judgement:
Civil Appeals Nos.
374 375 & 457 462 of 1976.
(From the Judgment and order dated 12 3 76 of the Guja rat High Court in S.C.A. Nos.
1784/73 and 650/74, 1125, 1118, 1123, 1124, 1835, 1836/74 respectively.) A.K. Sen, S.J. Sorabjee, M.V. Chinubhai and B.R. Agarwa la, for the appellants in CAs 374 375/76.
S.J. Sorabjee, Mrs. Chinubhai, S.H. Sanjanwala, P. H. Parekh and Miss Manju Jetley, for the appellants in CAs 457 462/76.
J.M. Thakere, Adv.
General, J. P. Nanavati and M.N. Shroff, for respondent No. 1 in all the appeals.
The Judgment of the Court was delivered by BEG, J.
The eight Civil Appeals before us by certifi cates of fitness of the cases for appeals to this Court raise common questions involving the interpretation of Articles 31A and 3lB of the Constitution of Indian relation to the Gujarat Agricultural Land Ceiling Act XXVII of 1961 (herein after referred to as 'the Act ').
The preamble of the Act says that it was enacted because: "xxx it is expedient in the public interest to make a uniform provision for the whole of the State of Gujarat in respect of restrictions upon holding agricultural land in excess of certain limits and it is also expedient for so securing the 105 distribution of agricultural land as best to sub serve the common good to provide for the acquisi tion of surplus agricultural land for the allotment thereof to persons who are in need of lands for agriculture (including cooperative farming socie ties, landless persons, agricultural labourers and small holders) or for the allotment of such surplus agricultural lands the integrity of which is main tained in compact blocks to a department of Govern ment or to cooperative farming societies or corpo rations owned or controlled by the State, for ensuring the full and efficient use thereof and to provide for other consequential and incidental matters hereinafter appearing?" The part of section 6 of the Act with which we are especially concerned provides: "6(1) Notwithstanding anything contained in any law for the time being in force or in any agreement, usage or decree or order of a Court, with effect from the appointed day, no person shall, subject to the provisions of sub sections (2), (3), (3A) and (3B) be entitled to hold, wheth er as owner or tenant or partly as owner and partly as tenant land in excess of the ceiling area.
(2) Where an individual, who holds land, is a member of a family, not being a joint family which consists of the individual and his spouse (or more than one spouse) and their minor sons and minor unmarried daughters, irrespective of whether the family also includes any major son, and land is also separately held by such individual 's spouse or minor children, then the land held by the individu al and the said members of the individual 's family, excluding major sons, if any shall be grouped together for the purposes of this Act and the provisions of this Act shall apply to the total land so grouped together as if such land had been held by one person.
(3) xxx xxx xxx (3A) xxx xxx xxx (3B) Where a family or a joint family con sist of more than five members comprising a person and other members belonging to all or any of the following categories, namely : (i) Minor son, (ii) widow of a pre deceased son, (iii) minor son or unmarried daughter of a pre deceased son, where his or her mother is dead, Such family shall be entitled to hold land in excess of the ceiling area to the extent of one fifth of the ceiling area for each member in excess of five, so however that the total holding of the family does not exceed twice the ceiling area; and, 9 1003 SCI 176 106 in such a case, in relation to the holding of such family, such area shall be deemed to be the ceiling area: Provided that if any land is held separately also by any member of such family, the land so held separately by such member shall be grouped together with the land to such family for the purpose of determining the total holding of such family: Provided further that where.
in consequence of any member of such family holding any land in any other part of India outside the State, the ceiling area in relation to the family is reduced as pro vided in sub section (3A), the one fifth of the ceiling area as aforesaid shall be calculated with reference to the ceiling area as would have been applicable had no such land been held by such member in any other part of India.
(3C) Where a family or a joint family irre spective of the number of members includes a major son, then each major son shall be deemed to be a separate person for the purposes of sub section ( 1 ) ".
In accordance with the provisions of Sections 4 and 5 of the Act, classes of land, nature of irrigation facilities provided there, and the ceiling area for each particular class of land in each locality were specified in Schedule I.
This is found classified in nine local areas.
The range of ceiling limit varies from 10 acres to 54 acres, according to the irrigation facilities and quality of land, the ceiling for less productive and less advantageously situated land being higher.
The question which has been raised before us is whether, apart from variations in the ceiling area imposed by stat ute, there can be a depriviation of rights of individuals holding property separately, in exercise of their separate individual rights, by grouping them as members of one family so as to compel them to take only one unit of land ' in such a way that their total holding does not exceed the ceiling limit which is the same for both individuals as well as families as defined by the Act with some allowances for large families.
This raises a further question: What is the unit for which this ceiling is prescribed? It is evident that Section 6 conceives of each "person" holding land as a single unit whose holding must not exceed the ceiling limit.
Section 2, sub section
(21) says: " 'person ' includes a joint family;".
Thus, the term "person" is not, strictly speaking, defined in the Act.
Section 2, sub section
(21) only clarifies that the term "person" will "include" a joint family also.
It certainly does not exclude an indi vidual from being a person in the eyes of law.
This has been done apparently to make it clear that, in addition to individuals, as natural persons, families, as conceived of by other provisions, can also be and are per sons.
This elucidation of the term "person" is in keeping with Section 3 (42) of the , which lays down: " 'person ' shall include any company or association or body of individuals, whether incor porated or not".
107 We have referred to the Central 10 of 1897 and not to the State , which also contains a similar clarification, because Article 367 of our Constitu tion provides that the definitions contained in the Central Act "apply for the interpretation of the Constitution".
The argument which has been ad vanced before us is that the concept of the term "person", having been fixed by the Central , this concept and no other must be used for interpreting the second proviso to Article 31A of the Constitution which lays down: "Provided further that where any law makes any provision for the acquisition by the State of any estate and where any land comprised therein is held by a person under his personal cultivation, it shall not be lawful for the State to acquire any portion of such land as is within the ceiling limit applicable to him under any law for the time being in force or any building or structure standing thereon or appurtenant thereto, unless the law relating to the acquisition of such land, building or structure, provides for payment of compensation at a rate which shall not be less than the market value thereof".
As no argument based on Articles 14 and 19 is open to the appellant, the Act under consideration having been included in the 9th Schedule to the Constitution, the ground now taken is that Section 6, subsection (2) of the Act, set out above, contains a colourable device for getting round the limitations on legislative power imposed by the second proviso to Article 31A(1) of the Constitution.
It is urged that this is done by adopting an unnatural and legally untenable concept of a "person" which transpires from an analysis of Section 6 of the Act.
It is true that, but for the provisions of Section 6, sub.s.(2) of the Act, the term "person", which includes individuals, as natural persons, as well as groups or bodies of individuals, as artificial persons, such as a family is, the entitlement to the ceiling area would be possessed by every person, whether artificial or natural.
In other words, if Section 6(2) of the Act was not there, each indi vidual member of a family would have been entitled to hold land upto the ceiling limit if it was his or her legally separate property.
This follows from the obivous meaning of the term "person" as well as the inclusive definitions given both in the Act under consideration and in the .
Spouses and minor children, as natural persons, have not been debarred from holding their separate rights to land by the provisions of the Act.
It is not the object of the Act to do that.
The object of the Act, as set out above, is two fold: firstly, to limit the ceiling area of each holder; and, secondly, to acquire what falls beyond the ceiling limit so that the State may distribute it to more needy persons.
It is not disputed that compensation is provided for acquisition of what exceeds the ceiling area in every case.
As was held by this Court in H.H. Kesavananda Bharati Sripadagalavaru vs State of Kerala,(1) the amount of compen sation fixed can not be questioned.
Therefore, no [1973] Supp.
S.C.R. 1. 108 provision of the Act could be or is challenged on the ground that the required compensation is not prescribed for an acquisition under it as required by Article 31(2) of the ' Constitution or is inadequate.
Article 3lB of the Constitu tion seems to us to provide a complete answer to any attack directed against the provisions of an Act based upon an alleged violation of any of the rights conferred by the provisions of Part III of the Constitution.
It reads: "3lB.
Without prejudice to the generality of the provisions contained in Article 31B, none of the Acts and Regulations specified in the Ninth Schedule nor any of the provisions thereof shall be deemed to be void, or ever to have become void, on the ground that such Act, Regulation or provision is inconsistent with, or takes away or abridges any of the rights conferred by, and provisions of this part, and notwithstanding any judgment, decree or order of any court or tribunal to the contrary, each of the said Acts and Regulation 's shall, subject to the power of any competent Legislature to repeal 'Or amend ' it, continue in Force".
Learned Counsel for the petitioners concede that, in view of the decision of this Court in H.H. Kesavananda.
Bharti 's case (supra) and other cases referred to there, it is not possible to assail the provisions.
of Section 6 of the Act on the ground that they take away or abridge any right.
conferred by Part III of the Constitution on individuals, But, what they urge is that the second proviso to Article 31A(1)does not confer any right upon any person but only imposes, a limit upon the Legislative compe tence to that the inclusion of the Act in the 9th Schedule will not validate a provision which a legislature was not competent it all to enact.
Such a provision, it was submit ted, will not be protected by Article 3lB of the Constitu tion.
The contention is that Article 3lB does not protect a provision from invalidity on the ground of legislative incompetence of the legislature enacting it.
We do not think that the ease before us raises any question of legislative competence of the nature which could arise if a State Legislature had tried to trespass upon the exclusive domain of Union Legislation.
What has been urged is simply that the second proviso to Article 31 (1) disables the State Legislature from acquiring any land below the ceiling limit without providing for compensation for such acquisition at the full market value.
The proviso certainly protects, and, indeed, confers certain rights upon individuals to an amount of compensation.
That is its direct effect.
The argument on behalf of the appellant, as we under stand it is that, although, an alteration of the ceiling limit for each "person" directly by prescribing its stauto ry limit is permissible, yet, if it is not done directly by changing the ceiling limit for each person but by introduc ing a concept of "person", contrary to the concept in the provisions of the second proviso to Article 31 A( 1 ), it becomes a prohibited colourable device for getting round the second proviso to Article 31A(1).
It is urged that the effect of the amended Section 6 of the 109 Act is to change the ceiling limit for some persons only by altering the legal and constitutional concept of a person.
We do not find any fixed concept of "person" anywhere.
No .doubt the concept is wide so that it could be contended that it should not be narrowed down or confined, But does Section 6 (2) do that? Section 6 (2) does not either disable a husband or wife from owning or holding their separate properties separately.
It does not merge or de stroy their separate legal personailties.
It requires their separate holdings to be grouped together as though they were held by one person only for the purpose of determining the ceiling limit for each member of a family.
It may indirect ly have the effect of disabling a member 'of a family from holding land upto the prescribed ceiling limit for a person holding as an individual.
In other words, the result is that such a member of a family will have to be content with a holding less than that of an unmarried individual.
It has the effect of making it clear that what have to be grouped together are the separate properties of individuals belong ing to families other than what are "joint families", in law.
It takes in and applies to members of families other than undivided Hindu families.
It means that married per sons and their minor children will have to be viewed as though they hold one lot together even though they retain their separate legal personalities and remain competent owners of their separate holdings.
It does not affect either their legal status or competence.
It does reduce their individual holdings.
But, we do not find any prohibi tion enacted by the second proviso to Article 31A(1) against different ceiling limits prescribed for various individuals or classes of individuals differently situated.
Nor does the second proviso to Article 31A(1) prescribe any particular or direct more of imposing different ceilings on individu als differently circumstanced.
A glance at the provisions of Section 20 of the Act shows that separate rights to properties grouped together for purposes of computation only do not vanish.
On the other hand, each holder of such separate rights above the ceiling ,limit is permitted to select the property he or she wishes to continue to hold in such a way "that the lands selected for such continuance shall be in the same propor tion in which lands held by each spouse before furnishing the relevant statement were under sub section (1) of Section 10.
The reduction in their holdings would, therefore, be proportionate to the areas of lands held separately but ' brought together only for the purposes of determining the: ceiling limit for the family.
The whole object of the proc ess prescribed seems to be that families, as contemplated by the Act, should be units for merely determination of ceil ings for each member of a family.
Appellants relied on Kunjukutty Sahib etc.
vs State of Kerala & Anr.(1) where it was held by this Court (at p. 314): "It was not disputed that the ceiling limit fixed by the amended Act was within the competence of the legislature to fix; nor was it contended that the ceiling fixed by the original unamended Act by itself debarred the legislature from further (1) [1973] 1 S.C.R.326 @ 341. 110 reducing the ceiling limit so fixed.
Prior to the amendment undoubtedly no land within the personal cultivation of the holder under the unamended Act within the ceiling limit fixed thereby could be acquired without payment of compensation according to the market value, but once ceiling limit was changed by the amended Act the second Proviso to article 31A (1) must be held to refer only to the new ceiling limit fixed by the amended Act.
The ceiling limit originally fixed ceased to exist for future the moment it was replaced by the amended Act.
The prohibition contained in the second proviso oper ates only within the ceiling limit fixed under the existing law, at the given time.
It is true that the new ceiling limit was fixed contemporaneously with the acquisition of the land in excess of that ceiling limit.
But it was not contended that a law so fixing the ceiling limit and acquiring the land in excess would offend any provision of the Consti tution".
Pritam Singh vs State of Punjab & Ors.(1) was also cited on behalf of the appellants.
Here the contention, amongst others, was repelled that, by adding land transferred to certain relations to that held by a person under his person al cultivation, for the purpose of determining his ceiling area and the surplus left, under the provisions of the Pepsu Tenancy and Agricultural Lands Act, 1955, as amended by a subsequent Act, rights guaranteed by the second proviso to Article 31A(1) were contravened.
This case certainly does not lay down that the ceiling limit applicable to each individual must be uniform or that it must be contained in a single statutory provision directly dealing with ceiling limits.
It follows that the ceiling limit may vary from individual to individual.
These varying limits may result from the combined effect of several provisions.
The pre scription of different ceiling limits for different individ uals, differently circumstanced, could be enacted directly by a single provision dealing with individual celling lim its, or, alternatively, it could be the consequence of several provisions dealing with differing sets of circum stances.
No law known to us has ever laid down that the intention of the law makers on a particular subject must necessarily transpire from a single statutory provision or statutory provisions dealing directly with a particular aspect.
To read any such limit into the 2nd proviso to Article 31A(1) of the Constitution would be to accept a novel restriction on legislative competence.
We have no doubt that no such restriction could be found in the 2nd proviso to Article 31 A ( 1 ) of the Constitution.
It was urged that Article 31A(1) and 3lB of the Consti tution operate in different fields of legislation.
Whereas Article 3 IA( 1 ) cures certain possible invalidities in ordinary legislation, arising from its.
inconsistencies with Articles 14 or 19 or 31 of the Constitution, Article 3lB cures a wider range of infirmities arising from conflict with any of the provisions of Part III of the Constitution and necessitates a constitutional amendment so as to protect an impugned legislation by its inclusion in the 9th Schedule to the Constitution.
Legislation protected (1) [1967] 2 S.C.R.p.
111 by Article 31A of the Constitution would fall under appro priate legislative entries in the 7th Schedule.
But, to secure the protection of Article 3lB of the Constitution, resort to the provisions of Article 368 of the Constitution is imperative.
These differences do not mean that legisla tion falling under any part of Article 31A(1) of the Consti tution, including the provisos, cannot receive also the protection contemplated by Article 3lB of the Constitution.
There is nothing in our Constitution to bar any statute from receiving a dual protection, so to speak, of both Article 31A(1) and 3lB of the Constitution if the conditions of each are satisfied.
It is clear to us that the proviso to Article 31A(1) of the Constitution confers certain rights upon individuals and protects them from constitutionally illegal invasion.
We are, therefore, unable to accept the argument advanced on behalf of the appellants that the "protective umbrella" of Article 3lB does not shield the impugned provisions ,against an attack based upon the limits imposed by the second provi so to Article 31A(1) on legislative power.
The argument overlooks certain obvious answers: firstly, that limits on legislative powers, imposed by Part III of the Constitution, do have the direct result of protecting individual rights; and, secondly, that no part of the second proviso to Article 31 (1) of the Constitution was, as already pointed out above, infringed by the impugned provisions; and, thirdly, even if one were to assume, for the sake of argument, that rights conferred on individuals 'by the 2nd proviso to Article 31 (1), were infringed in any way, pro.
visions of Article 3lB of the Constitution are enough to repel an attack based upon such an alleged infringement.
Both Arti cle 31A(1) and 3lB are intended to operate as protections against consequences of what could otherwise be breaches of the Constitution.
Consequently, we have to and do dismiss these appeals.
But, in the circumstances of the case, the parties will bear their own costs.
P.H.P. Appeals dis missed.

summary/full:
The appellants challenged the constitutional validity of the Gujarat Agricultural Land Ceiling Act 1961 by filing writ petitions in the High Court of Gujarat.
The Preamble of the Act state that the Act was enacted for Securing the distribution of agricultural land as best to sub serve the common good.
Section 6(1) of the Act provides that no person shall hold either as owner or tenant land in excess of the ceiling area.
Section 6(2) provides that where an individu al who holds land as a member of a family, not being a joint family, then the spouse.
and the children excluding major sons shall be grouped together for the purposes of the Act and the provisions of the Act shall apply to the total land so grouped together as if such land had been held by one person.
The ceiling area is fixed depending on the classes of land, nature of irrigation facilities and productivity.
The said statute has been put in the 9th Schedule by the Parliament.
The Gujarat High Court dismissed the writ petitions filed by the appellants but granted certificate of fitness under article 133(1) of the Constitution to the appel lant.
The appellants contended that (1).Second proviso to article 31A of the Constitution provides that where any law makes provision for the acquisition by the State of any estate which is held by a person under his personal cultivation, it shall not be lawful for the State to.
acquire any portion of such land as is within the ceiling limit applicable to him under any law for the time being in force unless the law provides for payment of compensation at a rate which is not less than the market value.
Apart from variations in the ceiling area imposed by a statute, there cannot be a depri vation of rights of individuals holding property separately in exercise of their separate individual rights by grouping them as members of one family.
(2) The concept 017 "person" adopted by the statute is unnatural and legally untenable.
The concept of the term 'person ' having been fixed by the Central General Clause Act, this concept and no other must be used for interpreting second proviso to article 31A of the Constitution.
(3) The second proviso to article 31A(1) does not confer any right upon any person but only imposes a limit upon legislative competence so that the inclusion of the Act in the ' 9th Schedule will not validate a provision which the Legislature was ' not competent at all to enact.
HELD: The term 'person ' is not defined in the.
Section 2(21 ) merely states that person includes a joint family Under s 3(42) of the , a person is defined as.
including any company or association or body of individuals whether incorporated or not.
In the absence of section 6(2) each individual member of a family would have been entitled to hold land upto the ceiling limit if it was his or her legally separate property.
The Act does not debar spouses and minor children from holding their sepa rate.
rights to land.
There is no fixed concept of 'person ' any where.
Section 6(2) does not either disable a husband or a wife from holding their separate properties separately.
It does not merge or destroy their separate legal personali ties.
It 104 merely requires their separate holdings to be grouped to gether as through they were held by one person only for the purpose of determining the ceiling limit Each, holder of such separate rights above the ceiling limit is permitted to select the property he or she wishes to continue to hold in such a way that the lands selected for such continuance shall be in the same proportion in which lands were held by each spouse.
The reduction in their holding will, there fore, be proportionate to the areas ' of lands held separate ly.
But, they are grouped together only for the purpose of determining the ceiling limit for the fan, and, as a result of a specific provision to that effect.
It is not denied by the appellants that the ceiling limit could have been low ered by the statute.
Article 31A does not prohibit the legislature from fixing ceiling limits for various individu als or the classes of individuals differently situated, nor does the second proviso to article 31A(1) prescribe any partic ular or direct mode of imposing different ceilings for individuals differently circumstanced.
[106 G H, 109 A E] Pritam Singh vs State of Punjab & Ors. ; distinguished.
(2) Article 3lB provides a complete answer to any attack directed against the provisions of the Act based upon viola tion of any of the rights conferred by the provisions of Part III of ' the Constitution.
To read any limit into the second proviso to article 31A(1) that there can be only single ceiling limit for all persons would be to accept a novel restriction on legislative competence.
There is nothing in the Constitution to bar any statute from receiving a dual protection.
In the.
present case, the statute in question is fully protected by article 3lB.
Since the second proviso to Article 31A confers certain rights up.on individuals, the protective umbrella of article 3lB shields the impugned provi sion against any attack based upon the alleged violation of such rights as well.
[110 G H, 111 A C] (3) There is no question of legislative competence.
in the present case.
The proviso protects and confers certain rights upon individuals to an amount of compensation.
That is the direct effect.
[111 B C]


judgement:
Appeal No. 138 of 1972.
(From the Judgment and Order dated 20.3.1971 of the Madhya Pradesh High Court in Misc.
Petition No. 313/70).
I. N. Shroff, for the appellants.
S.V. Gupte, J. D. Jain, Miss Kanwaljit Miglani and Balram Sahgal for the respondent.
The Judgment of the Court was delivered by KHANNA, J.
Whether sales tax is payable by a photographer under the Madhya Pradesh General Sales Tax Act (Act 2 of 1959) when the 436 photographer takes photographs or does other photographic work and thereafter supplies the photographic prints to his client or customer is the question which arises for determi nation in this appeal on certificate against the judgment of Madhya Pradesh High Court reported in 28 STC 1.
The High Court answered the question in the negative in favour of the assessee respondent.
The respondent is the proprietor of Kame Photo Studio.
He has apart from his main shop two branches.
He carries on business, inter alia, of buying and selling photographic goods.
After buying photographic goods he either sells them to his customers or uses them in three ways (1) in taking photographs and supplying prints thereof, (2) in making enlargements for the clients who bring their own negatives, and (3) in preparing positive prints of the same size from the negatives brought by the clients.
For doing these various types of works the assessee respondent charges consolidated amount depending upon the work involved and the size and number of prints demanded by the client.
The sales tax authorities assessed the respondent for different periods from April 1, 1964 to March 31, 1969 to sales tax on his turnover on best judgment basis as he had not kept full and complete accounts.
It may be convenient to refer to the figures of assessment for one of the years.
For the year 1964 65 the total turnover of the respondent was taken to be Rs. 41,500.
Out of this amount a deduction of Rs. 6,500 was allowed as relatable to developing and enlargement which was considered to be not chargeable to tax.
The balance of Rs. 35,000 was divided into two parts Rs. 12,000 being treated as relatable to sale of materials as such and the rest Rs. 23,000 being taken to be the re ceipts on account of the supply of photo prints to those who got themselves photographed at the studios.
The respondent filed writ petition to challenge the levy of sales tax on the last item, namely, the item for the supply of photo prints.
The contention of the respondent was that in taking a photograph, preparing its negative and thereafter the final positive print for supplying the same to the client, the respondent undertakes a contract of work and labour and does not enter into a sale transaction.
It was also stated on behalf of the respondent that the prepared positive print was not a marketable commodity and he could not sell the photograph of one person to any other person except with the former 's consent.
As against that, the case of the appellants was that the respondent was carrying on a commercial activity in the nature of trade and business and the finished photographs supplied by him to his customer was a commodity and the supply of same attracted the levy of sales tax.
The High Court, on consideration of the matter, came to the conclusion that the respondent only undertook the contract of work and labour and did not enter into a sale transaction.
The respondent as such was held not liable to pay sales tax in respect of the item to which the writ petition related.
The High Court while accepting the writ petition also observed as under: "We may lastly make it clear that in this case we are not called upon to go into the question whether the material used 437 in preparing the photograph is sold and taxa ble.
The petitioner has alleged in the petition that he was paid full tax on the value of such material and the respondents have neither denied the fact nor have claimed tax on such material.
We, therefore, express no opinion on that question and need not consider either Masanda 's case (1957) 8 STC 370, where the only question referred to this Court was whether such material alone could be taxed, or the observations of the Bombay High Court in Camera House Case (1970)25 STC 354, about severability of the contract into one spearately for service and supply of material.
" In appeal before us Mr. Shroff has assailed the judgment of the High Court.
As against that,.
Mr. Gupte on behalf of the respondent has canvassed for the correctness of the view taken by the High Court.
The question as to whether a contract is a contract of work and labour or a contract for sale is not one free from difficulty.
The reason for that is that in border line cases the distinction between the two types of contract is very fine.
This is particularly so when the contract is a composite one involving both a contract of work and labour and a contract of sale.
Nevertheless, the distinction between the two rests on a clear principle.
A contract of sale is one whose main object is the transfer of property in, and the delivery of the possession of, a chattel as a chattel to the buyer.
Where the principal object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one of work and labour.
The test is whether or not the work and labour bestowed end in anything that can properly become the sub ject of sale; neither the ownership of materials, nor the value of the skill and labour as compared with the value of the materials, is conclusive, although such matters may be taken into consideration in determining, in the circum stances of a particular case, whether the contract is in substance one for work and labour or one for the sale of a chattel (see The State of Himachal Pradesh & Ors.
vs Associ ated Hotels of India(1).
The respondent company in that case carried on business as hoteliers.
As a part of its business as hoteliers, the company received guests in its several hotels to whom, besides furnishing lodging, it also served several other amenities, such as public and private rooms, bath with hot and cold running water, linen, meals during stated hours.
The bill tendered to the guests was all inclusive one, namely, a fixed amount for the stay in the hotel for each day and did not contain different items in respect of each of the amenities.
The question which arose for determination was whether the company was liable to pay sales tax under the Punjab General Sales Tax Act, 1948 in respect of meals served in the hotel to the ,guests coming there for stay It was held by the Constitution Bench of this Court that the transaction was essentially one and indivisible, namely, one of receiving a customer in the hotel to stay.
It was essentially one of service by the hotelier in the performance of which, and as part of the amenities incidental to the service, the hotelier served meals at stated hours.
The revenue, it was held, was (1) 29 S.T.C. 474.
438 not entitled to split up the transaction into two parts, one of service and the other of sale of food stuffs.
This Court accordingly came to the conclusion that there was no sale of food stuffs and the respondent company was not liable to pay sales tax in respect of the meals served to the guests in the hotel.
In arriving at this conclusion this Court observed as under: "Thus, in considering whether a transaction falls within the purview of sales tax, it becomes necessary at the threshold to deter mine the nature of the contract involved in such a transaction for the purpose of ascer taining whether it constitutes a contract of sale or a contract of work or service.
If it is of the latter kind it obviously would not attract the tax.
From the decisions earlier cited it clearly emerges that such determina tion depends in each case upon its facts and circumstances.
Mere passing of property in an article or commodity during the course of the performance of the transaction in question does not render it a transaction of sale.
For, even in a contract purely of work or service, it is possible that articles may have to be used by the person executing the work and property in such articles or materi als may pass to the other party.
That would not necessarily convert the contract into one of sale of those materials.
In every case the court would have to find out what was the primary object of the transaction and the intention of the parties while entering into it.
It may in some cases be that even while enter ing into a contract of work or even service, parties might enter into separate agreements, one of work and service and the other of sale and purchase of materials to be used in the course of executing the work or performing the service.
But, then in such cases the trans action would not be one and indivisible, but would fail into two separate agreements, one of work or service and the other of sale.
" Reliance in the above cited case was placed upon an earlier decision of this Court in the case of State of Madras vs Gannon Dunkerley & Co. (Madras) Ltd.(1) wherein the Constitution Bench of this Court held that in a building contract the property in materials used, does not pass to the other party to the contract as movable property.
It would so pass if that be the agreement between the parties.
But if there was no such agreement and the contract was only to construct a building, then the materials used therein would, in the opinion of the Court, become the property of the other party to the contract only on the theory of accre tion.
The distinction between a contract of sale and contract for skill and labour has been discussed at page 10 of the 4th Edn. of "Sale of Goods" by P.S. Atiyah.
The following passage in that book has a material beating so far as the present case is concerned: (1) 9 S.T.C. 353. 439 "The distinction between contracts of sale and contracts for skill and labour has agitated the courts for many years, and though its importance has been greatly diminished by the repeal of Sect.
4 of the Act, it still cannot be ignored.
It was thought for many years that Lee vs Griffin ; laid down that, if a contract would result in the trans fer of the property in goods from one party to another, then it must be a contract of sale.
The view was exploded in Robinson vs Graves where it was held that a contract to paint a portrait was a contract for skill and labour and not a contract for the sale o[ goods, despite the fact that it was the object of the contract to transfer the property in the completed portrait to the defendent.
Green L.J. stated the law as fol lows (1935) 1 K.B. at p. 587: If the substance of the contract . is that skill and labour have to be exercised for the production of the articles and . it is only ancillary to that that there will pass from the artist to his client or customer some materials in addition to the skill in volved in the production of the portrait, that does not make any difference to the result, because the substance of the contract is the skill and experience of the artist in produc ing the picture." Keeping the above principles in view, we may now turn to the facts of the present case.
When a photographer like the respondent undertakes to take photograph, develop the negative, or do other photographic work and thereafter supply the prints to his client, he cannot be said to enter into a contract for sale of goods.
The contract on the contrary is for use of skill and labour by the photographer to bring about a desired result.
The occupation of a photographer, except in so far as he sells the goods pur chased by him, in our opinion, is essentially one of skill and labour.
A good photograph reveals not only the aes thetic sense and artistic faculty of the photographer, it also reflects his skill and labour.
A good photograph in most cases is indeed a thing of beauty.
It not only seeks to mirror and portray a scene from actual life, it also catches and preserves for the future what belongs to and is a part of the fleeting moment.
The ravage brought about by the passage of time, the decay and the ageing process which inevitably set in as the years roll by leave what is pre served in the photograph unaffected.
It is no wonder that an old photograph revives nostalgic memories of days no more, but to which we rook back through the mist of time with fondness even though such fondness has a tinge of sadness.
We, therefore, find no cogent ground to disagree with the High Court in so far as it has decided against the revenue and has held the contract to be one for work and labour.
Our attention has been invited during the course of arguments to some decisions of the High Courts.
It is, in our opinion, not necessary to deal with those cases 12 1546 SCI/76 440 because after giving the matter our consideration was are of the opinion, that the view taken by the High Court in the judgment under appeal substantially represents the correct position in law.
The appeal consequently fails and is dismissed, but in the circumstances without costs.
M.P. Appeal dis missed.

dataset_name: IN-Abs

summary/full:
The respondent carries on business, inter alia, of supplying photo prints to those who get themselves photo graphed at his studios.
Sales tax authorities assessed him and levied sales tax on his supply of photo prints.
The respondent filed a writ petition in the High Court contend ing that in supplying photo prints, he did not enter into sale transactions but only undertook contracts of work and labour.
He also refuted the appellant 's contention that a finished photograph was a marketable commodity.
The High Court allowed the writ petition holding the respondent not liable to pay sales tax on the supply of photo prints.
Dismissing the appeal, the Court, HELD: (1) When a photographer undertakes to take photo graph, develop the negative, or do other photographic work and thereafter supply the prints to his client, he cannot be said to enter into a contract for sale of goods.
The con tract on the contrary is for use of skill and labour by the photographer to bring about desired result.
[439E] Masanda 's case (1957) 8 STC 370 and Camera House Case (1970) 25 STC 354, distinguished; 28 S.T.C. 1 MP reversed.
(2) A contract of sale is one whose main object is the transfer of property in, and the delivery of the possession of, a chattel as a chattel to the buyer.
Where the principal object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one of work and labour.
The test is whether or not the work and labour bestowed end in anything that can properly become the subject of sale.
[437D E] State of Himachal Pradesh & Ors.
vs Associated Hotels of India Ltd. STC 474 and State of Madras vs Gannon Dunkerley & Co. (Madras) Ltd. STC 353, applied.
Sale of Goods, 4th Edn.
p. 10 by P.S. Atiyah relied upon.


judgement:
Civil Appeals Nos.
1221 1226 of 1974.
(Appeals by.
Special Leave from the Judgment and Order dated 26 2 1974 of the Andhra Pradesh High Court in Tax Revision Cases Nos. 5 10 of 1973).
K. Sen, S.T. Desai, B.M. Bagaria and D.P. Mukherjee, for the appellants.
P.P. Rao and T.V.S.N. Chari for the respondent.
The Judgment of the Court was delivered by RAY, C.J.
These six appeals are by special leave from the judgment dated 26 February, 1974 of the Andhra Pradesh High Court.
The principal question in these appeals is whether the appellants are the last purchasers of manganese ore within the State of Andhra Pradesh.
The appellants contended before the Sales Tax authorities that their sales of manga nese ore to the Mines and Minerals Trading Corporation in short called the M.M.T.C. were complete within the State of Andhra Pradesh.
The appellants therefore contended that they were not the last purchasers but the M.M.T.C. was the last purchaser within the State, and therefore, the M.M.T.C. was liable to pay the tax.
The High Court came to the conclusion that the appel lants were the last purchasers in the State.
The High Court held that the contract between the appellants and the M.M.T.C. indicated that the appellants ' contract of sale occasioned the export and that the contract of the appel lants with the M.M.T.C. was integrally connected with the contract entered into by the M.M.T.C. with their foreign buyer.
In short, the High Court held that there existed a bond between the contracts of sale entered into by the appellants with the M.M.T.C. and the actual exportation of the goods.
The High Court held that these contracts were intrinsically linked and connected and the sales effected were held to be sales in the course of export of manga nese ore out of the territory of India.
443 The Constitution Bench of this Court in the recent decision in Mohd. Serajuddin etc.
vs State of Orissa(1) held that manganese merchants who bought manganese from mines and thereafter sold the goods to the State Trading Corporation for short the S.T.C. could not be said on the terms and conditions of the contracts in that case to be exporters of the goods.
The S.T.C. contracts with the manganese merchants and the S.T.C. contracts with the For eign Buyers were held not to be integrated activities in the course of export.
The crucial words in section 5 of the are that a sale or purchase of goods shall be deemed to take place out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India.
This Court found that the contracts between the manganese merchants and the S.T.C. on the one hand and the contracts between the S.T.C. and their foreign buyers on the other were two separate and independent con tracts of sale.
The S.T.C. entered into direct contract with their foreign buyers.
The S.T.C. alone agreed to sell the goods to their foreign buyers.
The S.T.C. was the exporter of goods.
There was no privity of contract between the manganese merchants and the foreign buyers from the S.T.C.
The privity of contract was between the S.T.C. and the foreign buyers.
The immediate cause of the movement of goods and export was the contract between the foreign buyers who were the importers and the S.T.C. who was the exporter and shipper of the goods.
In Serajuddin 's case (supra) this Court referred to the rulings in Coffee Board Bangalore vs Joint Commercial Tax Officer Madras (a) and M/s Binani Bros. (P) Ltd. vs Union of India & Ors.(3) as laying down the correct tests to find out the sale in the course of export.
The tests are that there must be a single sale which itself causes the export or is in the progress or process of export.
There is no room for two or more sales in the course of export.
The only sale which can be said to cause the export is the sale which itself results in the movement of the goods from the export er to the importer.
Counsel for the State submitted that there were six contracts and it has been the case of the appellants that the contracts were different, and, therefore, there should be examination of five other contracts.
It may be stated here that counsel for the State did not dispute that the decision in Serajuddin 's case (supra) applied to one of the six contracts but he disputed the application of the ruling in Serajuddin 's case to the other five contracts.
The reasons given by counsel for the State are these.
Only one contract was referred to in the High Court.
The case of the appellants has all along been that the Sales Tax Appel late authorities considered only one contract.
The High Court also considered only one contract.
In the special leave petition the appellants assailed the assumption made by the High Court to the effect that all contracts between the appellants and the M.M.T.C. were similar.
(1) [1975] Supp.
S.C.R. 169.
(2) ; (3) ; 444 Counsel for the State put in the forefront the conten tion that the M.M.T.C. could not be the last purchaser of goods within the State of Andhra Pradesh because property in the goods passed from the appellants to the M.M.T.C. on board the ship.
In aid of that contention reliance was placed on F.O.B. character of the contract between the appellant and the M.M.T.C.
The position is identical in all the six contracts.
This Court in Serajuddin 's case (supra) pointed out that mention of F.O.B. price in the contracts between the manga nese merchants and the S.T.C. did not render these contracts F.O.B. contracts with the foreign buyers from the S.T.C.
The reason is simple.
The contracts between the S.T.C. and the foreign buyers are different contracts and it is the S.T.C. which entered into independent contracts with their foreign buyers on F.O.B. basis.
Under the contracts between the manganese merchants and the S.T.C. the merchants were required to bring the goods F.O.B. to the ship named by the S.T.C.
It has to be appreciated that quite often merchants dealing in goods which are exported out of our country enter into what is called string contracts for purchase of the goods from the factory or the mines for sale to exporters for sale to foreign buyers.
The Trading Corporations are often the only authorities allowed to export out of our country.
These Corporations enter into direct contracts with their foreign buyers for export.
The directions given by the Corporations to the merchants to place the goods on board the ship are pursuant to the contracts of sale between the merchants and the Corporation.
These directions are not in the course of export, because the export sale is an independent one between the Corporation and their foreign buyers.
The taking of the goods from the merchants ' place to the ship is completely separate from the transit pursuant to the export sale (See Serajuddin 's case at pp.
184 185).
In string contracts or chain contracts delivery is made by the original seller and eo instanti it is delivered in implement under each separate contract in the chain.
In chain or string contracts starting between the mills or mines or factories and their immediate buyer and ending with the ultimate buyer through several intermediaries not only does the mill give and its immediate buyer take actual delivery but eo instanti each middleman gives and takes actual delivery This process of delivery of possession goes all along the chain at the same moment when delivery is made to the steamer.
See Duni Chand Rataria vs Bhuwalka Brothers Ltd.(1).
In F.O.B. contracts the seller 's duty is to place the goods "free on board" a ship to be named by the buyer.
When the seller delivers the goods for loading on board he normally obtains a mate 's receipt which he transmits to the buyer and the buyer exchanges this for the proper bill of lading.
In this sort of F.O.B. contract the almost univer sal rule is that property and risk both pass on shipment as soon as the goods are over the ship 's rail and if it should be material, the property and risk in each part of the cargo will pass as it crosses the (1) ; 445 ship 's rail.
The loading of the goods is an unconditional appropriation which passes the property.
This is not because of any peculiarity of F.O.B. contracts but because in this type of contract the seller 's duty is to deliver the goods F.O.B. Once they are on board the seller has delivered them to the buyer and it is natural that they should thereafter be at the buyer 's risk.
Now a days a party which has contracted to sell goods to a foreign buyer may itself buy the goods F.O.B. Indian port from Indian seller in order to fulfill F.O.B. contract with a foreign buyer.
This Court in Serajuddin 's Case '(supra) has laid down that the mere mention of F.O.B. price or F.O.B. delivery in contract between a merchant and the S.T.C. which .exports the goods under a separate contract with the foreign buyer to the latter will not make the two contracts either inte grated or the contract between the merchant and the S.T.C. an F.O.B. contract.
There cannot be two last purchasers in the sale of same goods within the same State.
Similarly, there cannot be two exporters in respect of the same goods.
After the decision of the Constitution Bench in Serajuddin 's case (supra) the decision in National Tractors Hubli vs Commissioner of Commercial Taxes Bangalore(1) is no longer good law.
In the National Tractors case (supra) which was a three Judge Bench decision reliance was placed on the decision in B.K. Wadeyar vs M/s. Daulatram Rameshwarlal(2).
In Wade yar 's case (supra) this Court said that the normal presump tion attaching to F.O.B. contracts is that property in the goods passes only when they are put on board the ship.
Wadeyar 's case (supra) was before the Central Safes Tax Act 1956.
Further the Bill of Lading, the export licence and the export clause all showed that the export did not commence till the slip left the port.
In the National Tractors case (supra) it was said that the purchase by the State Trading Corporation from the merchant was in the course of export by the S.T.C. to the foreign buyer and, therefore, the purchase by the merchant from the mine owner was the last purchase in the State.
The basis of the decision is that these were integrated F.O.B. contracts in the course of export.
The decision in National Tractors case (supra) made no reference to the decision of this Court in Coffee Board case (supra).
The correct law is laid down by this Court in the Coffee Board case and Serajuddin 's case (supra).
The law is this.
It has to be found out whether the contracts between the merchants and the Corporation are integrated contracts in the course of export or they are different.
If they are different contracts, as they are in the present case, the last purchaser within the State is the M.M.T.C.
For the foregoing reasons the appeals are accepted.
The judgment of the High Court is set aside.
The parties will pa their costs.
P.B.R. Appeals allowed.

summary/full:
Under item 1 in the Second Schedule to the Andhra Pradesh General Sales Tax Act 1957, manganese ore was liable to be taxed at the point of purchase by the last dealer who bought in the State.
The appellants sell manganese ore to the Mines and Minerals Trading Corporation which exports the ore to buyers in foreign countries.
Their contention before the Sales Tax authorities that the sales of the ore to the MMTC were complete within the State of Andhra Pradesh and that it was the MMTC which was the last purchaser liable to pay sales tax was rejected.
On appeal the High Court held that the appellants ' contracts with the MMTC were integrally connect ed with the contract entered into by the MMTC with the foreign buyer and, as such, the appellants were the last purchasers liable to pay the tax.
The respondent State contended before this Court that since the property in the goods passed from the appellants to the MMTC on board the ship in view of the f.o.b.
charac ter of the contract, it was the appellants who, as the last purchasers, were liable to pay the tax and not the MMTC, Allowing the appeals, HELD: The law is that it has to be found out whether the contracts between the merchants and the Corporation are integrated contracts in the course of export or different contracts.
If they are different, the last purchaser within the State is liable to pay the sales tax.
[446G] (i) The tests for finding out the sale in the course of export are that there must be a single sale which itself causes the export or is in the progress or process of ex port.
There is no room for two or more sales in the course of export.
The only sale which can be said to cause the export is the sale which itself results in the movement of the goods from the exporter to the importer.
[443E F] (ii) State Corporations are often the only authori ties allowed to export goods out of the country.
These corporations enter into contracts with foreign buyers for export and the Corporations in turn give directions to the merchants to place the goods on board a ship.
These direc tions are not in the course of export because the export sale is an independent one between the Corporations and their foreign buyers.
[444D E] (iii) In f.o.b. contracts the sellers ' duty is to place the goods free on board a ship named by the buyer but the mere mention of f.o.b. price or f.o.b. delivery in a contract between the merchants and the trading corporations which export the goods under a separate contract with the foreign buyers to the latter will not make the two contracts either integrated or the contract between the merchants and the Corporation an f o.b. contract.
There cannot be two last purchasers in the sale of the same goods within the same State.
There cannot be two exporters in respect of the same goods.
[444G & 445C] 442 (iv) In string contracts the contracts between the Corporation and the foreign buyers are different and it is the Corporation which enters into independent contracts with foreign buyers on f.o.b. basis.
Under the terms of the contract, the merchants are required to bring the goods f.o.b.
to the ship named by the Corporation.
[444C] Mohd. Serajuddin etc.
vs State of Orissa [1975] Supp.
S.C.R. 169, Coffee Board, Bangalore vs Joint Commercial Tax Officer, Madras ; and M/s. Binani Bros. (P) Ltd. vs Union of India & Ors.
[1974] 1 S.C.C. 459, followed.
National Tractors Hubli vs Commissioner of Commercial Taxes Bangalore , no longer good law.


judgement:
APPEAL NO. 691 of 1976.
(From the Judgment & Order dated the 16th December 1975 of the Gujarat High Court in Special Civil Appln.
No. 572 of 1975).
G.L. Sanghi and Girish Chandra, for the Appellants.
480 V.M. Tarkunde, K.L. Hathi and Mrs. P.C. Kapur, for respondent No. 1.
The Judgment of the Court was delivered by GOSWAMI, J.
This appeal on certificate is from the judgment of the High Court of Gujarat.
The appellants 1 and 2 are respectively the Union of India and the Regional Provident Fund Commissioner.
Dhrangadhra Chemical Works Kamdar Sangh (hereinafter to be described as the union) is the first respondent.
The second respondent is Dhrangadhra Chemical Works (hereinafter to be described as the employer).
With respect to the dearness allowance (D.A.) of the workers under the employer there was a reference No. 70/70 before the Industrial Tribunal at Ahmedabad.
The parties arrived at a settlement of the said industrial dispute and an award was passed in terms of the settlement.
According to the award the employer was to pay D.A. to its employees at the rate of the quarterly average cost of living index as settled by the Simla Bureau, popularly known as "All India Consumers Price Index" for the relevant quarter.
Thus for the 'months of January, February and March, 1974, the rate of D.A. was on the basis of the average cost of living index for the months of July, August and September 1973 as pub lished by the said Bureau and this was to follow for every quarter.
It is the accepted position that for the months of April, May and June 1974 the D.A. worked out at Rs. 78/ per month, but for the quarter.
commencing on 1st July, 1974, and ending on 30th September, 1974, it worked out at Rs. 88.50 per month.
In other words, it was an agreed position between the union and the employer that the rate of D.A. payable to all the workers from 1st July, 1974, was at the rate of Rs. 88.50 per month.
With effect from 6th July, 1974, The Additional Emolu ments (Compulsory Deposit) Ordinance 1974 came into force.
This Ordinance was replaced by The .
(Act No. 37 of 1974) (briefly the Act) and the Act is deemed to have come into force on the 6th day of July 1974.
We have already made a detailed reference to the aim and object of the Act and also dealt with the material provi sions thereof in dealing with a similar question in Civil Appeal No. 690 of 1976 in which we have delivered our judg ment to day(1).
It is, therefore, not necessary to repeat those observations here.
The short question that arises in this particular appeal turns on the Explanation I to section 2(b) of the Act.
We will, therefore, read that provision: "2(b) 'additional dearness allowance ' means such dearness allowance as may be sanc tioned from time to time, after the appointed day, over and above the amount of dearness allowance payable in accordance with the rate in force immediately before the date from which such sanction of additional dearness allowance is to take effect.
(1) [1977] 2 S.C.R.472.
481 Explanation I.
Where payment of dearness allowance is linked to a cost of living index or any other factor, any automatic payment, after the appointed day, of dearness allowance in consequence of any rise in such cost of living index or in consequence of any change in such other factor shall, notwithstanding the provisions of this clause, be deemed to be the additional dearness allowance.
" It is clear under section 2(b) that additional D.A. has to be sanctioned after the appointed day. "Sanctioned" is the heart of the definition clause.
Since additional D.A. is defined to mean such D.A. as may be sanctioned from time to time after the appointed day, Explanation I 'to the definition is inserted to.
deal with a situation to avoid any controversy about the sanction while there is an auto matic rise in D.A. linked to a cost of living index.
Where D.A. is linked to a cost of living index any automatic payment, after the appointed day, of D.A. in consequence of any rise in such cost of living index shall be deemed to be the additional D.A.
In the absence of Explanation I there would have been scope for controversy whether additional D.A. which is paid automatically with the rise in the cost of living index, as agreed upon, can be said to be D.A. sanctioned from time to time.
Such a controversy is set at rest by insertion of Explanation I which is a deeming clause.
The question that arises for consideration in this appeal is whether the rise in the cost of living index has also got to be after the appointed day.
The union contends that the D.A. of Rs. 88.50 which is payable from 1st of July, 1974, for the quarter 1st July, 1974 to 30th Septem ber, 1974 is an pursuance of the rise of cost of living index between January to March 1974 which is prior to the appointed day, namely, 6th July, 1974.
It is, therefore, submitted that no additional D.A. is deductible under the Act.
The High Court has accepted the contention of the union and allowed the application under Article 226 of the.
Con stitution granting a Mandamus restraining the employer from deducting additional D.A. from the emoluments of the em ployees.
The High Court also granted certificate to appeal to this Court.
it is common knowledge that when D.A. is linked to a cost of living index, actual determination of the D.A. takes place after the index is published and known.
The index, therefore, is always of a past period by the yardstick of which D.A. is adjusted.
This being the concept about link age of D.A. to cost of living index, Explanation I makes it clear that when payment of D.A. is linked to a cost of living index any automatic payment after the appointed day of D.A. in consequence of any rise in the cost of living index shall.
notwithstanding the provisions of this clause, be deemed to be the additional D.A.
The non obstante clause in the Explanation takes note of the definition clause where sanction after the appointed day has been mentioned.
Explanation I therefore, plays its role, not withstanding whatever is stated in section 2(b), the definition clause.
We do not find anything in Explana tion I to warrant the conclusion that rise of the cost of living index should be after the appointed day.
What is to be after the appointed day is "any automatic payment of D.A. in consequence of any 482 rise . "and not that any rise in the cost of living index should be after the appointed day.
We are, therefore, unable to agree with the High Court that the rise of cost of living index also should be after the appointed day.
It is sufficient for the purpose of Explanation I if payment of D.A., in consequence of rise of cost of living index, takes place after the appointed day on account of rise in the cost of living index even prior to the appointed day.
The nexus for the purpose of Explana tion I is with the payment after the appointed day and not with the rise in the cost of living index.
The specified percentage of additional D.A. which is 50% of the rise, being the difference, between Rs. 78/ and Rs. 88.50 is, therefore, deductible under section 6(2)(b) of the Act and the High Court was not correct in holding to the contrary.
The appeal is allowed and the judgment of the High Court is set aside.
There will be, however, no order as to costs.
P.B.R. Appeal allowed.

summary/full:
Section 2(b) of the defines additional dearness allowance to mean such dearness allowance as may be sanctioned from time to time after the appointed day over and above the amount of dearness allowance payable in accordance with the rate in force immediately before the date from which such sanction of additional dearness allowance is to take effect.
Expla nation I to the clause states that where payment of dearness allowance is linked to the cost of living Index any auto matic payment after the appointed day of dearness allowance in consequence of any rise in such cost of living index or in consequence of any change in such other factor shall, notwithstanding the provisions of this clause, be deemed to be the additional dearness allowance.
Dearness allowance was paid to the employees of the respondent at the rate of quarterly average cost of living index for the relevant quarter.
The rate of dearness allow ance for one quarter e.g. the first quarter of 1974 was paid on.
the basis of the average cost of living index for the months of July September, 1973.
For the quarter July September, 1974 there was a rise in the cost of living index and consequently there was a rise in the dearness allowance payable to the employees.
In a writ petition under article 226 of the Constitution the employees contended that the increased dearness allowance payable for the quar ter July September, 1974 was as a result of rise in the cost of living index between January March, 1974 which was before the appointed day in July 6, 1974 and, therefore, no additional dearness allowance was deductible under the Act.
The High Court granted the writ.
Allowing the appeal, HELD: The High Court was wrong in its view that the rise of cost of living index should be after the appointed day.
The nexus, for the purpose of the explanation, is with the payment after the appointed day and not with the rise in the cost of living index.
There is nothing in the Explanation to warrant the conclusion that rise in the cost of living index should be after the appointed day.
What is to be after the appointed day is any automatic payment of dearness allowance in consequence of any rise in such cost of living index and not that any rise in the cost of living index should be after the appointed day.
[482B: 481H] When D.A. is linked to the cost of living index, actual determination of the D.A. takes place after the index is published and known.
The index, therefore, is always of a past period by the yard stick of which D.A. is adjusted.
This being the concept about linkage of D.A. to cost of living index.
Explanation I makes it clear that when pay ment of D.A. is linked to cost of living index any automatic payment after the appointed day of D.A. in consequence 'of any rise in the cost of living index shall, notwithstanding the provisions of this clause, be deemed to be the addition al D.A. [481G]