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Chrestien Mica Industries Ltd. v. State Of Bihar And Another
Factual and Procedural Background
The appellant, an incorporated company operating at Domchanch in the Hazaribagh District of Bihar, was assessed to sales tax for the four quarters of Assessment Year 1948-49 under Section 13(4) of the Bihar Sales Tax Act, 1947 (as amended by Bihar Act 6 of 1949). The Sales Tax Officer levied tax on the company’s sales of mica on the ground that the goods were “produced or manufactured in Bihar.”
The appellant’s initial contention—that the 1949 Amendment, effective from 1 October 1948, could not govern sales made before that date—was rejected by the Sales Tax Officer and, on appeal, by the Commissioner of Sales Tax. In revision, however, the Board of Revenue accepted the company’s position, holding that mining and splitting mica did not amount to “production” or “manufacture” under Section 2(g) of the amended Act.
At the request of the Commissioner of Sales Tax, the Board stated a case to the Patna High Court, which framed the following question: “Whether the assessee has been rightly taxed under the newly added proviso to Section 2(g) of the Bihar Sales Tax Act for the two quarters from 1 October 1948 to 31 March 1949.” The High Court decided against the appellant on two grounds: (1) the reference was proper, and (2) the sales concerned goods manufactured in Bihar. The present appeal challenges that judgment.
Legal Issues Presented
- Whether, for Assessment Year 1948-49 (post-1 October 1948), the appellant’s transactions constituted a “sale” of goods “produced or manufactured in Bihar” within the meaning of Section 2(g) of the amended Bihar Sales Tax Act.
- Whether the reference made to the Patna High Court by the Board of Revenue was competent (an issue decided by the High Court but not pressed independently in the Supreme Court).
Arguments of the Parties
Appellant's Arguments
- The 1949 Amendment, which came into force on 1 October 1948, could not retrospectively affect sales of mica made before that date.
- The processes of mining, splitting, and sizing mica did not amount to “production” or “manufacture”; therefore, the statutory deeming provision in Section 2(g) did not apply.
Respondent's Arguments
The opinion does not elaborate the respondent’s arguments.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court focused on whether the appellant’s activities brought the goods under the category “produced or manufactured in Bihar” in Section 2(g). Neither “production” nor “manufacture” is defined in the Act, so the Court referred to the ordinary dictionary meaning of “production,” noting it encompasses “that which is produced; a product of human activity or effort.”
The Court reviewed the detailed description in the 1944-45 Mica Enquiry Committee Report, which outlines the extraction of crude mica (“books of mica”), rifting into slabs, sickle-dressing, grading, sorting, and finally obtaining block mica, chillas, and waste. These steps, in the Court’s view, clearly constituted “production” because they transformed raw material into a commercial commodity with enhanced market value.
Finding it “obvious” that the activities met the dictionary definition of “production,” the Court held it unnecessary to decide whether they also amounted to “manufacture.” Once characterised as goods “produced in Bihar,” the statutory proviso deemed the sales to have occurred within Bihar for tax purposes. Accordingly, the question referred had to be answered in the affirmative, validating the tax assessment.
Holding and Implications
Appeal Dismissed with Costs.
The High Court’s decision stands, and the appellant remains liable for sales tax on its mica transactions for the relevant quarters. The ruling confirms that mining and subsequent processing of mica into commercially saleable forms constitute “production” under Section 2(g) of the Bihar Sales Tax Act. No broader precedent beyond this statutory interpretation was articulated.
Kapur, J.— This is an appeal against the judgment and order of the High Court of Patna in a sales tax reference made under Section 25(1) of the Bihar Sales Tax Act of 1947 as amended by Bihar Act 6 of 1949.
2. The appellant is an incorporated company carrying on its business at Domchanch in the Hazaribagh District in the State of Bihar. It was assessed to sales tax in regard to the four quarters of Assessment Year 1948-49 under Section 13(4) of the Bihar Sales Tax Act. According to the Sales Tax Officer the tax was leviable on its sales of mica which was produced or manufactured in Bihar. Before the Sales Tax Officer it was unsuccessfully contended on behalf of the appellant that Amendment Act having come into force on October 1, 1948, it could not affect the sales of mica before that date, but this plea was not accepted by that Officer and the tax was levied for all the quarters. The appellant appealed to the Commissioner of Sales Tax, but the appeal was dismissed. The matter was then taken in revision to the Board of Revenue and was allowed on the ground that the process of mining mica which was the commodity sold by the appellant Company could not be said to be a process of production or manufacture within the meaning of Section 2(g) of the amended Act. The Board held that splitting up of mica did not constitute a process of manufacture because the constitution of the mica remained just the same, the only difference being that there was change in its dimensions. Against that order at the instance of the Commissioner of Sales Tax a case was stated to the High Court and the following question was referred:
“Whether the assessee has been rightly taxed under the newly added proviso to Section 2(g) of the Bihar Sales Tax Act for the two quarters from the 1st of October, 1948 to the 31st of March, 1949.”
3. Two points were decided by the High Court (1) as to whether there was a proper reference, and (2) whether it could be said that the sale was of goods which had been manufactured in the State of Bihar. On both these points the decision was against the appellant and this appeal is directed against that judgment and order.
4. The only question which has been raised in this Court is whether the transactions of the appellant Company fall within the definition of the word “sale” under Section 2(g) of the amended Bihar Sales Tax Act. That section provides:
“‘Sale' means, with all its grammatical variations and cognate expressions, any transfer of property in goods for cash or deferred payment or other valuable consideration, including a transfer of property in goods involved in the execution of contract but does not include a mortgage, hypothecation, charge or pledge:
* * *
Provided further that notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930 (3 of 1930), the sale of any goods—
(i) * * *
(ii) which are produced or manufactured in Bihar by the producer or manufacturer thereof, shall, wherever the delivery or contract of sale is made, be deemed for the purposes of this Act to have taken place in Bihar:
(iii) * * *
5. The decision of the question raised depends upon whether the process which is used by the appellant would fall within the meaning of the words ‘produced or manufactured in Bihar'. The appellant Company is carrying on mica mining operations by which crude mica is taken out of the mine and processed into split mica which is a commercial commodity. What happens is that there is winning of crude mica from the earth which is split into thinner plates and cut into commercial sizes. The process has been set out in the Mica Enquiry Committee Report of 1944-45 at p. 6 as follows:
“Mica is found imbedded in the pegmatite vein in the form of what are known as ‘books of mica'. These are crystals of mica and comprise the mineral in its crude form. They may vary in size from a few cubic inches to big blocks, measuring two to three hundred square inches in the place of the laminations and one foot or more across it. For preliminary treatment, the books are rifted into slabs, varying from eight to thirty mils in thickness, and the worst flaws are then cut away. This work is usually done with sickles and the mica at this stage is described as sickle-dressed block, or, more shortly, as S.D.B of recent years, small dealers and some of the bigger producers are using knives for the initial cutting before passing the slabs to the sickle-dressing department; it is claimed that this involves less waste. After sickle-dressing the mica goes to the grading department, where the mica is graded according to size. Finally the mica passes to the sorting department, which is the most important stage. The principal qualities upon which sorting depends are clearness, hardness, flatness, colour and the size and number of ‘air' inclusions and ‘vegetable' and mineral stains. The different degrees of these qualities are not capable of exact measurement, and it takes years of experience to make a good sorter. Besides possessing the capacity to classify mica, the sorter must be an expert with the knife, and be well acquainted with the value of different qualities of mica. A block of mica consists of a large number of adhering films. It may be that the defects which affect the quality of the block are confined to one or two of these films. A skilful sorter by removing a film from the surface, or by splitting a thick block into two thinner blocks and removing a defective film between them, may raise the quality of the resultant blocks and make a big increase in the selling value of the mica. On the other hand, a mistake in judgment on his part will affect the weight, and therefore the value, of the mica which can be sold as block.
After sorting stage the mica is in three forms, block mica, chillas and waste. Block mica is the dressed graded and qualified product, varying in thickness from eight to thirty mils. The superior qualities of the block mica and the bigger sizes of the inferior qualities are largely exported as such. The chillas are thin sheets of mica, less than eight mils thick, removed in the course of processing and qualifying mica. With the block, which is not exported as such, they undergo further processing into splittings, wrappers, condenser films, condenser plates, washers and discs.”
6. Neither of the words “production” or “manufacture” is defined in the Bihar Sales Tax Act but according to the Oxford English Dictionary “production” means amongst other things that which is produced; a thing that results from any action, process or effort, a product; a product of human activity or effort.
7. It is obvious that what is described in the report above quoted would fall within the dictionary meaning of the word “production”. It is unnecessary to decide what the word “manufacture” means. As what was sold was mica produced in Bihar by the appellant, the answer of the question would be in the affirmative and therefore in favour of the State.
8. The appeal therefore fails and is dismissed with costs.
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