<NAME>, J.

1. This is a revision petition against the order of the Ex-Officio First Class Magistrate at Mannargudi in M. S. No. 1 of 1957 on his file. The petitioners herein are A party, and the respondents B party. A party, that is, the petitioners herein, asked for an order under Section 145, Criminal P. C., in respect of the properties which are subject-matter of dispute and which are mentioned in the schedule annexed to the petition.

In accordance with the procedure laid down, affidavits and also documents were filed by both parties. As the lower court was unable to decide as to who was in possession of the properties, the matter was referred to <ORG>. <NAME>, under Clause 1 of Section 146, Criminal Procedure Code . <ORG>, after perusing the affidavits and the documents, gave a finding that B party was in possession of the lands and transmitted the findings together with records of proceedings to the Magistrate who made the reference.

The magistrate, thereupon, disposed of the petition in conformity with the decision given by <ORG> and found that B party was in possession of the lands. Against that order A party has filed this revision.

2. Mr. <NAME>, appearing for B party raised a preliminary objection to the maintainability of this revision against the order passed by the Magistrate. His contention is based upon Clause 1-D of Section 146 , which is as follows:

"No appeal shall lie from any finding of the civil court given on a reference under this section nor shall any review or revision of any such finding be allowed."

He contends that this revision does not lie in view of the above clause. But Mr. <NAME>, appearing for A party, points out that this clause is confined only to the appeals or reviews or revisions against the findings of the civil court. I agree with his contention that the Sub-clause 1-D, refers only to an appeal, or review or revision against the finding of the civil court, that is, no appeal or review or revision lies on the civil side against the finding of <ORG>.

But certainly it is open to file a revision under Sections 435 and 439 against the order of the Executive First Class Magistrate at least to show that the order of the lower court is not in conformity with the decision of the civil Court and it cannot be said that no revision at all lies against the order of the Sub-Magistrate. I, therefore, overrule the preliminary objection and hold that revision lies against the order of the trial court under Sections 435 and 439 .

3. The contention of Mr. <NAME> is that this court has jurisdiction to go into the correctness or legality or otherwise of the findings of the civil court. I do not think that what is prohibited in the section in one way can be gone into in another way. As pointed out by their Lordships at page 627 in <NAME> v. <ORG>, 1899 AC 626, "it is a very familiar principle that you cannot do that indirectly which you are prohibited from doing directly."

The above decision has been followed in A. G. of Saskatchewan v. A. G. of Canada, AIR 1949 PC 190 and the observations are at paragraph 14 in page 193. Therefore, for this court to go into the correctness of the findings of the civil court would be to do a thing indirectly what is directly prohibited. What utmost this court can do in revision is to ascertain whether the criminal court has implemented the decision of the civil Court.

To this limited extent only a revision can lie. It is fairly conceded by Mr. <NAME> that the criminal court has followed the decision of the civil court. Therefore, there is no scope for interference, as it is a statutory duly imposed upon the criminal courts to follow the findings of civil courts, and pass orders in accordance with that. This the trial court has done. Therefore, there are no grounds for interference in revision, and this revision petition is dismissed.


PETITIONER: <NAME> AND ORS. Vs. RESPONDENT: STATE OF PUNJAB AND ORS. DATE OF JUDGMENT10/02/1995 BENCH: <NAME> (J) BENCH: <NAME> (J) MOHAN, <NAME> M.K. (J) HANSARIA B.L. (J) MAJMUDAR S.B. (J) CITATION: 1995 AIR 1371 1995 SCC (2) 745 JT 1995 (2) 351 1995 SCALE (1)685 ACT: HEADNOTE: JUDGMENT:

1. The petitioners and respondents 4, 5 and 6 arc members of <ORG> (Class 1) (the <ORG>) in <ORG> of the State of Punjab. The respondents are members of the Scheduled Castes whereas the petitioners belong to the general category. The conditions of service of the members of the <ORG> are governed by the Rules called The Punjab <ORG> of Engineers Class I P.W.D. (I.B.) Rules, 1964 (the Rules). <ORG> by the instructions dated May 4, 1974 provided reservations for the Scheduled Castes and Backward Classes in promotions to and within Class I and II services under <ORG>. It was laid down under the said instructions that 16 per cent of the posts to be filled by promotion were to be reserved for members of the Scheduled Castes and Backward Classes (14 per cent for the Scheduled Casts and 2 per cent for the Backward Classes) subject to the conditions that the persons to be considered must possess the minimum necessary qualifications and they should have, satisfactory record of service. The instructions further provided as under:

"(i) In a lot of 100 vacancies occurring from time to time, those falling at serial numbers mentioned below should be treated as reserved for the members of Scheduled Castes; 1, 7, 15, 22, 30, 37, 44, 51, 58, 65, 72, 80, 87, 91 and so on. Vacancies falling at serial numbers 26 and 76 should be treated as reserved for the members of Backward Classes.

(ii) The reservation prescribed shall be given effect to in accordance with a roster to be maintained in each Department. The roster will be implemented in the form of a running account from year to year."

Rule 9 of the Rules which provides for promotion within the service reads as under "Promotion within service;-

(1) Subject to the provisions of sub-rules 2 and 3 members of the Service shall be eligible for promotion to any of the posts in the Service, namely, Executive Engineers, Superintending Engineers and Chief Engineers: Provided that a Member of the Service in whose case the qualifications mentioned in clause (a) of Rule 6 have been waived, shall not be eligible for promotion to the post of Superintending Engineer or above till he has acquired the necessary qualification.

Explanation:- Once an officer has been appointed a member of the <ORG>, his promotion within it from one rank to an- other shall be regarded as promotion within the same cadre. (2) Promotions shall be made by selection on the basis of merit and suitability in all respects and no member of the <ORG> shall have any claim to such promotion as a matter of right or mere seniority.

(3) A member of the Service shall not be eligible for promotion to the rank of---

(a) Executive Engineer unless he has rendered five years service as an Assistant Executive Engineer; Provided that an officer who has rendered six years or more service as an Assistant Executive Engineer shall unless he is considered unsuitable for promotion, be given preference for such promotion over an eligible Class II Officer;

(b) Superintending Engineer, unless he has rendered seven years service as an Executive Engineer;

(c) Chief Engineer, unless he has rendered three years service as Superintending Engineer;

Provided that, if it appears to be necessary to promote an officer in public interest, the Government may, for reasons to be recorded in writing, either generally for a specified period or in any individual case reduce the period specified in clauses (a), (b) and (c) to such extent as it may deem proper.

It is stated in the writ petition that the petitioners are at serial Nos. 19, 23, 26, 29, 30, 31, 34 and 38 of the seniority list of the Service whereas the respondents are at serial Nos. 46, 140 and 152. Respondent <NAME> was promoted to the rank of Chief Engineer against the post reserved for the Scheduled Castes by superseding 36 senior colleagues including the petitioners. Similarly, respondents <NAME> and <NAME> were promoted as Superintending Engineers against the reserve vacancies by superseding 82 and 87 senior colleagues respectively. According to the petitioners at the time of promotion of these respondents the petitioners were already working as Superintending Engineers for several years. It is further averred in the petition that respondents 4, 5 and 6 were in fact working as Executive Engineers when the petitioners were holding the posts of Superintending Engineers.

2. On the above facts the petitioners have challenged the reservation-policy on several grounds but Mr. <NAME>, learned counsel for the petitioners, has confined the arguments to the following two points:

(1) The object of reservation is to provide adequate representation to the Scheduled Castes/Tribes and Backward classes in services and as such any mechanism provided to achieve that end must have nexus to the object sought to be achieved. The precise argument is that for working out the percentage of reservation the promotees/appointees belonging to the Scheduled Castes and Backward Classes whether appointed against the general category posts or against the reserve posts are to be counted. In other words if more than 14% of the Scheduled Castes candidates are appointed/promoted in a cadre on their own merit/seniority by competing with the general category candidates then the purpose of reservation in the said cadre having been achieved the <ORG> instructions providing reservations would become inoperative.

3. Once the posts earmarked for the Scheduled Castes/Tribes and Backward Classes on the roster are filled the reservation is complete. Roster cannot operate any further and it should be stopped. Any post falling vacant, in a cadre thereafter, is to be filled from the category - reserve or general - due to retirement etc. of whose member of the post fell vacant.

4. Adverting to the first point Mr. <NAME> and Mr. <NAME>, learned counsel representing the petitioners, have contended that the total number of promotees/appointees belonging to the reserve categories in a cadre are to be counted to work-out the prescribed per- centage of reservation. According to the learned counsel the reserve categories can take advantage of the reservation made in their favour till their representation in the <ORG> -- including those appointed against general category posts -- reaches the prescribed percentage. For working out the percentage the promotees/appointees belonging to reserve categories in the <ORG>, whether on the reserve posts or general category posts, are to be counted.

Support is sought from the judgment of <ORG> in <NAME> and others v. <ORG> and other 1982 (2) SLR 307. In the said case 22% reservation was provided for the members of Scheduled Castes/Tribes and Backward Classes. In the cadre strength of 202 posts the Scheduled Castes candidates were entitled to 42 posts. There were already 47 members of the said category in the cadre but out of them 10 were promoted on the basis of seniority-cum-merit against the general cat- egory posts. There being only 37 persons who had been promoted against the reserved posts 4 more Scheduled Castes were sought to be promoted against the reserve vacancies. <ORG> quashed the promotion on the ground that the cadre was already having more than 22% persons from the reserve categories. We are of the view that <ORG> in <NAME>'s case fell into a patent error. The said case was subsequently considered by a Full Bench of <ORG> in <CITATION> [ 1989 (4) Services Law Reporter 257]. The Full Bench did not agree with the ratio in <NAME>'s case and reversed the same.

5. When a percentage of reservation is fixed in respect of a particular cadre and the roster indicates the reserve points, it has to be taken that the posts shown at the reserve points are to be filled from amongst the members of reserve categories and the candidates belonging to the general category are not entitled to be considered for the reserve posts. On the other hand the reserve category candidates can compete for the non-reserve posts and in the event of their appointment to the said posts their number cannot be added and taken into consideration for working out the percentage of reservation. Article 16(4) of the Constitution of India permits <ORG> to make any provision for the reservation of appointments or posts in favour of any backward class of citizen which, in the opinion of the <ORG> is not adequately represented in the <ORG> under the <ORG>. It is, therefore, incumbent on <ORG> to reach a con- clusion that the backward class/classes for which the reservation is made is not adequately represented in the <ORG> <ORG>. While doing so <ORG> may take the total population of a particular backward class and its representation in the <ORG> <ORG>. When <ORG> after doing the necessary exercise makes the reservation and provides the extent of percentage of posts to be reserved for the said backward class then the per- centage has to be followed strictly. The prescribed percentage cannot be varied or changed simply because some of the members of the backward class have already been appointed/promoted against the general seats. As mentioned above the roster point which is reserved for a backward class has to be filled by way of appointment/promotion of the member of the said class. No general category candidate can be appointed against a slot in the roster which is reserved for the backward class. The fact that considerable number of members of a backward class have been ap- pointed/promoted against general seats in the <ORG> <ORG> may be a relevant factor for <ORG> to review the question of continuing reservation for the said class but so long as the instructions/ Rules providing certain percentage of reservations for the backward classes are op- erative the same have to be followed. Despit any number of appointment/promotees belonging to the backward classes against the general category posts the given percentage has to be provided in addition. We, therefore, see no force in the first contention raised by the learned counsel and reject the same.

6. We see considered force in the second contention raised by the learned counsel for the petitioners. The reservations provided under the impugned <ORG> instructions are to be operated in accordance with the roster to be maintained in each Department. The roster is implemented in the form of running account from year to year. The purpose of "running account" is to make sure that <ORG>/Schedule Tribes and Backward Classes get their percentage of reserved posts. The concept of "running account" in the impugned instructions has to be so interpreted that it does not result in excessive reservation. "16% of the posts......are reserved for members of the Scheduled Caste and Backward Classes. In a lot of100 posts those falling at serial numbers 1,7, 15, 22, 30, 37, 44, 51, 58, 65, 72, 80, 87 and 91 have been reserved and earmarked in the roster for-<ORG>. Roster points 26 and 76 are reserved for the members of Backward Classes. It is thus obvious that when recruitment to a cadre starts then 14 posts earmarked in the roster are to be filled from amongst the members of the Scheduled Caste. To illustrate, first post in a cadre must go to the Scheduled Caste and thereafter the said class is entitled to 7th, 15th, 22nd and onwards upto 91st post. When the total number of posts in a cadre are filled by the operation of the roster then the result envisaged by the impugned instructions is achieved. In other words, in a cadre of 100 posts when the posts earmarked in the roster for <ORG> and the Backward Classes are filled the percentage of reservation provided for the reserved categories is achieved. We see no justification to operate the roster thereafter. The "running account" is to operate only till the quota provided under the impugned instructions is reached and not thereafter. Once the prescribed per- centage of posts is filled the numerical test of adequacy is satisfied and thereafter the roster does not survive. The percentage of reservation is the desired representation of the Backward Classes in the <ORG> services and is consistent with the demographic estimate based on the proportion worked out in relation to their populations The numerical quota of posts is not shifting boundary but represents a figure with due application of mind. Therefore, the only way to assure equality of opportunity to the Backward Classes and the general category is to permit the roster to operate till the time the respective appointees/ promotees occupy the posts meant for them in the roster. The operation of the roster and the running account" must come to an end thereafter. The vacancies arising in the cadre, after the initial posts arc filled, will pose no difficulty. As and when there is a vacancy whether permanent or temporary in a particular post the same has to be filled from amongst the category to which the post belonged in the roster. For example the Scheduled Caste persons holding the posts at Roster - points 1, 7, 15 retire then these slots are to be filled from amongst the persons belonging to <ORG>. Similarly, if the persons holding the post at points 8 to 14 or 23 to 29 retire then these slots are to be filled from among the general category By following this procedure them shall neither be short-fall nor excess in the percentage of reservation.

7. The expressions "posts" and "vacancies", often used in the executive instructions providing for reservations, are rather problematical. The word "post" means an appointment, job, office or employment. A position to which a person is appointed. "Vacancy" means an unoccupied post or office. The plain meaning of the two expressions make it clear that there must be a 'post' in existence to enable the 'vacancy' to occur. The cadre - strength is always measured by the number of posts comprising the cadre. Right to be consid- ered for appointment can only be claimed in respect of a post in a cadre. As a consequence the percentage of reservation has to be worked out in relation to the number of posts which form the cadre-strength. The concept of 'vacancy' has no relevance in operating the percentage of reservation.

8. When all the roster-points in a cadre am filled the required percentage of reservation is achieved. Once the total cadre has full representation of the Scheduled Casts/Tribes and Backward Classes in accordance with the reservation policy then the vacancies arising thereafter in the cadre are to be filled from amongst the category of persons to whom the respective vacancies belong. <NAME>, J. speaking for the majority in <CITATION> (AIR 1993 SC 477) observed as under:-

"Take a unit/service/cadre comprising 1000 posts. The reservation in favour of scheduled Tribes Scheduled Cass and other Backward Classes is 50% which means that out Of the 1000 posts 500 must be held by the members of these classes i.e- 270 by Other Backward Classes, 150 by Scheduled Casts and 80 by Scheduled Tribes. At a given point of time, let us say the number of members of OBC in the unit/ service/ category is only 50, a shortfall of 220. Similarly the number of members of scheduled Casts and Scheduled Tribes is only 20 and 5 respectively, shortfall of 130 and 75. If the entire service/cadre is taken as as unit and the backlog is sought to be made up, then the open competition channel has to be chocked altogether for a number of years until the number of members of all backward classes reaches 500 i.e., till the quota meant for each of them is filled up. This may take quite a number of vacancies arising each year are not many. Meanwhile, the members of open competition category would become age barred and ineligible. Equality of opportunity in their case would become a mere mirage. It must be remembered that the equality of opportunity guaranteed by clause (1) is to each individual citizen of the country while clause (4) contemplates special provision being made in favour of socially disadvantaged classes. Both must be balanced against each other. Neither should be allowed to eclipse the other. For the above reason, we hold that for the purpose of applying the rule of 50% a year should be taken as the unit and not the entire of the cadre, service or the unit as the case may be"

9. The quoted observations clearly illustrate that the rule of 50 % a year as unit and not entire strength of the cadre has been adopted to protect the rights of the general category under clause (1) of Article 16 of the Constitution of India. These observations in <NAME> case, arc only in relation to posts which are filled initially in a cadre. 'The operation of a roster, for filling the cadre strength, by itself ensures that the- reservation remains within the 50 % limit. <NAME> case- is not the authority for the point that the roster survives after the cadre-strength is full and the percentage of reservation is achieved.

10.A Division Bench of <ORG> in <NAME> and others v. <ORG> and others (1978)SLR 844) interpreted <ORG> circular dated April 20, 1970 providing 15% reservations for the Scheduled Casts. <ORG> held that the percentage of reservation is in respect of the appointment to the posts in a cadre. On the basis of the material placed before <ORG> it reached the conclusion that if the reservation is permitted in the vacancies after all the posts in cadre are filled then serious consequences would ensure and the general category is likely to suffer considerably. We see no infirmity in the view taken by <ORG>.

11. We may examine the likely result if the roster is permitted to operate in respect of the vacancies arising after the total posts in a cadre are filled. In a 100 point roster, 14 posts at various roster points are filled from amongst the scheduled Casts/ Scheduled Tribes candidates, 2 posts arc filled from amongst the Backward Classes and the remaining 84 posts are filled from amongst the general cat- egory. Suppose all the posts in a cadre consisting of 100 posts are filled in accordance with the roster by December 31, 1994. Thereafter in the year 1995, 25 general category persons (out of the 84) retire. Again in the 1996, 25 more persons belonging to the general category persons (out of the 84) retire. Again in the year 1996, 25 more persons belonging to the general category retire. The position which would emerge would be that the Sched-

uled Casts and Backward Classes would claim 16% share out of the 50 vacancies. If 8 vacancies are given to them then in the cadre of 100 posts the reserve categories would be holding 24 posts thereby increasing the reservation from 16% to 24%. On the contrary if the roster is permitted to operate till the total posts in a cadre are filled by the same category of persons whose retirement etc. caused the vacancies then the balance between the reserve category and the general category shall always be maintained. We make it clear that in the event of non-availability of a reserve candidate at the roster-point it Would be open to <ORG> to carry forward the point in a just and fair manner.

12. We, therefore, find considerable force in the second point raised by the learned counsel for the petitioners. We, however, direct that the interpretation given by us to the working of the roster and our findings on this point shall be operative prospectively.

13. The writ petition is, therefore, disposed of in the above terms. No costs.


JUDGMENT <NAME>, J.

1. This is an appeal under Order 43, Rule 1(m), Civil P.C., from. an order passed by the learned Subordinate Judge, <NAME>. The plaintiff-respondent obtained a preliminary decree for sale in a suit on mortgage. The mortgagor was directed to pay Rs. 12,881-4-0-within six months from the date of the.-. preliminary decree, the 22nd of May 1930. An appeal from this decree to this <ORG> was dismissed. The mortgagee applied for a final decree under Order 34, Rule 5 Civil P.C. He alleged that no payment, had been made in <ORG>, as directed by the preliminary decree. The mortgagor the appellant before us, objected, by a, petition dated 26th August 1933, on the allegation that after the dismissal. of the appeal by the High <ORG> a settlement was arrived at between the parties that, if Rs. 8,000 were paid by the mortgagor immediately and a sum of Rupees. 4,000 were paid in two instalments by the months of June 1934, the entire mortgage money would be taken to have been satisfied, and that accordingly the mortgagor paid Rs. 8,000 on 4th June, 1933, for which a receipt was granted by the mortgagee, and that the mortgagor was ready to pay Rs. 2,000, the first. of the two instalments above referred to. If this allegation is true, the time fixed for payment of the last instalment had not expired when the mortgagor preferred his objection.

2. The lower <ORG> dismissed the objection without recording a finding as to whether this settlement, alleged by the mortgagor, had, in fact, taken place. The ground on which the order of the lower <ORG> proceeds is that no payment out of <ORG> can be recognized by the <ORG> passing a final decree under Order 34, Rule 5, as the preliminary decree, which was drawn up in terms of Order 34, Rule 4, Civil P.C. provides that, if the mortgage money is not deposited in <ORG>, a 'final decree for sale shall be passed. The contention which found favour with the lower <ORG> was that, even if the mortgagor paid Rs. 8,000, as alleged by him, he could not successfully resist the mortgagee's application for a final 'decree in respect of the entire mortgage money payable under the preliminary decree. It is argued on behalf of the mortgagor that a mortgage suit does not terminate with the passing of the preliminary decree and that proceedings in such suit continue till a final decree is passed. Accordingly, it is contended, any adjustment agreed to by the parties must be recorded and must be given effect to under Order 23, Rule 3, Civil P.C.

3. Whatever may be the correct view on the question whether money paid out of <ORG> in satisfaction of the preliminary decree, wholly or in part, can be recognized by a <ORG> when it is moved to pass a final decree-a point on which we express no opinion-it seems to us that the <ORG> cannot refuse to act under Order 23, Rule 3, Civil P.C. if the conditions required by that rule are fulfilled, so that if a suit had been adjusted wholly or in part by any lawful agreement or compromise, or where the defendant satisfies the plaintiff in respect of the whole or any part of the subject-matter of the suit, the <ORG> has no option but to order that such agreement, compromise or satisfaction be recorded, and to pass a decree in accordance therewith. This is a necessary corollary of the view taken by this <ORG> that a preliminary decree does not terminate the suit, which continues till a final decree is passed. Once a suit is finally disposed of Order 23, Rule 3, cannot have any application; but so long as the suit is pending, it is open to the parties to enter into a compromise or otherwise adjust their differences. Great stress is laid on behalf of the respondent on the imperative language of the preliminary decree that, if the amount declared due by the preliminary decree, is not paid in <ORG> on or before the date fixed for payment, the plaintiff shall be entitled to apply for a final decree directing that the mortgaged property, or a sufficient part thereof, be sold....

4. It is argued that the payment not having been made in the manner directed by the preliminary decree, the plaintiff has an absolute right to apply for a final decree being passed. Reference is also made to Order 34, Rule 5(3), which provides for the consequences of non-payment in the manner laid down by the preliminary decree, namely that the Court shall pass a final decree directing that the mortgaged property or a sufficient portion thereof be sold.

5. The provisions contained in this rule should, however, be read with other parts of the Civil Procedure Code, including Order 23, Rule 3, which is equally imperative and gives no discretion to the <ORG> where an agreement, compromise or satisfaction of the suit wholly or in part has taken place. It may be that where all that is alleged by the defendant in a mortgage suit is payment out of <ORG>, which does not necessarily amount to an adjustment of the suit wholly or in part, the <ORG> required to pass a final decree may ignore it, leaving the mortgagor to pursue his remedy by other appropriate means; but where both parties deliberately agree to a compromise or otherwise agree to an adjustment in respect of the subject-matter of the mortgage suit, the <ORG> is bound to give effect to such compromise or agreement. To hold otherwise would be to introduce serious anomalies in the application of law to cases in which preliminary decrees are passed. Such decrees are passed in suits for partition, dissolution of partnership for accounts, in administration suits and others. We do not think it can be seriously contended that, where a preliminary decree is passed directing that a partition shall take place, or that accounts shall be taken between the parties, it is not open to the parties amicably to settle their differences before a final decree is passed. If a mortgagee has agreed with the mortgagor, after the passing of the preliminary decree, that the rights and liabilities of the parties would stand differently from what they are declared to be by the preliminary decree, he is clearly estopped from going behind that arrangement. To take an extreme case, Suppose a mortgagee accepts the sale of part of the mortgaged property in lieu of the entire mortgage money, but subsequently repudiates the sale on some ground and applies for a final decree. We do not think that the mortgagor's plea that the whole suit has been adjusted by Sale of part of the mortgaged property can be overruled by the <ORG> on the ground that nothing short of payment of the mortgage money in <ORG> declared due by the preliminary decree can prevent the passing of a final decree for recovery of the amount declared due by the preliminary decree. For these reasons we are of opinion that Order 34, Rules 4 and 5, Civil P.C., are subject to the provisions contained in Order 23, Rule 3, Civil P.C.

6. In the case before us, the petition of objection filed by the appellant clearly alleged not a mere payment but au adjustment between the parties. The respondent denied having agreed to the adjustment of the suit alleged by the appellant. The lower <ORG> did not inquire into the truth of the appellant's allegation and threw out the objection on a preliminary ground. The appellant's allegation should have been inquired into and given effect to if it was found to be true. In these circumstances, we allow the appeal, set aside the order of the lower <ORG> and remand the case to that <ORG> for disposal according to law as herein indicated. Costs shall abide the result. The court-fee paid in this <ORG> shall be refunded.


PETITIONER: <NAME> Vs. RESPONDENT: COMMISSIONER OF INCOME-TAX, BOMBAY. DATE OF JUDGMENT: 28/10/1954 BENCH: <NAME>, MEHAR CHAND (CJ) BENCH: <NAME>, MEHAR CHAND (CJ) DAS, <NAME>, <NAME>, <NAME>, <NAME> CITATION: 1955 AIR 740 1955 SCR (1) 876 CITATOR INFO : RF 1961 SC1019 (7) R 1963 SC1185 (9) R 1965 SC1836 (11) RF 1967 SC 81 (11) RF 1970 SC1578 (9) F 1976 SC1790 (14) F 1988 SC1708 (13) ACT: Indian Income-tax Act (XI of 1922), ss. 2(1) , 4(3)(viii) , 69 and rule 24-Agricultural Income, Meaning of-Growing and manufacturing tea company's dividend, Nature of- -Dividend how arises -Distinction between shareholder and partner--Difference between company and firm-Decided cases on English Tax Law, Use of. HEADNOTE: Agricultural income as defined in a. 2(1) of the Indian Income. tat Act, 1922, signifies income proximately derived from direct association with land by a person who actually tills the land or 877 gets it cultivated by others. Agricultural income does not mean income which can be ultimately or indirectly traced to have connection with agricultural operations. Even though a tea company growing and manufacturing top gets an exemption of 60 per cent. of the profits as agricultural income in accordance with rule 24 framed under s. 59 of the Act, it must be held that the dividend of such company is not derived by the shareholder owing to his direct connection with the land in which be% is grown and such dividend is not agricultural income within the meaning of s. 2(1) of the Act and hence is not exempted from income-tax under s. 4(3)(viii) of the Act. The dividend of a shareholder is the outcome of his right to participate in the profits of the company arising out of the contractual relation between the company and the shareholder and this right exists independently of any declaration of the dividend though until such declaration the enjoyment of the profits is postponed. The shareholder by purchase of the share does not acquire any interst in the assets 'of the company till after the company is wound up. The position of a shareholder of a company is altogether different from that of a partner of a firm. A company is a juristic entity distinct from the shareholders but the firm is a collective name or an alias for all the partners. Decisions based on the peculiarities of Income-tax law of England are hardly safe guides for determining the true meaning of the term "agricultural income" Under the Indian Income-tax Act , 1922. <CITATION>  S.C.R. 869) followed. Commissioners of Inland Revenue v. <NAME> (1924) 8 T.C. 704, <NAME>'s <CITATION> .  1 Ch. 279, <CITATION>  16 I.T.R. 325, <CITATION> of lncome-tax, Bombay City  16 I.T.R. 380 and <NAME> <CITATION>  3 I.T.R. 237 referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 104 of 1953. Appeal from the Judgment and Order dated the 28th day of March, 1952, of <ORG> at Bombay in Income-tax Reference No. 39 of 1951 arising out of the Order dated the 23rd day of April, 1951, of <ORG> in Income-tax Appeal No. 5228 of 1950-51.

<NAME>, (<NAME>, <NAME> and <NAME>, with him) for the appellant.

<NAME>, Attorney-General. for India, (<NAME>, with him) for the respondent.

1954. October 28. The Judgment of the Court was delivered by <NAME> appeal raises an interesting point of law under the Indian Income-tax Act .

The question referred by the <ORG> to <ORG> at Bombay was stated thus:

" Whether 60% of the dividend amounting to Rs. 2,750- received by the assessee from the two Tea companies is agricultural income and as such exempt under section 4(3)

(viii) of the Act."

<NAME> and <NAME>, who heard the reference, answered the question in the negative by two separate but concurring judgments dated March 28, 1952. The facts lie within a narrow compass. The appellant, Mrs. <NAME>, was, in the accounting year 1949-50, a shareholder in two Tea:companies, <ORG>, and <ORG>, and received from the aforesaid companies dividends aggregating to Rs. 2,750. The two companies carried on business of growing and manu- facturing tea. By rule 21 of the Indian Income-tax Rules, 1922, made in exercise of the powers conferred by section 59 of the Indian Income-tax Act, it is provided that "income derived from the sale of tea grown and manufactured by the seller in the taxable territories shall be computed as if it were income derived from business and 40% of such income shall be deemed to be income, profits and gains, liable to tax." It is common ground that 40% of the income of the Tea companies was taxed as income from the manufacture and sale of tea and 60% of such income was exempt from tax as agricultural income. According to the appellant, the dividend income received by her in respect of the shares held by her in the said Tea companies is to the extent of 60% agricultural income in her hands and therefore pro tanto exempt from tax while the <ORG> contends that dividend income is not agricultural income and therefore the whole of the income is liable to tax. The Income-tax Officer and on appeal, the Appellate Assistant Commissioner both concurred in holding the whole of the said income to be liable to tax. <ORG> confirmed the view that the dividend income could not be treated as agricultural income in the hands of the shareholder and decided in favour of the <ORG>, but' agreed that its order gave rise to a question of law and formulated the same as set out above and referred it to <ORG>. <ORG> upheld the order of the <ORG> but granted leave to appeal to this Court.

The question, we comprehend, is capable of an easy solution and can best be answered by reference to the material provisions of the Income-tax Act . Under section 2(1) 'agricultural income' means:

(a) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land- revenue in the taxable territories or subject to a, local rate assessed and collected by officers of the Government as such;

(b)

(i)..............

(ii).................................

(iii).................................

(c)...................................." Sub-section (15) of section 2 defines " total income" as total amount of income, profits and gains, referred to in sub-section (1) of section 4 computed in the manner laid down in this Act, Section 3 authorises income-tax to be charged upon a person in respect of the total income of the previous year. Section 4 lays down that the total income of any previous year of any person to be charged must include all income, profits and gains, from whatever source derived and defines the scope of its application for purposes of tax. Sub-section (3) of the same section - enacts certain exemptions upon the chargeability of -the income and clause

(iii) includes agricultural income in the category of exemptions. Section 6 mentions the various heads of income, profits and gains, chargeable. to income,-tax including in that category clause (v) 'income from other sources.' It is common ground that dividend falls under this category.

In order, however, that dividend may be held to be Agricultural income it will be incumbent upon the appellant to show that, within the terms of the definition, it is rent or revenue derived from land which is used for agricultural 'purposes. Mr. <NAME>, for the appellant, contends that it is revenue derived from land because 60% of the profits of the company out of which dividends are payable are referable to the pursuit of agricultural operations on the part of the company. It is true that the agricultural process renders 60% of the profits exempt from tax in the hands of the company from land which is used for agricultural purposes but can it be said that when such company decides to distribute its profits to the shareholders and declares the dividends to be allocated to them , such dividends in the hands of the shareholders also partake of the character of revenue derived from land which is -used for agricultural purposes ? Such a position - if accepted would extend the scope of the vital words I revenue derived from land' beyond its legitimate limits. Agricultural income as defined in the Act is obviously intended to refer to the revenue received by direct association with the land which is used for agricultural purposes and not by indirectly extending it to cases where that revenue or part thereof changes hands either by way of distribution of dividends or otherwise. In fact and truth dividend is derived from the investment made in the shares of the company and the foundation of it rests on the contractual relations between the company and the shareholder. Dividend is not derived by a shareholder by his direct relationship with the land. There can be no doubt that the I initial source which has produced the revenue is land used for agricultural purposes but to give to the words 'revenue derived from land the unrestricted meaning, apart from its direct association or relation with the land, would be quite unwarranted. For example, the proposition that a creditor advancing money on interest to an agriculturist and receiving interest out of the produce of the lands in the hands of the agriculturist can claim exemption of tax upon the ground that it is agricultural income within the meaning of section 4 , sub-section (3) (viii), is hardly statable. The policy of the Act as gathered from the various sub-clauses of section 2(1) appears to be to exempt agricultural income from the purview of Income tax Act. The object appears to be not to subject to tax either the actual tiller of the soil or any other person getting land cultivated by others for deriving benefit therefrom, but to say that the benefit intended to be conferred upon this class of persons should extend to those into whosoever hands that revenue falls, however remote the receiver of such revenue may be, is hardly warranted.

It was argued by Mr. <NAME> on the strength of an observation made by Lord <NAME> in <ORG> v. Forrest(1), that an investor buys in the first place a share of the assets of the industrial concern proportionate to the number of shares he has purchased and also buys the right to participate in any profits which the company may make in the future. That a shareholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company. The use of the word 'assets' in the passage quoted above cannot be exploited to warrant the inference that a shareholder, on investing money in the purchase of shares, becomes entitled to the assets of the company and has any share in the property of the company. A shareholder has got no interest in the property of the company though he has undoubtedly a right to participate in the profits if and when the company decides to divide them. The interest of a shareholder vis-a-vis the company was explained in the case of <NAME> v. <ORG>). That judgment negatives the position taken up on behalf of the appellant that a shareholder has got a right in the property of the company. It is true that the shareholders of the company have (1) (1924) 8 T.C. 704,710., (2) [1950] S.C.R. 869, 904.

the, sole determining voice in administering the affairs of the company and are entitled, as provided by the Articles of Association to declare that dividends should be distributed out of the profits of the company to the shareholders but the interest of the shareholder either individually or collectively does not amount to more than a right to participate in the profits of the company. The company is a juristic person and is distinct from the shareholders. It is the company which owns the property and not the shareholders. The dividend is a share of the profits declared by the company as liable to be distributed among the shareholders. Reliance is placed on behalf of the appellant on a passage in <ORG> Companies Act , 12th Ed., page 894, where the etymological meaning of dividend is given as dividendum, the total divisible sum but in its ordinary sense it means the sum paid and received as the quotient forming the share of the divisible sum payable to the recipient. This statement does not justify the contention that shareholders are owners of a divisible sum or that they are owners of the property of the company. The proper approach to the solution of the question is to concentrate on the plain words of the definition of agricultural income which connects in no uncertain language revenue with the land from which it directly springs and a stray observation in a case which has no bearing upon the present question does not advance the solution of the question. There is nothing in the Indian law to warrant the assumption that a shareholder who buys shares buys any interest in the property of the company which is a juristic person entirely distinct from the shareholders. The true position of a shareholder is that on buying shares an investor becomes entitled to participate in the profits of the company in which he holds the shares if and when the company declares, subject to the Articles of Association, that the profits or any portion thereof should be distributed by way of dividends among the shareholders. He has undoubtedly a further right to participate in the assets of the company which would be left over after winding up, but not in the assets as a whole as Lord <NAME> puts it.

<ORG> expressed the view that until a dividend is declared there is no -right in a shareholder to participate in the profits and according to them the declaration of dividend by the company is the effective source of the dividend which is subject to tax. This statement of the law we are unable to accept. Indeed the learned Attorney- General conceded that he was not prepared to subscribe to that proposition. The' declaration of -dividend is certainly not the source of the profit. The right to participation in the profits exists independently of any declaration by the company with the only difference that the enjoyment of profits is postponed until dividends are declared.

It was argued that the position of shareholders in a company is analogous to that of partners inter se. - This analogy is wholly inaccurate. Partnership is -merely an association of persons for carrying on the business of partnership and in law the firm name is a compendious method of describing the partners. Such is, however, not the case of a company which stands as a separate juristic entity distinct from the shareholders. In <ORG>, Volume 6 (3rd Ed.), page 234, the law regarding the attributes of shares is thus stated :

" A share is a right to a specified amount of the share capital of a company carrying with it certain rights and liabilities while the company is a going concern and in its winding up. The shares or other interest of any member in a company are personal estate transferable in the manner provided by its articles, and are not of the, nature of real estate. "

In Borland's Trustee v. <ORG>), <NAME> held that "a share in a company cannot properly be likened to a sum of money settled upon and subject to executory limitations to arise in the future ; it is rather to be regarded as the interest of the shareholder in the company, measured, for the purposes of liability and dividend, by a sum of money ..............................." It was suggested that the dividend arises out of the profits accruing from land and is impressed with the same character as the profits (1) L.R. [1901] 1 Ch. 279.

and that it does not change its character merely because of the incident that it reaches the hands of the shareholder. This argument runs counter to. the definition of agricultural income which emphasizes the necessity of the recipient of income having a direct and an immediate rather than an indirect and remote relation with land. To accept this argument will be tantamount to saying that the creditor recovering interest on money debt due from the agriculturist who pays out of the produce of the land is equally entitled to the exemption. In fairness to Mr. <NAME> it must, however, be stated that the contention was not so broadly put but there is no reason why one should stop at a particular stage and not pursue the analogy to its logical limits.

English decisions resting upon the peculiarities of the English Income-tax law can hardly be a safe guide ,in determining upon the language of the Indian Income-tax Act the true meaning of the words 'agricultural income.' A few cases of <ORG> decided with reference to the provisions of the Indian Income-tax Act , however, deserve notice. The first case, - <CITATION> (1), dealt with the question whether interest on arrears of rent payable in respect of land used for agricultural purposes is agricultural income and therefore exempt from income-tax. It was held that it was neither rent nor revenue derived from land within the meaning of section 2(1) of the Income-tax Act. Lord <NAME> who delivered the judgment of <ORG> used the following piquant language in coming to that conclusion : "The word derived' is not a term of art. Its use in the definition indeed demands an enquiry into the genealogy of the product. But the enquiry should stop as soon as the effective source is discovered. In the genealogical tree of the interest land indeed appears in the second degree, but the immediate and effective source is rent, which has suffered the accident of (1)  16 I.T.R. 325.

non-payment. And rent is not land within the meaning of the definition. "

The second case, viz., <CITATION> (1), dealt, with the nature of the commission of a managing agent of the company a part of whose income was agricultural income. The assessee claimed exemption from tax on the ground that his remuneration at 10 per cent. of the profits was calculated with reference to the income of the company part of which was agricultural income. It was held that the assessee received no agricultural income as defined by the Act but that he received a remuneration under a contract for personal service calculated on the amount of profits earned by the employer, payable not in specie out of any item of such profits, but out of any moneys of the employer avail- Able for the purpose, and that the remuneration therefore was not agricultural income and was not exempt from tax. Sir <NAME> in the above case observed :

" In their Lordships' view the principle to be derived from a consideration of the terms of the Income-tax Act and the authorities referred to is that where an assessee receives income, not itself of a character to fall within the definition of agricultural income contained in the, Act, such income does not assume the character of agricultural income by reason of the source from which it is derived, or the method by which it is calculated. "

In the third case, viz., <NAME> v. Commissioner of Income-tax, Bihar and Orissa(1), an annual payment for life to the assessee was not held to be agricultural income and therefore not exempt from tax where the annuity arose out of a transfer made by the assessee of a portion of his estate for discharging his debts and for obtaining an adequate income for his life it being held that it was not rent or revenue derived from land --but. money paid under a contract imposing personal liability on the covenantor the discharge of which was secured by a charge on (1) [1948] 16 I.T.R. 380.

(2) [1935] 3 I.T.R. 237.

land. But reliance was placed uponanother judgment of <ORG> in the same volume at page 305 'in <CITATION> (1). That was a case of a usufructuary mortgagee the profits received by whom were exempt from income-tax on the ground that they were agricultural income in his hands. Lord <NAME>, after referring to certain sections of the Act, observed that "the result of those sections is to exclude agricultural income altogether from the scope of the Act howsoever or by whomsoever it may be received." These observations must be held to be confined to the facts of that particular case which was a case of usufructuary mortgagee who had received profits directly from the land. The obvious implication of the words used by Lord <NAME> was that whosoever receives profit from the land directly is entitled to the exemption. Reference was also made to some English decisions but they have no bearing upon the present case as they were founded on the English Income-tax law and the provisions of the particular statute.

The learned Attorney-General also contended that the conclusion that dividend is not agricultural income also follows from the provisions of section 16 , subsection (2) and the proviso to the Act. According to him, this section compels the assessee to show in his return the whole dividend including the portion which is excluded on the ground of agricultural income. We do not consider it necessary to express any opinion upon this contention as our conclusion reached as a result of the foregoing discussion is sufficient to dispose of the appeal. We accordingly dismiss the appeal with costs.

Appeal dismissed.

(1) [1935] 3 I.T.R. 305.


JUDGMENT

1. The point involved in these cases has arisen in a batch of cases which was posted for hearing along with these and the question that is raised for our decision is as to the validity of the levy of sales tax on iron flats, iron sheets and iron bars made out of iron scrap which has already been subjected to tax. We have heard the various counsel appearing for the petitioners in the entire batch of cases but we render our decision in the above two cases leaving the other cases to be disposed of later on the particular facts. Before dealing with the contentions of the assessee in these cases, it is necessary to set out the facts at least in one case and we propose to deal with the facts in Writ Petition No. 520 of 1968.

2. The petitioners herein are carrying on business of re-rolling steel. They buy iron and steel scraps from other registered dealers and convert them into mild steel rounds, flats, angles etc., by rolling them. The concerned assessing authority by its Order dated 25th January, 1968, proposed to assess the said petitioners under the Tamil Nadu General Sales Tax Act, 1959, treating their sales turnover of Rs. 28,20,278.76 of mild steel rounds, flats, angles, etc., as liable to tax at 2 percent, for the assessment year 1966-67. The objection to the proposed assessment by the petitioners was that the iron and steel scraps from which rolled mild steel rounds, flats and angles have been made had already suffered tax in the <ORG> as first sale of declared goods and that as such rolled mild steel, iron flats and angles are not liable to tax, as they are declared goods Under Section 14 of the Central Sales Tax Act not liable to tax on second and subsequent sales. They also contended that the rolled mild steel rounds, flats and angles are not goods different from the iron and steel scraps purchased by them. The petitioners filed the above Writ Petition No. 520 of 1968 for prohibiting the assessing authority from making any assessment on the basis of the said notice proposing assessment.

3. In the said writ petition they contend that the prescription of single point tax specified in Section 14 of the Central Sales Tax Act hereinafter referred to as the " Central Act " 1956 means and requires a single point tax in respect of the series of sales within the State of the goods specified in the opening part of each item comprised under the Roman numeral numbering in Section 14 of the said Act, that prescription of a single point tax in respect of item 4, that is "iron and steel", means that there should be a tax at a single point only in the series of sales of "iron and steel" within the State though the iron and steel may be converted into other items comprised in the definition and that as such any manufactured Article composed of iron and steel which fell within any one of the particular specific items listed in item 4 as being "iron and steel" will have to be taxed only at one prescribed point in the series of sales. According to the petitioners all the particular forms of iron and steel mentioned in item 4 are the iron and steel either in the crudest form such as pig iron or steel ingots or scrap or Articles produced therefrom in rolling mills, which convert the basic material into usable forms such as plates, sheets, bars or Sections and that it is not permissible to take each particular specification under the same item 4 and levy a single point tax on the series of sales of each particular sub-item within item 4 as it is not possible to contemplate levy of one single point tax on the iron plates, sheets or bars or steel scrap or steel ingots. They urge that the levy of sales tax on the rolled steel plates, bars etc., made out of iron and steel scrap or ingots purchased by them will infringe the provisions of Sections 14 and 15 of the Central Sales Tax" Act and as such the levy will be invalid. They question the jurisdiction of the assessing authority to make assessment on the alleged second sales of "iron and steel". This writ petition is to prohibit the concerned assessing officer from bringing to tax rolled "iron and steel" bars or plates etc., produced from and out of the scrap iron and steel purchased by them and which had suffered tax.

4. Before considering the merits of the contentions of the petitioners, it is necessary to set out the relevant statutory provisions. Section 3(1) and (2) of the Tamil Nadu General Sales Tax Act, 1959, hereinafter referred to as the local Act, is as follows :

Section 3 : Levy of taxes on sales or purchases of goods.-(1) Every dealer (other than a casual trader or agent of a non-resident dealer) whose total turnover for a year is not less than fifteen thousand rupees and every casual trader or agent of a non-resident dealer, whatever be his turnover for the year, shall pay a tax for each year at the rate of three per cent, of his taxable turnover:....

(2) Notwithstanding anything contained in Sub-section (1) in the case of goods mentioned in the First Schedule, the tax under this Act shall be payable by a dealer, at the rate and only at the point specified therein on the turnover in each year relating to such goods whatever be the quantum of turnover in that year.

Section 4 : "Notwithstanding anything contained in Section 3 , the tax under this Act shall be payable by a dealer on the sale or purchase inside the State of declared goods at the rate and only at the point specified against each in the Second Schedule on the turnover in such goods in each year, whatever be the quantum of turnover in that year.

5. Schedule I to the Act sets out the goods in respect of which single point tax is leviable under Sub-section (2) of Section 3 and Schedule II sets out a list of declared goods in respect of which single point tax only is leviable Under Section 4 of the local Act. Item 4 in Schedule II is as follows:

Description of the goods Point of levy Rate of tax percent. (1) (2) (3) Iron and steel that is to say- At the point of first sale in the State. 3 (a) pig iron and iron scrap ; (b) iron plates sold in the same form in which they are directly produced by the rolling mill; (c) steel scrap, steel ingots, steel billets, steel bars and rods ; and (d) (i) steel plates ; (ii) steel sheets ; (iii) sheet bars and tin bars ; (iv) rolled steel Sections ; and (v) tool alloy steel. Items (i) to (v) sold in the same form in which they are directly produced by the rolling mill.

6. Section 14 of the Central Act declares certain goods as being of special importance in inter-State trade or commerce and item (iv) therein is practically the same as has been set out under item 4 of Schedule II to the Act. As a matter of fact the entire Second Schedule is based on the list of goods mentioned in Section 14 . Section 15 imposes certain restrictions and conditions in regard to the levy of tax by the States on the sales of declared goods as enjoined by Article 286(3) of the Constitution of India. It is useful to set out the said Section 15 as it stood originally:

15. Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State.-Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely :-

(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed two per cent, of the sale or purchase price thereof and such tax shall not be levied at more than one stage;

(b) where a tax has been levied uiider that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be provided in any law in force in that State.

7. This Section came into force on 1st October, 1958 and the restrictions imposed by the Section became applicable as and from that date. The rate of 2 per cent, mentioned in Sub-section (a) was, however, raised to 3 per cent, by the Finance Act of 1966 with effect from 1st July, 1966. Section 15 ensures that in the case of declared goods they should in all circumstances be liable to tax only at a specified stage in the series of sales and at the prescribed rate.

8. In the light of the above statutory provisions the substantial contention of the petitioners is that "iron atyd steel" cannot be subjected to tax at more than one stage and at more than the prescribed rate of 3 per cent, under any circumstances and that if the sales tax law of any State imposes or authorises the imposition of a tax on the sale or purchase of "iron and steel" at more than one stage or at more than 3 per cent., such law would be invalid. Admittedly the rate of tax has not exceeded the prescribed rate of 3 per cent, as the rate of tax levied Under Section 4 read with Schedule II of the Act is only 3 per cent and it has not exceeded the rate fixed in Section 15(a) . We are concerned herein only with the question whether by levying tax on rolled "iron and steel" bars and plates etc., made out of iron and steel scrap and the ingots (already subjected to tax), the revenue has contravened the provisions of Section 15 of the Central Sales Tax Act prohibiting the levy of tax on "iron and steel" at more than one stage.

9. Mr. <NAME>, learned counsel for the petitioner in W.P. No. 520 of 1968 submitted that the words "that is to say" following "iron and steel" in item (iv) in Section 14 of the Central Act as also in item 4 of Schedule II to the local Act are of considerable importance. According to him these words are explanatory of what "iron and steel" is and all rticles enumerated under that head either in their crude form or in their manufactured stage or in any of the forms listed under the sub-headings (a), (b), (c) and (d) are treated as various forms of "iron and steel". It is said that the statute contemplates a single point tax in the series of sales of all forms mentioned under the heading "iron and steel" and that it does not contemplate a single point among the series of sales of Articles in various forms mentioned in (a), (b), (c) and (d) of item (iv). In this connection, the learned counsel referred to the decision in <CITATION> , A.I.R. 1947 P.C. 72. for ascertaining the scope of the words "that is to say" occurring in item (iv). In that case <ORG> had to deal with the scope of item 21 of List II of the Seventh Schedule of the Government of India Act, 1935, when they expressed as follows :

The key to item 21 of List II of the Seventh Schedule of the Constitution Act is to be found in the opening word 'land'. That word is sufficient in itself to include every form of land, whether agricultural or not. 'Land', the governing word in the entry is followed by the rest of the item, which goes on to say, 'that is to say'. As to the scope of the words 'that is to say' occurring in item 21, it was held that they introduce the most general concept 'rights in or over land'.

10. On the same reasoning, it is possible to say that by the use of the words "that is to say" after the words "iron and steel", the <ORG> had intended to adopt the most general concept of "iron and steel" and wanted all forms of iron and steel to be brought within the entry (iv). 'The learned counsel also brought to our notice an explanatory note issued by <ORG>, <ORG>, by their letter No. 4(2) S.T./58, dated 21st July, 1958, which detailed the following items as falling within item (iv), "iron and steel".

A. 1. Pig iron. 2. Steel ingots. 3. Steel billets, blooms and slabs. 4. Tin bars. 5. Skelp.

B. 1. Steel bars and rods. 2. Structurals (viz. angles, tees, joists and channels). Bearing plates and crossing-sleeper bars. 3. Plates. 4. Chequered plates. 5. Boiler plates. 6. Black sheets-plain and corrugated. 8. Heavy rails. 9. Light rails. 10. Fish-plates-heavy and light. 11. Tool steel. 12. Bullet-proof plates. 13. Shell steel blooms and bars. 14. Box strapping. 15. Baling hoops. 16. Gate channels.

C. 1. Hard bright wire. 2. Annealed wire. 3. Galvanised wire. 4. Telegraph wire. 5. Signal wire galvanised.

D. Tin plates.

E. Alloy steel.

F. Iron and steel defectives and scraps.

11. On the basis of the said explanatory note, it was contended that the Government of India had itself treated all the commodities listed under the head A to F as "iron and steel", that the single point tax contemplated by Section 15 of the Central Sales Tax Act should therefore be levied at only one stage in the series of sales from the raw stage to the final stage of production by the rolling mills and that it is not contemplated that the goods are to be taxed at various stages and in its various forms. The learned counsel is willing to concede that "iron and steel" scrap and ingots may be commercially different from the rolled plates, bars and sheets as produced by the petitioners and that the local Act may treat them as different AQrticles for purpose of single point tax so long as there is no prohibition as the one contained in Section 15 of the Central Act. But it is said that once a prohibition has come into existence in the form of Section 15 of the Central Act, it is not possible for the local Act to treat sales of different forms of iron and steel as constituting separate series of sales for the purpose of levying single point tax Under Section 4 of the local Act and that if the State were to treat the sales of various forms of iron and steel mentioned under sub-items (a), (b), (c) and (d), as separate series of sales of different commodities and subject them to tax in all its forms, it will be contravening the mandate of single point provided in Section 15 of the Central Sales Tax Act.

12. Mr. <NAME>, learned counsel for some of the petitioners, however, contends that the various forms of "iron and steel" following the words "that is to say" in item 4 cannot be treated as different Articles and that whatever the form of the Articles be, it continues to be "iron and steel".

13. Mr. <NAME> refers to the other items of declared goods mentioned in Section 14 of the Central Act to substantiate his con-tention that a single point has to be fixed for the series of sales in all forms of Articles mentioned under the entry. He refers to the entry (ii) dealing with cotton and states that all kinds of cotton (indigenous or imported) in its unmanufactured state, whether ginned or unginned, baled, pressed or otherwise, are treated as one commodity for purpose of single point levy and that sales of cotton, whether ginned or unginned, suffer only one tax, though ginned cotton and unginned cotton are commercially different as single point has been fixed with reference to series of sales both in the ginned stage and unginned stage. He also refers to the entry "hides and skins" which has also contemplated single point levy in the series of sales of hides and skins either raw or dressed. It is urged that the Central Act limits the series of sales for purposes of single point levy up to the stage of production by the rolling mill, thus excluding the sales of fabricated materials from the single point scheme and that the single point scheme contemplated by Section 15 should be from the stage of scrap up to the production stage by the rolling mills.

14. The learned counsel relies on the decision in <CITATION>  25 S.T.C. 52 (S.C.) in support of his stand that cotton, ginned or unginned, is treated as a single commodity under one item of declared goods and that, though they are two distinct commercial goods, for the purpose of Section 15 of the Central Act it is treated as one item. The learned counsel also referred to the decision of <ORG> in <CITATION>  17 S.T.C. 313 (S.C.) where it was held, construing Notification No. 58 Under Section 5 of the Madhya Bharat Sales Tax Act, 1950, exempting "iron and steel" from sales tax, that the exemption will include iron and steel bars, flats and plates. The learned Judges in that case negatived the contention of the <ORG> that the expression "iron and steel" meant "iron and steel" in the original condition and not "iron and steel" in the shape of sheets, bars and plates and that distinction should be made between raw materials of "iron and steel" and the goods prepared out of them. The learned Judges took the view that "iron and steel" used as raw materials for manufacturing other goods also are exempted from taxation, that scrap iron purchased by the assessee was merely re-rolled into bars, flats and plates, that the process was only for convenience of sale and for making them attractive and in acceptable forms and that by the process of re-rolling their character as "iron and steel" is not lost. In these cases also it is urged by the petitioners that the process adopted by them is only re-rolling and that the same does not involve any process of manufacture as such.

15. <CITATION>  20 S.T.C. 430 (S.C.) <ORG> had again to consider the correctness or otherwise of the decision of <ORG> in <CITATION>  12 S.T.C 590. holding that when steel is rolled into rolled steel Sections the outcome is a different and a new commodity, that when it is sold, there is a sale of a different commodity and not a sale of steel over again and that when sales tax is levied on the sale of rolled steel Sections it is not levied second time or at the second stage on the same commodity in the same condition. <ORG> had expressed that the purchase of "iron and steel" as raw material was for the purpose of manufacture so as to exempt from tax the manufactured ASrticle, that when iron scrap is converted into rolled steel it undergoes a vital change in the process of manufacture and is converted into a different commodity, that during the process the scrap iron loses its identity and transforms into a new marketable commodity and that the process is certainly one of manufacture.

16. The learned Judges noted Section 15 of the Central Act before and after its amendment in 1053 and stated that while Section 15 of the Central Sales Tax Act before the amendment described the stage at which the purchase tax can be levied, Section 15 after the amendment only declares that it cannot be levied at more than one stage and that the stage prescribed Under Section 15 of the Central Act before the amendment and the prohibition against taxation at more than one stage contained in the amended Section would automatically control the provisions of the Punjab General Sales Tax Act, 1948. In their view till 1st October, 1958, the State can levy tax at one stage in respect of purchases of declared goods inside the State made by a dealer for use by him in the manufacture of goods and that from 1st October, 1958, the State was enabled to levy tax at any one stage as it chooses. They also noted that the amended Section 15 of the Central Act does not fix the stage by its own force but that the Punjab Act , which they had to consider, had provided in Section 2(ff) that the prescribed stage for single point taxation was the stage of purchase by a dealer for use in the manufacture of goods. This decision, according to the learned counsel for the petitioners, does not decide the question at issue in the case and we also agree with him. The question decided by <ORG> was that when iron and steel scraps and ingots are converted into iron and steel bars and plates, the process involves one of manufacture and this was necessary for the purpose of levying a purchase tax on the purchase of raw material for producing the rolled iron and steel Sections. The learned Judges have not expressed any view on the question whether in the manufactured state, iron and steel plates and bars etc., cease to be "iron and steel" as defined in item (iv) of Section 14 of the Central Sales Tax Act as they were not concerned with the taxability or otherwise of the sales of manufactured Articles made out of iron and steel scrap.

17. Mr. <NAME> referred to the words "in the same form" used in sub-items (b) and (d) in item (iv) of Section 14 and contended that there cannot be a straight-jacket formula for finding out whether a particular Article was sold in the same form as was produced by the rolling mill. <CITATION>  15 S.T.C. 586. a Bench of <ORG> held that where pieces of rolled steel Sections are joined together by rivetting, they still retain the same form in which rolled steel Sections are directly produced by the rolling mills within the meaning of entry 4 in Schedule A A of the Bombay Sales Tax Act, 1953 and that rivetted baling hoops which are nothing but pieces of rolled steel Sections joined together by rivetting, fall within that entry. The learned Judges expressed that it is impossible to attempt to formulate a general test which must be applicable in all cases and it is a difficult question to decide as to when can an Article which is a rolled steel Section be said to be in the same form in which it is directly produced by the rolling mill,

18. Reference was also made to <CITATION>  19 S.T.C. 24 (S.C.) where <ORG> had held that sugar in entry 47 of the Bombay Sales Tax Act, 1959, included within its ambit all forms of sugar, that is to say, sugar of any shape or texture, colour or density and by whatever name it is called.

19. It was also contended by the learned counsel that the object of the statute should be effectuated and that cannot be done if each sub-item in item (iv) is treated as an independent item for purpose of levying single point tax. Reference is made to <CITATION>  11 S.T.C. 827(S.C.) where <ORG> held that hydrogenated ground-nut oil (commonly called vanaspati) is "groundnut oil" within the meaning of Rule 18(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939. <ORG> expressed :

That the hydrogenated oil sold by the appellants was out of groundnut not being in dispute, the only point is whether it continues to be oil even after hydrogenation. Oil is a chemical compound of glycerine with fatty acids, or rather a glyceride of a mixture of fatty acids-principally oleic, linoleic, stearic and palmitic-the proportion of the particular fat varying in the case of the oil from different oil-seeds and it remains a glyceride of fatty acids even after the hardening process, though the relative proportion of the different types of fatty acids undergoes a slight change. In its essential nature therefore no change has occurred and it remains an oil-a glyceride of fatty acids-that it was when it issued out of the press.

20. It is urged that when vanaspati, which is produced from groundnut oil after chemical process, is treated as groundnut oil, rolled iron and steel Sections which are made out of iron and steel scrap into certain presentable and usable forms will not cease to be "iron and steel". According to the learned counsel this is a fortiori case, for reconversion is impossible in the case of vanaspati while it is possible in the case of "iron and steel".

21. The learned Assistant Government Pleader appearing on behalf of the <ORG>, however, contends, relying on the decisions in <CITATION>  12 S.T.C. 590 and <CITATION>  20 S.T.C. 430 (S.C.) above referred to, that "iron and steel" plates and rods sold by the petitioners are commodities different from iron and steel scrap or ingots, that they are treated commercially different for purposes of taxation and that the <ORG> is entitled to levy on the first sales of the goods manufactured by the petitioners, notwithstanding the fact that scrap out of which they have been manufactured had suffered tax already. He also contends that the words "that is to say" following "iron and steel" in entry (iv) of Section 14 of the Central Act cannot be said to be explanatory but that it should be construed as restrictive of the scope of the words "iron and steel". Though the contention of the learned Assistant Government Pleader that there is a manufacturing process when iron and steel scraps are melted and converted into iron and steel plates and rounds may be correct in view of the decision of <ORG> in <CITATION>  20 S.T.C. 430 (S.C.) the facts in these cases as averred by the petitioners and not traversed by the <ORG> are different. The petitioners are said to have adopted merely a process by which different shape is given to the scrap which they have purchased by heating and beating them to shape. It is said that they do not melt the iron scrap to make it into a different form, but merely heat the scrap and beat them to required sizes and shapes. The question is whether this process can be said to be a manufacturing process. We are of the view that on the facts of these cases as averred by the petitioners the process adopted will come under the principle of the decision of <ORG> in <CITATION>  17 S.T.C. 313 (S.C.) and not within the principle of the decision in <CITATION>  20 S.T.C. 430 (S.C.) However, we are not resting our decision solely on the fact that the process adopted by the petitioners is not a manufacturing process. Even assuming that the process adopted is a manufacturing process and the product sold by the petitioner is a manufactured product, we are of the view that even in their manufactured state the goods did not cease to be "iron and steel" as defined in entry (iv) in Section 14 of the Central Act. A reading of the said entry as a whole shows that the statute wanted to treat all forms of iron and steel either as raw material or as a finished product from the rolling mill as "iron and steel" and the product as emerging from the various stages of manufacture cannot be treated different from "iron and steel".

22. The learned Government Pleader places strong reliance on the case reported in <CITATION>  12 S.T.C. 590 and the decision of <ORG> in <CITATION>  20 S.T.C. 430 (S.C.) and contends that the rolled iron and steel Articles are commercially different and that the <ORG> is entitled to bring them to tax notwithstanding the fact that the scrap out of which they have been made had been taxed already. In effect the <ORG> contends that it is entitled to treat each of the commodities mentioned in the various sub-items in entry (iv) separately for the purpose of levying single point tax. As we had already noted, the decision in <CITATION>  12 S.T.C. 590 and <CITATION>  20 S.T.C. 430 (S.G.) were concerned with the validity of the purchase tax levied on the iron and steel scraps purchased for the purpose of rolling them into bars, plates and sheets and the question was whether they had been purchased for the purpose of manufacture for attracting the levy of purchase tax. In those cases the question of liability to sales tax on the sales of the manufactured product did not come up for consideration. In our view the principle of the decision in <CITATION>  17 S.T.C. 313(S.C) has to apply as, in our opinion, even after manufacture the rolled iron and steel rounds, plates etc., continue to be "iron and steel" as defined in the said entry (iv). The learned Government Pleader faintly contended that in the manufactured state the goods sought to be taxed in the petitioners' hands have ceased to be "iron and steel" as coming under entry (iv). But when pointed out that if such were the contention the manufactured goods have to be taxed at the multi-point, he had to give up that contention, for the <ORG> is contemplating to levy only single point tax on the first sale of the manufactured product even now and they did not treat the manufactured product as subject to multi-point tax. Even though after manufacture the goods are commercially different as has been held by <ORG> in <CITATION>  20 S.T.C. 430 (S.C.) still the goods, in our view, did not cease to be "iron and steel" and tax has to be levied only at a single point in the series of sales from the stage of raw material till it is sold in the same form as it had been produced by the rolling mills, that is, till the manufactured Articles had been converted into any other form of fabricated material. The learned Assistant Government Pleader also referred to the decision of <ORG> in Commissioner of Sales Tax v. <NAME> and Sons  21 S.T.C. 17 (S.C.). There the word "manufacture" has been held to have various shades of meaning and in the context of sales tax legislation, if the goods to which some labour is applied remain essentially the same commercial Article, it cannot be said that the final product is the result of manufacture. This decision, in our view, supports the view we have expressed above that notwithstanding some work and labour are applied, the iron and steel scrap remained essentially the same and that it had not ceased to be iron and steel.

23. The learned Government Pleader also referred to the decision in <CITATION>  23 S.T.C. 288 particularly the dissenting view of <NAME>, J., that "the real test applicable to such cases is the test of possibility of substitution of the one for the other so far as consumers are concerned and if there is no such possibility, it would be a new commodity and would no longer be a form of the original Article and that corrugated iron sheet is not a form of iron or steel but is an Article of iron or steel and is a distinct commodity covered by entry 80 of Schedule B to the Bombay Sales Tax Act, 1953." But it is found that the majority view was that corrugated iron sheets were merely iron in another shape and form, that it cannot be regarded as an Article or product manufactured or fabricated out of iron, that merely because iron is given the shape of sheet and is subject to corrugation for the purpose of giving it rigidity and increased stiffness so as to make it acceptable to a particular class of persons who might want to use it in the form of iron sheet for roofing and walling, it does not cease to be iron; and it merely assumes another form, namely, that of a wrinkled sheet, but it still continues to retain the essential character of iron. The majority was of the view that the sale of corrugated iron sheets was covered by entry 15 of Schedule B of the Bombay Sales Tax Act prior to its amendment in 1957 and not by the residuary entry 80 of that Schedule. On a consideration of the entire matter with reference to the decided cases on the point, we are of the view that the goods sold by the petitioners in these cases are "iron and steel" as defined in entry (iv) of Section 14 of the Central Act and that they cannot be taxed once over, if they had suffered tax in their raw or unmanufactured stage, that is, as iron and steel scrap. The petitioners have alleged that the iron and steel scrap, which they have used for manufacturing iron and steel sheets, bars, plates etc., had been subjected to tax, but this has to be established before the concerned authorities. In view of the fact that the factual question whether the iron and steel scrap had suffered tax at the purchase stage has to be investigated, we have to dismiss the writ petitions after expressing our view on the legal question, giving liberty to the assessing authority to ascertain the actual factual position and to proceed with the assessment, if any, in accordance with law. The above writ petitions are therefore dismissed.