P. C. Cheriyan v. Barfi Devi

SARKARIA, J.-WheU1er a lease of a premises for carrying on the business of retreading of tyres is a lease; for "manufacturing purpooes" within the contemplation of Section 106, Transfer of Property Act, is the only question that falls for consideration in this appeal by special leave directed against a judgment, dated December 11, 1968, of the Iligh Court of Allahabae. Tue question arises in these circum­ stances : The plaintiff-respondent Jet out the accommodation in dispute. at H a rent of Rs. 850/- per annum to the defendant who was doing the business of retreading of tyres in the said premises. The d6fendant defaulted in payment of rent. The plaintiff, therefore, sent one 1 .. ,., ~ '' P. c. CHER!YAN v. BARF! DEVI (Sarkaria, J.) 963 rno11th's notice to the defendant terminating his tenancy. Thereafter. A , the plaintiff instituted a suit for ;recovery of arrears of rent and eject- rnent against the defendant. The suit was resisted, inter alia, on the ground that the premises in dispute had been let out to him for manufacturing purposes and ill view of Section 106, Transfer of Property Act, therefore, the lease B coald be terminated by the landlady only by six months' notice expiring with the end of tho year of tenancy, and since the plaintiff had served -0nly 30 days' notice, the same was invalid and ineffective to terminate the tenancy. The trial Court and the First Appellate Court concurrently decreed the suit for arrears of rent as well as for ejectment. C The only ground urged before the First Appellate Court and the High Court was that the tenancy being for manufacturing purposes, could not be terminated by one month's notice. All the courts below negatived this contention and have concurrently held that the retreading uf tyres, is not a manufacturing! purpose and, therefore, 30 days' notice D given by the plaintiff toi the defendant for terminating his tenancy, was >ialid. Mr. Khader, learned counsel for the defendant-appellant, conteiids 1hat the process of retreading old tyres, involves the nsei of sophisticat- ed machinery _and results in b;ringing into being a distinct commercial commodity. It is argued that the essential test of a manufacturing pro­ -cess is that it must bring ab-Ou~ a change in the character, quality or user of the old material processed so as to produce a distinct market- able article, but it is not necessary that the old material should comple- tely lose its identity. It is nrged that the High Court was in _enor in taking the view that from the process of retreading old tyres a commercially different article does not emerge. In support of t11e proposition that a process by which a useless article becqmes useful >and its character ov use is changed is a manufacturing prncess, counsel has cited Commissioner of Sales Tax, U.l'. v. Dr. Sukh Deo;(') Al/enburry Engineers Pvt. Ltd. v. Ramakrishna Dalamia & Ors.;(2) State of Maharashtra v. The Central Provinces Manganese Ore Co. Ltd.;(3) North Bengal Stores Ltd. v .. Member, Board of Revenue, Benga/;(4) and an Australian case; Federal Commissioner of Taxation v-. Jack Zinader Proprietary Ltd. (5). (I) [1969] I s.c.R. 710. ·(2) [1973] 2 S.C.R. 257· (3) [1977] 1 S.C.R. 1002. (4) (1938-50) I STC.157. (5) (1948-49) 78 C.L.R. 336· 964 SUPREME COURT REPORTS , [1980] 1 S.C.R>- The expression "manufacturing purposes" has not been defined iIJ. the Transfer of Property Act. It has therefore, to be construed in its popular sense. According to the Permanent Edition of Words· and Phrases, Vol. 26, 'manufacture' implies a change but every change is not manufacture and yet every change in an article is the result of treatment, Jabour and manipulation. But something more is necessary and there must be transformation; a new and different article mus1t emerge having a distinctive name, character or use. This construc­ tion of the expression "manufacture" received the imprimatur of this Court in South Bihar Sugar Mills v. Union of India.(') But the case. directly in point is Allenburry Engineers Ltd. v. Ramakrishna Dalamia, ibid; wherein the.question for consideration before this Court was whe­ ther the lease in favour of Allenbury Engineers was for "manufacturing purposes" within the meaning of Section 106, Transfer of Property Act. On the facts of that case, answering the question in the negative, this Court held that even\ though t11e lessees were manu- facturing some spare parts for repairing or reconditioning vehicies, yet the dominant purpose of t11e lease was one of the storage and resale of the vehicles after repairing and reconditioning them; and that manufac-. tnring of spare parts was merely incidental tO' the main purpose of re- . pairing or reconditioning the vehicles for disposal. Since the instant case is covered by the ratio of Allenbury Engi- E neers, it is not necessary to discuss all the cases cited by Mr. Khader. Nevertheless, it will be proper to notice briefly one case, namely, Federal· Commissioner of Taxation v. Jack Zinader Proprietary Ltd, ibid; on­ which the counsel bas staked a good deal in his argument. In Jack Zinader (ibid), a furrier company received from customen>' fur garments which bad become too badly wqrn and damaged to be· repaired, and, after removing the defective, parts, remodelled, for those­ customers respectively by various processes, what was left into modem­ styles of coats, fur capes, fur collars, fur coats and stoles having re­ gard to the extent, shape and nature of the available materials. Tbe­ mntcrials used by the company in remodelling were. except about five per cent of the linings, confined to .those available from the customer's·. garment. If. new linings were required the customer supplied them. The question for decision before the High Court of Australia was:; whether fur coats, stoles, capes and collars formed by remodelling fur garments are foc the purposes of the Sales Tax Assessment Act (No. 1), 1930-1942, goods "manufactured sold". The Court by a m'l;Ority consisting of Dixon and Williams JJ. (Web J. dissenting) answered! (I) (1968] 3 S.C.R. 21. J l l "' I P. c. CllERIYAN v. BARF! DEVI (Sarkaria, J.) 965 this question in the affirmative. Dixon J. in his leading judgment A (at p. 343), after quoting with approval the dictum of Darling J. in McNicol v. Pinch,(') that "the essence of making or of manufacturing is that what is made shall be a different thing from that out of which it is made", observed : "The first and, it may be thought, the decisive question in the case, is therefore whether the garments which result from the process of remodelling are different things, that is are different goods, from the garments that the customer hands over. This perhaps is rather a question of fact than of law ........ The Commissioner distinguishes between re- pair and remodelling and does not claim s.ales tax in respect of repair even although it may mean some change in, for example, the length of the garment. We are told that an old or worn fur coat is remodelled into a modern style of coat, 'that a fur necklet is remodelled into a stole and a fur neck!et or fur stole is remodelled into a cape. A full length fur coat may be converted into a saunter' o.r the somewhat similar 'swagger' coats which are considerably shorter but full and often flared at ,the bottom. 1\ut the conversion may be to a jacket, which is coatee, which is less than waist length an(! fits more closely and usually is not fastened in front . ........... " "On the side of the taxpayer it is contended that these procedures do not change the identity of the garment but only some of its characteristics. The custome.r hands in a fur garment and takes away a fur garment. It is altered and renovated but it is still a fur garment; it is her fur gar­ ment; it is the fur garment she brought to the furriers. On the side of the Commissi<¥Jer it is said that a different fur garment has been brought into existence. The old fur gar­ ment has been used only to provide the materials or somE> of them from which the new fur garment has been made. It is a thing of a different description both commercially and from the point of view of the wearer. It is a different en- tity and has a new identity. Goods have therefore been ·produced. " "On the whole, the Commissioner's view appears to be the more correct. The work of the furrier is to use skins to fonn garments. Fashion, commercial usage and his cus- (1) [1906] 2 K.B. 352 at p. 361. tamer's tastes combine to distinguish tbe various descJip­ tions of garment he makes and to compel the recognization of them as separate categories of goods. When he takes skins made up into the description of fur garment and pro­ duces another, he cannot be treated as having altered an exiSf­ ing thing without producing a new one. He has made a diJferent article." Williams J., agreed with Dixon J., that the question at issue was one of fact aud degree and that the process concerned involved manu· facture of goods into different goods from their second-hand compo­ nents. The learned Jndge rejected the argument on behaif of the taxpayers that the work could be described as a mere repair or modifi· cation of the goods which did not affect their original character, with the observation that "once the work done causes the goods to lose this charaCter th<>y become 'goods' within the meaning of the Act." It will be seen that Jack Zinader's case bears no analogy with the present case. The facts of that case were materially different. There, from the serviceable components taken out from old gannents, the furrier by his skill and Jabour made garments od' different design and description both commercially and from the point of view of the wearer. But in the instant case, by retreading an old tyre does not become a different entity, nor acquires a new identity. The r~reading process does not cause the old tyre to lose its origirial chara­ cter. The broad test for determining whether a process is a manufacturing process, is whether it brings out a complete transfor­ mation for the old components so as tO' produce a commercially diffe­ rent article or commodity. This question as rightly emphasiseo by the learned Judge in Jack Zinader, is largely one of fact. In the case before ns, all the courts below have concurrently answered this question in the negative. In our opiniqn, this finding of the courts below is unassailable. The retreading of old tyres does not bring in­ to being a commercially distinct or different entity. The old tyre retains its original character, or identity as a ty.re. Retreading does not comp­ letely transform it into another commercial article, although it improve Jts performance and serviceability as a tyre. Retreading of old tyres is just like resoling oil old shoes. Just as resoling of old shoes, does not produce a comme.rcially different entity having a different identity, so from retreading no new or distinct article emerges. The old tyre retains its basic structure and identity. The courts below were therefore, right in holding that the lease in the present case was not for mannfacturing pu;rposes, and the tenancy had been rightly ter­ minated by thirty days notice. r ~··· P. c. CHERIYAN v. BARF! DEVI (Sarkaria, !.) 967 Before parting with this judgment, we may sound a note of caution, A that definitions of "manufacture" given in other enactments, such as, in the Factories Act or the Excise Act should not be blindly applied while interpreting the expression "manufacturing purposes" in Section 106, of the Transfer of Property Act. In some enactments, for instance b the Excise Act, the tcrm "manufacture" has been given an extended meaning by including in it "repairs", also. B For the foregoing reason~, the appeal fails and is dismissed w~'.h costs. N.V.K. Appeal dismissed. \ '