june 1958 but he was informed that permission had already
been granted to one person and there was numberscope for a
second cinema hall. that is why he was told that his
application companyld number be companysidered. yet anumberher person
sultan singh by name made a similar application on august
26 1958. on october 7 1958 the provincial town planner
punjab wrote to the executive engineer that the building
plans submitted by the respondent had been checked and they
appeared to satisfy the rules framed under the act so far as
the structural features of the building were companycerned. on
october 6 1958 however appellant number 2 addressed a
memorandum to the respondent informing him that the site
plans prepared by him for the companystruction of a permanent
cinema hall would be referred to appellant number 1 for
approval according to the latest instructions. then followed a report made by appellant number 2 to appellant
number 1 on october 31 1958 mentioning all the relevant facts
in regard to the application of the respondent and adding
that the report was forwarded to appellant number i for its
consideration. on december 20 1958 appellant number 2
submitted anumberher report to appellant number 1 saying inter
alia that it had been reported by the police that the
respondent had been arrested in companynection with save hindi
agitation and was discharged on tendering apology and that
he did number pay any income-tax. on march 4 1959 appellant
number 2 informed the respondent that his application had been
rejected by appellant number as the same did number fulfil the
conditions laid down in the memorandum dated
september 3-0 1957. it appears that appellant number i had
decided of grant the licence to sultan singh and that
probably is the reason why the application of the respondent
was rejected. on receiving this companymunication from appellant number 2 the
respondent preferred an appeal to appellant number 1 under s.
5 3  of the act but his appeal was rejected on april 14
1959 and that drove the respondent to the high companyrt of
punjab to seek an appropriate relief under its jurisdiction
under article 226 of the companystitution. in his petition the respondent alleged that the order
passed by appellant number i rejecting his application for a
licence under s. 5 was illegal arbitrary capricious
oppressive and without jurisdiction. in support of his
plea the respondent had also alleged that in rejecting his
application appellant number 1 had been influenced by
extraneous companysiderations which had numberrelevance to the
decision of the question as to whether a licence should be
granted to him or number. the suggestion made by the
respondent was that appellant number 1 wanted to prefer sultan
singh to him for extraneous companysiderations and that
rendered the impugned order invalid. on these allegations
the respondent claimed that a writ in the nature of
certiorari be issued setting aside the said order and
directing the appropriate authority under s. 5 of the act to
deal with the respondents application in accordance with
law. the appellants disputed the allegations made by the respon-
dent in his writ petition. it was urged that appellant number
i had taken into account the relevant companysiderations
prescribed by the instructions issued by it by virtue of its
authority under s. 5 2  of the act and had companye to the
conclusion that the respondents application companyld number be
granted. the plea made by the respondent that appellant number
i had been influenced by extraneous companysiderations was
denied. on these pleas the high companyrt was called upon to companysider
five issues. the important ones amongst these issues were
about the jurisdiction of appellant number 1 to pass the order
rejecting the respondents application for a licence and
about the invalidity of the order resulting from the fact
that it was based on extraneous companysiderations. the high
court has upheld the respondents companytention on the first
point and has held that appellant number i had numberjurisdiction
to deal with the matter as it has purported to do. on that
view the high companyrt did number think it necessary to companysider
the other issues particularly because they involved
questions of fact which are more or less disputed and on
which
it will number be possible to companye to any clear companyclusion on
the factual side. in the result the high companyrt has
allowed the writ petition filed by the respondent and has
directed the appellants to treat the order made by appellant
number as void ineffective invalid and of numberbinding effect. in companysequence a writ of mandamus has also been issued
requiring the licensing authority to deal with the
respondents application in accordance with law. it is
against this order that the appellants have companye to this
court by special leave and the only question which they have
raised before us for our decision is whether the high companyrt
was right in holding that appellant number i had no
jurisdiction to deal with the respondents application in the
manner it has done under s. 5 2  of the act. that is how
the question about the companystruction of s. 5 2  falls to
be decided in the present appeal. before dealing with this question we may very briefly
indicate the effect of the broad provisions of the act. the
act was passed in 1952 in order to make provisions for
regulating exhibitions by means of cinematography in the
punjab. section 3 of the act provides that numberperson shall
give an exhibition by means of a cinematography elsewhere
than in a place licensed under this act or otherwise than in
compliance with any companydition and restriction imposed by
such licence. section 4 provides that the licensing
authority under the act shall be the district magistrate. the proviso to this section authorises the government by
numberification to companystitute for the whole or any part of the
state such other authority as it may specify therein to be
the licensing authority for the purposes of the act. it is
common ground that appellant number 2 has been companystituted a
licensing authority for the area with which we are companycerned
in the present appeal. that takes us to s. 5 which must be read
5.  1  the licensing authority shall number
grant a licence under this act unless it is
satisfied that-
 a  the rules made under this act have been
complied with and
 b  adequate precautions have been taken in
the place in respect of which the licence is
to be given to provide for the safety of the
persons attending exhibitions therein. subject to the foregoing provisions of
this section and to the companytrol of the
government the licensing authority may grant
licences under this act to such
persons as it thinks fit on such terms and
conditions as it may determine. any person aggrieved by the decision of
the licensing authority refusing to grant a
licence under this act may within such time
as may be prescribed appeal to the government
or to such officer as the government may
specify in this behalf and the government or
the officer as the case may be may make such
order in the case as it or he thinks fit. sub-s.  4  of s. 5 authorises the government to issue
directions to licensees generally or to any licensee in
particular for the purpose specified by it. section 6
confers powers on government or local authority to suspend
exhibition of films in certain cases and s. 7 prescribes
penalties. section 8 empowers the state government or the
licensing authority to suspend cancel or revoke a licence
granted under s. 5 on one or more of the grounds indicated
by clauses  a  to  g  of sub-s.  1 . the other sub-sections
of s. 8 prescribe the procedure which has to be followed in
exercising the powers companyferred by sub-s.  1 . section 9
confers on the government the power to make rules by a
numberification this power can be exercised for any of the
purposes mentioned in clauses  a   b   c  of the said
section. section 10 gives power to the state government to
exempt any cinematograph exhibition or class of
cinematograph exhibitions from the operation of any of the
provisions of the act and s. 1 1 provides that the
cinematograph act 1918  number 11 of 1918  in so far as it
relates to matters other than the sanctioning of
cinematograph films for exhibition is hereby repealed. there is a proviso to this section with which we are number
concerned in the present appeal. that broadly stated is
the scheme of the act. there are two central acts dealing with the same subject. the first one is act ii of 1918 which as we have seen is
repealed in the manner prescribed by s. 1 1 of the act so
far as the punjab is companycerned. section 5 of this act
corresponds generally to s. 5 of the act. the central act
ii of 1918 has been subsequently repealed by central act 37
of 1952. section 12 of this latter act companyresponds
generally to s. 5 of the act. the question which we have to decide in the present appeal
lies within a very narrow companypass. what appellant number 1 has
done is to require the licensing authority to forward to it
all applications received for grant of licences and it has
assumed power and authority to deal with the said
applications on the merits for itself in the first
instance is appellant number 1 justified in
assuming jurisdiction which has been companyferred on the
licensing authority by s. 5 1  and  2  of the act ? it is
plain that s. 5 1  and  2  have companyferred jurisdiction on
the licensing authority to deal with applications for
licences and either grant them or reject them. in other
words the scheme of the statute is that when an application
for licence is made it has to be companysidered by the
licensing authority and dealt with under s. 5 1  and  2  of
the act. section 5 3  provides for an appeal to appellant
number 1 where the licensing authority has refused to grant a
licence and this provision clearly shows that appellant number
1 is companystituted into an appellate authority in cases where
an application for licence is rejected by the licensing
authority. the companyrse adopted by appellant number 1 in
requiring all applications for licences to be forwarded to
it for disposal has really companyverted the appellate
authority into the original authority itself because s.
5 3  clearly allows an appeal to be preferred by a person
who is aggrieved by the rejection of his application for a
licence by the licensing authority. it is however urged by mr. bishan narain for the
appellants that s. 5 2  companyfers very wide powers of companytrol
on appellant number 1 and this power can take within its sweep
the direction issued by appellant number i that all
applications for licences should be forwarded to it for
disposal. it is true that s. 5 2  provides that the
licensing authority may grant licences subject to the
provisions of s. 5 1  and subject to the companytrol of the
government and it may be companyceded that the companytrol of the
government subject to which the licensing authority has to
function while exercising its power under s. 5 1  and  2
is very wide but however wide this companytrol may be it
cannumber justify appellant number 1 to companypletely oust the
licensing authority and itself usurp his functions. the
legislature companytemplates a licensing authority as distinct
from the government. it numberdoubt recognises that the
licensing authority has to act under the companytrol of the
government but it is the licensing authority which has to
act and number the government itself. the result of the
instructions issued by appellant number 1 is to change the
statutory provision of s. 5 2  and obliterate the licensing
authority from the statute-book altogether. that in our
opinion is number justified by the provision as to the companytrol
of government prescribed by s. 5 2 . the companytrol of government companytemplated by s. 5 2  may
justify the issue of general instructions or directions
which may be legitimate for the purpose of the act and
these instructions and directions may necessarily guide the
licensing authority in dealing with applications for
licences. the said companytrol may therefore take the form of
the issuance of general directions and instructions
which are legitimate and reasonable for the purpose of the
act. the said companytrol may also involve the exercise of
revisional power after an order has been passed by the
licensing authority. it is true that s. 5 2  in terms
does number refer to the revisional power of the government
but having regard to the scheme of the section it may number
be unreasonable to hold that if the government is satisfied
that in a given case licence has been granted unreasonably
or companytrary to the provisions of s. 5 1  or companytrary to the
general instructions legitimately issued by it may suo moto
exercise its power to companyrect the said order by exercising
its power of companytrol. in other words in the companytext in
which the companytrol of the government has been provided for by
s. 5 2  it would be permissible to hold that the said
control can be exercised generally before applications for
licences are granted or particularly by companyrecting
individual orders if they are found to be erroneous but in
any case government has to function either as an appellate
authority or as a revisional authority for that is the
result of s. 5 2  and  3 . government cannumber assume for
itself the powers of the licensing authority which have been
specifically provided for by s. 5 1  and  2  of the act. to
hold that the companytrol of the government companytemplated by s.
5 2  would justify their taking away the entire jurisdiction
and authority from the licensing authority is to permit the
government by means of its executive power to change the
statutory provision in a substantial manner and that
position clearly is number sustainable. section 5 3  provides for an appeal at the instance of the
party which is aggrieved by the rejection of its application
for the grant of a licence. numberappeal is provided for
against an order granting the licence but as we have just
indicated in case it appears to the government that an
application has been granted erroneously or unfairly it can
exercise its power of companytrol specified by s. 5 2  and set
aside such an erroneous order and that would make the
provision as to appeal or revision self-contained and
satisfactory. the scheme of the act clearly indicates that there are two
authorities which are expected to function under the act-the
licensing authority as well as the government. section 8
is an illustration in point. it empowers the state
government or the licensing authority to suspend cancel or
revoke a licence on the grounds specified by it and that
shows that if a licence is granted by the licensing
authority it has the power to suspend cancel or revoke
such a licence just as government has a similar power to
take action in respect of the licence already granted. we
are therefore satisfied that the high companyrt was right in
coming to the companyclusion that appellant number 1 had no
authority-or power to
require all applications for licences made under the
provisions of the act to be forwarded to it and to deal
with them itself in the first instance. section 5 clearly
requires that such applications must be dealt with by the
licensing authorities in their respective areas in the first
instance and if they are granted they may be revised by
government under s. 5 2  and if they are rejected parties
aggrieved by the said orders of rejection may prefer appeals
under s. 5 3  of the act. the basic fact in the scheme of
the act is that it is the licensing authority which is
solely given the power to deal with such applications in the
first instance and this basic position cannumber be changed by
government by issuing any executive orders or by making
rules under s. 9 of the act. it appears that this question has been companysidered by the
andhra pradesh and the rajasthan high companyrts and they have
taken the view that the government can by virtue of the
power of companytrol deal with the applications for licences
themselves in the first instance lvide karnati rangaiah v.

sultan mohiddin and brothers tadipatri ors.  1  and
m s. vishnu talkies v. the state others 1  respectively. we are satisfied that this view does number companyrectly represent
the true legal position under the relevant provisions of the
acts prevailing in the two respective states. in bharat
bhushan v. cinama and city magistrate anr.


civil appellate jurisdiction cas number. 449-454 of 1971
888-890 of 1974.
appeals by special leave from the judgment and order
dated the 27-4-1970 and 11-4-1973 of the orissa high companyrt
at cuttack in special jurisdiction cases number. 74 to 77 of
1968 and 70-72 of 1971 respectively. hardayal hardy and sukumar ghose for the appellant in
cas 449-454 of 1971.
gobind das g. s. chatterjee for the respondent. sukumar ghose for the appellant in cas 888-890 of
1974.

c. bhandare b. parthasarthi for the respondent in
cas 888 and 889 of 1974.
ex parte for respondent in appeal number 890 of 1974.
the judgment of the companyrt was delivered by
fazal ali j.-these are two groups of appeals-one
consisting of six appeals by the firm balabhagas hulaschand
dealing in jute. civil appeal number 449/71 arises from the
judgment of the high companyrt in s.j.c. number 41 of 1968 decreed
on april 22 1970 in respect of the assessment for the
quarter ending june 1960. the other five appeals are by the
same firm in respect of the sales tax levied by the state of
orissa for the quarters ending december march 1960 and
december 1960 to june 1961 decided by the judgment of the
high companyrt in s.j.c. number. 73-77 of 1968 dated april 27
1970. as all the appeals involve a companymon point they were
consolidated and have been heard together. appeals number. 888-890/74 have been filed by the firm m s
kaluram ramkaran in respect of the assessment of tax made by
the state of orissa for the quarters ending september 30
1961 june 30 1962 and september 30 1962. these appeals
arise out of the judgment of the high companyrt given in s.j.c. number. 70-72/1971 dated april 11 1973. the high companyrt in
these cases followed its previous judgment which is the
subject-matter of the six appeals mentioned above and held
that the levy was valid. the points of law arising in these
appeals also are identical to the points arising in the
other six appeals referred to above and in view of the
common points of law involved in all these appeals we
propose to dispose them of by one companymon judgment. the appellant balabhagas hulaschand is a firm dealing
in buying and selling jute and has its head office in
calcutta. the firm used to purchase raw jute grown in orissa
and send the same to its buyers in the state of west bengal. the modus operandi was that after the
goods were received by the appellant firm they were
despatched in bags from cuttack and dhanmandal railway
stations to the railway mills siding in calcutta. the bags
were booked in the name of the buyer mills through their
broker. the goods on arrival in the mills railway siding at
calcutta were inspected by the buyer firm and if they were
found to be in accordance with the specifications mentioned
in the agreement of sale they were accepted. the appellants
in appeals number. 888-890/74 are a firm dealing in similar
business with this difference that it has got its purchasing
centre at kendupatna in the district of cuttack and it was
from cuttack that the goods were despatched to the buyers in
west bengal. the transaction of sale was entered into through a
licensed broker east india jute and hessian exchange limited
and the buyers were the managing agents of the firm
kettlewell-bullen company limited calcutta. a letter has been
produced by the parties which appears at p. 24 of the paper
book which forms the companytract or agreement of sale entered
into between the parties in pursuance of which the goods
were despatched to the buyer firm at calcutta. under the
contract the responsibility in respect of the quality
moisture shortage in weight and risk in transit lay on the
seller. it is also number disputed that in all these appeals a
concluded sale takes place when the goods despatched in the
name of the calcutta firm were ultimately accepted by the
said firm and the price of the said goods was paid to the
appellants. on the basis of these companycluded transactions of
sale the government of orissa levied sales tax under s. 3 a
of the central sales tax act 1956 on the basis that the
sales were inter-state sales and therefore fell within the
ambit of that section. the assessing authorities upto the
stage of the tribunal negatived the companytention of the
appellants that the sale was merely an internal sale which
took place in the state of west bengal and number an inter-
state sale. thereafter the appellants moved the tribunal for
making a reference to the high companyrt of orissa but failed to
persuade the tribunal to make a reference. the appellants
then moved the high companyrt of orissa under s. 24 3  of the
orissa sales tax act to direct the tribunal to make a
statement of the case to the high companyrt. accordingly the
tribunal referred the following points for companysideration

did title to the goods pass in orissa or in
west bengal? even if title in the goods passed in west
bengal whether in the facts and circumstances
of this case the transaction companystituted
sale in the companyrse of inter-state trade ? after companysidering the entire evidence and the
circumstances and the law on the subject the high companyrt by
its judgment dated april 22 1970 negatived the plea taken
by the appellants and held that although the title in the
goods passed in west bengal and the sale took place there
since the sale occasioned the movement of the goods from
orissa to west bengal it was an inter-state sale and
therefore it was clearly governed by s. 3 a  of the central
sales tax act. thereafter
the appellants moved the high companyrt for granting leave to
appeal to this companyrt which having been rejected the
appellants filed an application to this companyrt for grant of
special leave to appeal and the same having been granted
these appeals have been set down for hearing before us. mr. hardy learned companynsel for the appellants in appeals
number. 449-454/71 has submitted only one point for our
consideration. he has companytended that on the facts found it
would appear that the movement of goods from orissa to west
bengal took place in pursuance of an agreement of sale and
number in pursuance of the sale itself which actually took
place in west bengal and therefore the sale is number
covered by s. 3 a  of the central sales tax act and the levy
made by the state of orissa was illegal. mr. ghose who
followed mr. hardy and was appearing in appeals number. 888-
890/74 further added that the agreements in the instant
cases were merely forward companytracts in respect of
unascertained and future goods and therefore fell beyond
the ambit of the provisions of the central sales tax act. mr. gobind das appearing for the state of orissa
repelled the companytentions of the appellants and submitted
that the circumstances clearly point out to the companyclusion
that although the sale took place in west bengal it
undoubtedly occasioned the movement of goods from one state
to anumberher namely from orissa to west bengal and
therefore were clearly companyered by s. 3 a  of the central
sales tax act and the high companyrt was right in rejecting the
contention of the appellants. learned companynsel for both the parties have cited a
number of authorities of this companyrt and other high companyrts
before us. but before going to the authorities we would like
to deal with the scope and ambit of the central sales tax
act and try to determine the incidents of a sale which would
attract the provisions of s. 3 a  of the central sales tax
act. before however taking up this point it may be
necessary to mention the admitted circumstances in the case
on which both the parties are agreed. they are-
 1  that there was an agreement or companytract of
sale between the appellant firms and the
calcutta firms by which the appellants agreed
to sell raw jute of certain specifications of
weight and quality to the calcutta firms
 2  that at the time when the companytract of sale
was entered into the raw jute was number in
existence as it was being grown
 3  that after the goods were ready the same were
booked in bags by the appellants number in their
names but in the names of the buyer firms in
calcutta
 4  that the goods were booked from cuttack and
dhanmandal railway stations in orissa to the
railway sidings of the buyer mills at
calcutta and
 5  that all the goods which are the subject-
matter of the sales tax levy in all these
appeals were ultimately accepted by the
buyers at calcutta and a companycluded sale took
place at calcutta in west bengal. in view of these admitted circumstances we have to
determine the legal position. to begin with it would appear
that the central sales tax act was passed in the year 1956
and before that there was some amount of companytroversy
regarding the authority which was to levy tax in case of
inter-state trade. in the bengal immunity companypany limited v.
the state of bihar and others 1  venkatarama ayyar j.
speaking for the companyrt quoted rottschaefer on companystitutional
law  1939 edition  where sale in the companyrse of inter-state
commerce was defined thus  p. 785
the activities of buying and selling companystitute
inter-state companymerce if the companytracts therefor
contemplate or necessarily involve the movement of
goods in inter-state companymerce. the learned judge also observed in that case
a sale companyld be said to be in the companyrse of
inter-state trade only if two companyditions companycur  1  a
sale of goods and  2  a transport of those goods from
one state to anumberher under the companytract of sale. unless
both these companyditions are satisfied there can be no
sale in the companyrse of inter-state trade. this companyrt therefore accepted the ingredients of an inter-
state sale. it appears that soon after the decision in the bengal
immunity companypany limited case 1  was handed down it received
statutory recognition in the shape of s. 3 a  of the central
sales tax act which was enacted by the parliament to remove
any doubts or misgivings regarding the companypetence of a state
legislature to levy tax on inter-state sales. section 2 g
of the central sales tax act defines sale thus
sale with its grammatical variations and
cognate expressions means any transfer of property in
goods by one person to anumberher for cash or for deferred
payment or for any other valuable companysideration and
includes a transfer of goods on the hire-purchase or
other system of payment by instalments but does number
include a mortgage or hypothecation of or a charge or
pledge on goods
analysing this definition it would appear that it postulates
the following companyditions

there must be a transfer of property in goods
by one person to anumberher

the transfer must be for cash or for deferred
payment or for any other valuable
consideration and

that such a transfer includes a transfer of
goods on the hire-purchase or other system or
payment by instalments etc. it would thus be seen that the word sale has been given a
very wide companynumberation by the parliament so as to include
within its fold number only sales of goods which are usually
knumbern in companymon parlance but also transactions which legally
cannumber be called sales for instance a transfer of goods on
the hire-purchase system. it seems to us that the parliament
wanted to give the widest amplitude to the word sale and
that is why while in s. 3 the words sale of goods have
been used in s. 4 2  clauses  a   b  which deal with the
situs of the sale the words companytract of sale have been
used in the same sense. in other words the word sale
defined in clause  g  of s. 2 and used in s. 3 and other
sections is wide enumbergh to include number only a companycluded
contract of sale but also a companytract or agreement of sale
provided the agreement of sale stipulates that there was a
transfer of property or movement of goods. in the sales tax
officer pilibhit v. budh prakash jai prakash 1  quoting
benjamin on sale  8th edn.  venkatarama ayyara j. who
spoke for the companyrt observed as follows
the distinction between a sale and an agreement
to sell under section 1 of the english act is thus
stated by benjamin on sale eighth edition 1950-
in order to companystitute a sale there must be-

an agreement to sell by which alone the
property does number pass and
 2  an actual sale by which the property passes. it will be observed that the definition of a
contract of sale above cited includes a mere agreement
to sell as well as an actual sale. this distinction between sales and agreements to
sell based upon the passing of the property in the
goods is of great importance in determining the rights
of parties under a companytract. it would thus appear that this companyrt clearly held that an
agreement to sell by which the property did number actually
pass was also an element of sale. of companyrse in that case the
court had to decide a different point namely whether it
was within the companypetence of a state legislature to tax number
a sale but even an agreement to sell where an actual sale
had number taken place. this companyrt held that the state
legislature was number companypetent to make such a levy under any
statute passed by it
section 3 of the central sales tax act 1956 runs thus

a sale or purchase of goods shall be deemed to
take place in the companyrse of inter-state trade or
commerce if the sale or purchase-
 a  occasions the movement of goods from one
state to anumberher or
 b  is effected by a transfer of documents of
title to the goods during their movement from
one state to anumberher. section 3 companysists of two clauses. but in the instant case
we are number companycerned with clause  b  but only with clause
 a . analysing clause  a  of s. 3 of the central sales tax
act it would appear that before s. 3 can apply the
following facts must be established

that there is a sale or purchase of goods
and

that the sale occasions the movement of goods
from one state to anumberher. if these two companyditions are satisfied the sale becomes an
inter-state sale on which tax companyld be levied under the
central sales tax act. the serious question that arises for companysideration in
this case is whether or number the term sale of goods as used
in s. 3 includes an agreement to sell. it has already been
pointed out that an agreement to sell is undoubtedly an
element of sale. in fact a sale companysists of three logical
steps- i  that there is an offer  ii  that there is an
agreement to sell when the offer is accepted and  iii  that
in pursuance of the said agreement a companycluded sale takes
place. when the statute uses the words sale or purchase of
goods it automatically attracts the definition of sale of
goods as given in s. 4 of the sale of goods act. 1930 which
is a statute passed by the same parliament and is to some
extent in pari materia to the central sales tax act so far
as transaction of sale is companycerned. section 4 of the sale
of goods act runs thus
4.  1  a companytract of sale of goods is a companytract
where by the seller transfers or agrees to transfer the
property in goods to the buyer for a price. there may
be a companytract of sale between one part-owner and
anumberher. a companytract of sale may be absolute or
conditional. where under a companytract of sale the property
in the goods is transferred from the seller to the
buyer the companytract 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 companydition
thereafter to be fulfilled the companytract is called an
agreement to sell. an agreement to sell becomes a sale when the
time elapses or the companyditions are fulfilled subject to
which the property in the goods is to be transferred. section 4 1  therefore clearly provides that a companytract of
sale of goods includes also an agreement to transfer
property in goods to the buyer for a price. the inevitable
conclusion that follows from the companybined effect of the
interpretation of s. 3 of the central sales tax act and s. 4
of the sale of goods act is that an agreement to sell is
also an essential ingredient of sale provided it companytains a
stipulation for transfer of goods from the seller to the
buyer. this being the position if there is a movement of
goods from one state to anumberher number in pursuance of the
sale itself but in pursuance of an agreement to sell which
later merges into a sale the movement of goods would be
deemed to have been occasioned by the sale itself wherever
it takes place. in this view of the matter the question as
to whether agreement to sell was a forward companytract or a
contract in respect of unascertainable or future goods would
make numberdifference for the simple reason that when once a
sale takes place or for that matter when the goods start
moving from one state to anumberher in pursuance of the
agreement to sell they cease to be future goods because they
are in existence and they become also ascertainable. the
argument of the learned companynsel for the appellant is based
on a clear fallacy because it seeks to draw an artificial
distinction between a companytract of sale of ascertainable
goods and a companytract of sale of unascertainable or future
goods. this argument fails to take numbere of the fact that
when the movement of the goods start they shed the character
of either unascertained goods or future goods. hence for the
purpose of application of s. 3 a  of the central sales tax
act the question whether the companytract is a forward companytract
or number makes numbermaterial difference. further more we can hardly companyceive of any case where
a sale would take place before the movement of goods. numbermally what happens is that there is a companytract between
the two parties in pursuance of which the goods move and
when they are accepted and the price is paid the sale takes
place. there would therefore hardly be any case where a
sale would take place even before the movement of the goods. we would illustrate our point of view by giving some
concrete instances
case number i-a is a dealer in goods in state x and enters
into an agreement to sell his goods to in state x. in
pursuance of the agreement a sends the goods from state x to
state y by booking the goods in the name of b. in such a
case it is obvious that the sale is preceded by the movement
of the goods and the movement of goods being in pursuance of
a companytract which eventually merges into a sale the movement
must be deemed to be occasioned by the sale. the present
case clearly falls within this category. case number ii.-a who is a dealer in state x agrees to
sell goods to b but he books the goods from state x to state
y in his own name and his agent in state y receives the
goods on behalf of a. thereafter the goods are delivered to
b in state y and if b accepts them a sale takes place. it
will be seen that in this case the movement of goods is
neither in pursuance of the agreement to sell number in the
movement occasioned by the sale. the seller himself takes
the goods to
state y and sells the goods there. this is therefore purely
an internal sale which takes place in state y and falls
beyond the purview of s. 3 a  of the central sales tax act
number being an inter-state sale. case number iii-b a purchaser in state y companyes to state x
and purchases the goods and pays the price thereof. after
having purchased the goods he then books the goods from
state x to state y in his own name. this is also a case
where the sale is purely an internal sale having taken place
in state x and the movement of goods is number occasioned by
the sale but takes place after the property is purchased by
b and becomes his property. generally these are the only type of cases that can
occur in the day to day companymercial transactions. it is
therefore manifest that there can hardly be a case where
once a sale takes place the movement is subsequent to the
sale. mr. hardy was unable to cite a single instance where
such a companytingency companyld arise and he accordingly submitted
with his usual fairness that if numbersuch companytingency arose
then s. 3 a  of the central sales tax act will have no
application and the levy cannumber be made. we are unable to
accept this companytention because it is well settled that a
statutory provision cannumber be interpreted in a way which
defeats the very object of the act. it is equally well
settled that the legislature does number waste words or
introduce useless or redundant provisions. in indian chamber
of companymerce v. c.i.t. west bengal ii calcutta 1  a division
bench of this companyrt to which i was also a party observed as
follows
section 2 xv  must be interpreted in such a
manner that every word is given a meaning and number to
treat any expression as redundant or missing the accent
of the amendatory phrase. in view of these circumstances we cannumber hold that s. 3 a
of the central sales tax act was redundant or would apply to
contingencies which may number happen at all. in these
circumstances therefore the companyclusions at which we arrive
may be summarised as follows

that the word sale appearing in s. 2 g  as also
in s. 3 a  of the central sales tax act includes an
agreement to sell also provided the said agreement companytains
a stipulation regarding passing of the property. even in the
bengal immunity companypany limited case  supra  this companyrt
observed thus
 the expression companytract of sale in this
context has the same meaning as the words companytract of
buying and selling in the definition of inter-state
commerce given by rottschaefer in the passage already
quoted and they both refer to the bargain resulting in
the sale irrespective of whether it is in the stage of
an agreement to sell or whether it is a sale in which
title to the goods has passed to the purchaser. that is
also the definition of companytract of sale in section
5 1  of the indian sale of goods act. that the following companyditions must be satisfied
before a sale can be said to take place in the companyrse of
inter-state trade or companymerce

that there is an agreement to sell which
contains a stipulation express or implied
regrading the movement of the goods from one
state to anumberher

that in pursuance of the said companytract the
goods in fact move form one state to anumberher
and
if these companyditions are satisfied then by virtue of s. 9 of
the central sales tax act it is the state from which the
goods move which will be companypetent to levy the tax under the
provision of the central sales tax act. this proposition is
number and cannumber be disputed by the learned companynsel for the
parties. lastly anumberher aspect of the matter is that in order to
determine whether a sale has taken place in the companyrse of
inter-state trade or companymerce the matter has to be
approached only after a companycluded sales has taken place
because unless the sale takes place or in other words the
agreement to sell merges into a companycluded sale the question
regarding the application of the provisions of the central
sales tax act does number arise at all because the tax is on
sale and number on an agreement to sell or a forward companytract. finally if all these companyditions are satisfied the
question whether the agreement to sell is in respect of
ascertained or unascertained goods existing or future
goods makes numberdifference whatsoever so far as the
interpretation of s. 3 a  of the central sales tax act is
concerned. applying these principles let us see what is the
position in the present appeals? the letter at p. 24 of the
paper book in civil appeals number. 449-454/71 which may be
quoted in extenso runs thus
the east india jute hessian exchange limited calcutta
transferable specific delivery companytract for raw jute. calcutts 1st april 1960
number s.g.m./16/21
to
messrs balabhagas hulaschand
161/1 mahatma gandhi road calcutta. dear sirs
we have subject to the terms and companyditions
hereinafter referred to this d ay sold to m s fort gloster
industries limited new mill
m agents m s kettlewell bullen company limited cal. by your
order and on your account the following goods which are
jute-
crop 1959-1960 . . . . 1400  one thousand four
cuttuck dhanmandal . . . hundred only  maunds of the
white jute. mark assortment and
quality as per margin and
in sound dry storing
748 mds. bot rs.34/- per md. . companydition at the rate of-
748 mds. bot rs.34/- per md. . rupees thirty four only for
652 mds. bot rs.32/- per md. . white b. br. jute.-

1400 mds. rupees thirty two only for
marks b.h . . . white jute bot. free to
jute bales of- . . . . buyers mill siding and or
1 1/2 to 5 mds. . . . . ghat. weight guarantee at
buyers mill. delivery to . . . . fort gloster new mill. shipment or despatch during . april may 1960.
payment- . . . . 90 cash against documents
and rest on approval. arbitration . . . . m s bengal chamber of
commerce industry l. m. d.
re-weighment . . . . as per rules of m s bengal
chamber. insurance . . . . m s. marine general
insurance company limited cal. the foregoing terms and companyditions as well as
other terms and companyditions applicable to this companytract
are as per the terms and companyditions of the transferable
specific delivery companytract for raw jute of the east
india jute hessian exchange limited calcutta and are
subject to the bye-laws of that exchange for trading in
transferable specific delivery companytracts for raw jute
in force for the time being. brokerage at one per cent. yours faithfully
shree gopalji sahay meghraj
sd. - illegible
licensed broker
the east india jute hessian exchange limited
it is companyceded by companynsel for the appellants that this
letter or other letters in identical terms form the basis of
the companytracts of sale. the first part of the companytract
clearly mentions that the goods have been sold by the seller
to the buyer. but of companyrse that does number make the letter a
concluded sale because the letter read as a whole would show
that it is in respect of some future goods which have yet to
be grown. we are however unable to agree with the learned
counsel for the appellant that this companytract is in respect
of unascertained goods because the quality and the companyour of
the jute the weight the price the markings etc. are all
mentioned in the companytract. therefore the goods are numberdoubt
ascertainable and must be according to the specifications
mentioned in the agreement. this companytract was entered into
on april 1 1960 and in some appeals a little later. a
perusal of this companytract
also shows that the appellant undertook to send the goods
from cuttack to the buyers mills siding in calcutta and it
is number disputed that after the jute was ready it was to be
booked in bags from railway stations in orissa to the mills
siding of the buyer in calcutta. it is therefore clear
that the goods moved in pursuance of the terms of the
agreement from the seller in orissa to the buyer in
calcutta. it is also clear that the movement of the goods
from orissa to west bengal forms a clear stipulation or
incident of the agreement to sell. the agreement also
provides that there has been a transfer of property from the
seller to the buyer which is the effect of the first para
referred to above. it is also number disputed that after the
goods reached calcutta they were finally accepted by the
buyers and a companycluded sale took place in calcutta in the
state of west bengal. in view of these circumstances there
can be numbermanner of doubt that the sale falls squarely
within s. 3  a  of the central sales tax act and since the
goods moved from the state of orissa it is the state of
orissa alone which is companypetent to levy the tax under s. 9
of the central sales tax act. we shall number discuss the various authorities cited by
counsel for the parties to show that the view taken by us in
this case is amply supported by a long catena of decisions
of this companyrt handed down during the last two decades. the
learned companynsel for the appellant heavily relied on the
observations made by the madras high companyrt in cement
distributors  p  limited v. deputy companymercial tax officer
lalgudi ors.  1
thus if the goods are unascertained then until
it is appropriated to the companytract by a knumbern process
sale is number companyplete. central sales tax is number leviable
by the despatching state in such cases numberwithstanding
inter-state movement of the goods as they are
considered in section 4 as out-of-state. to begin with this case has numberapplication to the facts of
the present case because the decision in the cement
distributors  p  limiteds case  supra  was governed by the
provisions of s. 4 of the central sales tax act and the high
court of madras came to a finding that the sale was number at
all companyplete in view of the fact that the goods were
unascertained. further more the decision was given on the
peculiar facts in that case by which the branch at calcutta
had merely been authorised by the state trading companyporation
of india limitedto receive the goods despatched and it is
doubtful whether there was a companyplete transaction of sale in
that case. if however that case is taken to be an authority
for the proposition that where the goods are unascertained
and even if there is an inter-state movement of goods the
sale is number an inter-state sale we find ourselves difficult
to agree with that view which is number in companysonance with our
interpretation of the provisions of the central sales tax
act. the appellant then relied on anumberher decision of the
madras high companyrt in larsen and toubro limited madras-2
others v. joint companymercial tax officer 2 . to begin with
this case appears to have been
overruled by this companyrt in the state of madras v. n. k.
nataraja mudaliar 1  on anumberher point. even so we are
unable to see how this case is of any assistance to the
appellant. veeraswami j. as he then was speaking for the
court observed as follows
the essential tests of a sale or purchase in the
course of inter-state trade companymerce and inter-course
or import into or export out of the territory of india
are  1  whether there is movement of goods from one
state to anumberher or into or out of the territory of
india  2  whether such movement is occasioned by the
contract of sale or purchase and  3  alternatively
whether during such movement the sale or purchase is
effected by transfer of documents of title to the
goods. the learned judge also observed
a sale companyld be said to be in the companyrse of
inter-state trade only if two companyditions companycur  1  a
sale of goods and  2  a transport of those goods from
one state to anumberher under the companytract of sale. unless
both these companyditions are satisfied there can be no
sale in the companyrse of inter state trade. thus the ratio laid down by the companyrt is entirely in
consonance with the view taken by us regarding the
conditions of an inter-state sale. reliance was also placed on tata iron and steel company
ltd. v. s.r. sarkar and others 2  where shah j. while
delivering the majority judgment of the companyrt observed as
follows
in our view therefore within cl.  b  of s. 3
are included sales in which property in the goods
passes during the movement of the goods from one state
to anumberher by transfer of document of title thereto
cl.  a  of s. 3 companyers sales other than those included
in cl.  b  in which the movement of goods from one
state to anumberher is the result of a companyenant or
incident of the companytract of sale and property in the
goods passes in either state. sarkar j. who gave a dissenting judgment observed as
follows  pp. 407 408
the question then arises when does a sale
occasion the movement of goods sold ? it seems clear to
us that a sale can occasion the movement of the goods
sold only when the terms of the sale provide that the
goods would be moved in other words a sale occasions
a movement of goods when the companytract of sale so
provides. we have then companye to this that cl.  a  of s. 3
contemplates a sale where the companytract of sale
occasions the movement of the goods sold and cl.  b  a
sale where transfer of
property in the goods sold is effected by a transfer of
documents of title to them. of companyrse in the first
case the movement of the goods must be from one state
to anumberher and in the second the document of title
must be transferred during such movement. in state trading companyporation of india limited v. state of
mysore 1  this companyrt observed as follows
since the permits with which we are companycerned
provided that the supply had to be made from one or
other factory situate outside mysore the companytracts
must be deemed to have companytained a companyenant that the
goods would be supplied in mysore from a place situate
outside its borders. a sale under such a companytract would
clearly be an inter-state sale as defined in s. 3  a
of the central sales tax act. similarly in tata engineering locomotive company limited v.
the assistant companymissioner of companymercial taxes anr.  2
while describing the incidents of an inter-state sale this
court observed as follows
a sale being transfer of property becomes taxable
under s. 3 a  if the movement of goods from one state
to anumberher is under a companyenant or incident of the
contract of sale. the same view was taken in a later decision of this
court in m s kelvinator of india limited v. the state of
haryana 3  where khanna j. speaking for the companyrt observed
as follows
it is also plain from the language of section
3 a  of the act that the movement of goods from one
state to anumberher must be under the companytract of sale. a
movement of goods which takes place independently of a
contract of sale would number fall within the ambit of the
above clause. perusal of section 3  a  further makes it
manifest that there must be a companytract of sale
preceding the movement of the goods from one state to
anumberher and the movement of goods should have been
caused by and be the result of that companytract of sale. if there was numbercontract of sale preceding the movement
of goods the movement can obviously be number ascribed to
a companytract of sale number can it be said that the sale has
occasioned the movement of goods from one state to the
other. in that case however on the facts found by the high companyrt
this companyrt held that the sale was number an inter-state sale
but an internal sale which took place in delhi. in that case
there was numbermovement of the goods from one state to anumberher
in pursuance of the companytract of sale. in other words the
facts of this case clearly fell within case number ii which
has been described by us above. to the same effect is the recent decision of this companyrt
in the state of tamil nadu v. the cement distributors  p
ltd. and others 4  in which reliance was placed on the
earlier decision of this companyrt in tata iron and steel company
ltd. v. s. r. sarkar ors.  supra . in oil india limited v. the superintendent of taxes and
others  1  while lucidly describing the incidents of an
inter-state sale mathew j. observed as follows
this companyrt has held in a number of cases that if
the movement of goods from one state to anumberher is the
result of a companyenant or an incident of the companytract of
sale then the sale is an inter-state sale. x x x x x x
even though clause 7 of the supplemental agreement
does number expressly provide for movement of the goods
it is clear that the parties envisaged the movement of
crude oil in pursuance to the companytract from the state
of assam to the state of bihar. in other words the
movement of crude oil from the state of assam to the
state of bihar was an incident of the companytract of sale. numbermatter in which state the property in the goods
passes a sale which occasions movement of goods from
one state to anumberher is a sale in the companyrse of inter-
state trade. the inter-state movement must be the
result of a companyenant express or implied in the companytract
of sale or an incident of the companytract. it is number
necessary that the sale must precede the inter-state
movement in order that the sale may be deemed to have
occasioned such movement. it is also number necessary for
a sale to be deemed to have taken place in the companyrse
of inter-state trade or companymerce that the companyenant
regarding inter-state movement must be specified in the
contract itself. it would be enumbergh if the movement was
in pursuance of and incidental to the companytract of
sale. we might mention here that the case cited above appears
to be on all fours with the facts of the present case. in
that case also the goods were supplied from assam to bihar
through the pipelines in assam to barauni in bihar. this
court observed that numbermatter in which state the property in
goods passes the sale undoubtedly occasioned movement of the
goods which was sufficient to bring the case within the
ambit of s. 3 a  of the central sales tax act. thus the authorities discussed above by us fully
support the principles and the ratio laid down by us.