Sasi
K.G.
01. INTRODUCTION
The case law in State Level Committee
v. Morgardshammer India Ltd. (1996) 1 SCC 108 is an example in the
interpretation of the internal aid of Explanation used as a definition with an
‘or’ clause. The judgment offers not much arguments of the appellants, but the
court seems to counter the manifold arguments offered by the respondent based
on different theories of interpretation of Statutes. Thus this case has ample
scope in understanding the role of an Explanation in the form of a definition
as applicable in tax laws, as the Apex Court has upheld that the interpretation
of tax legislations have a different standing than other types of Statutes.
02. PRELIMINARIES
01. Parties to the appeal
This case was decided by a two member
Division Bench comprising of Justice B.P. Jeevan Reddy and Justice S.B.
Majmudar of the Supreme Court of India. The case was moved as a special leave
application and was numbered as Civil Appeal No. 9968 of 1995 against an order
of the Allahabad High Court decided against the appellant. The Appellant in
this case was State Level Committee of Uttar Pradesh and the respondent was M/s
Morgardshammer India Ltd. The appellant was represented by the Government
pleader whereas the respondent was represented initially by Advocate Sunil
Kumar Jain and at argument stage by Adv. S.K. Dhavon. The judgment was
pronounced by Justice B.P. Jeevan Reddy on behalf of both Judges.
02. Citations
This judgment was cited in various journals a
few of which are given below.
1996 AIR 524
1996 SCC (1) 108
JT 1995 (8) 53
1995 SCALE (6)306
03. The law involved
The
case was interpreting Explanation (i) of Sub Section (2) of Section 4A of the
UP Sales Tax Act, 1948 / UP Trade Tax Act, 1948. The provision runs as follows.
“Explanation.- For the purposes of this section,-
(i) `new unit’ means a factory or workshop whether set up by
a dealer already having an industrial unit manufacturing the same goods at any
other place in the State or an industrial unit, adjacent to, the site of an
existing factory or workshop; but does not include:
(a) any
factory or workshop using machinery, accessories or components already used or
acquired for use in any other factory or workshop in India,
(b) any
factory or workshop established on, or adjacent to the site of an existing
factory or workshop manufacturing the same goods, or
(c) any
addition to or extension of an existing factory or workshop
(d) any
factory or workshop established on or adjacent to the site of an existing
factory or workshop manufacturing same goods as are being manufactured in the
existing factory or workshop cannot be called “new unit” for the purposes of
the Explanation.
(e) Any
addition to or extension of an existing factory or workshop cannot and does not
qualify as a new unit.”
04. Cases Relied on
The following cases were relied on.
Mangalore Chemicals and Fertilizers
Limited v. Deputy Commissioner of Commercial Taxes (1992 Supp. (i) S.C.C.21
CCE v. Parle Exports (P) Ltd. (1989)
1SCC 345: 1989 SCC (Tax) 84
Union of India v. Wood Papers
Ltd.[(1990) 4 SCC 256 : 1990 SCC (Tax) 422
Novopan India Ltd., Hyderabad v.
Collector of Central Exercise and Customs, Hyderabad (1994 Suppl. (3) S.C.C.606
Hansraj Gordhandas v. H.H. Dave
[(1969) 2 SCR 253: AIR 1970 SC 755
Orient Weaving Mills (P) Ltd. v.
Union of India, [1962 Supp (3) SCR 481 : AIR 1963 SC 98
Judicial Committee in Coroline M.
Armytage v. Frederic Wilkinson, (1878) 3 AC at p. 370
Hindustan Aluminium Corporation Ltd.
v. State of Uttar Pradesh, [(1982) 1 SCR 139]: AIR 1981 SC 1649
Caroline M. Armytage v. Frederic
Wilkinson (1878) 3 AC 355
05. Cases Referred to
The following cases were also referred to.
Amit Plastic Industry, Ghaziabad v.
Divisional Level Committee, Meerut (1994 UPTC 121
Kailash Nath v. State of U.P. AIR
1957 SC 790
Collector of Central Excise. Bombay
v. M/s.Parle Exports (P) Ltd. (1989 (1) S.C.R. 345
03. JURISDICTION OF THE COURT
This Civil Appeal before the Honourable
Supreme Court of India was not filed with the certificate of the High Court
under Article 134A, but as a Special Leave Petition under Article 136 which the
Honourable Supreme Court granted in due course.
Article 136 is reproduced below.
“136. (1) Notwithstanding
anything in this Chapter, the Supreme Court may, in its discretion, grant
special leave to appeal from any judgment, decree, determination, sentence or
order in any cause or matter passed or made by any court or tribunal in the
territory of India.
(2) Nothing in clause
(1) shall apply to any judgment, determination, sentence or order passed or
made by any court or tribunal constituted by or under any law relating to the
Armed Forces.”
04. FACTS OF THE CASE
The facts of the case are summarized as
follows.
The Respondent Morgardshammar India
Ltd had set up a production unit with machinery worth about Rs.25 lakhs, out of
which machinery worth Rs.4,59,575/- was acquired from M/s. Modi Steels under
Bill No.244 dated April 27, 1984. Admittedly, the said machinery was acquired
by M/s Modi Steels for setting up an unit of its own but it abandoned that idea
later and sold the machinery to the respondent.
The Respondent Morgardshammar India
Ltd then claimed tax relaxation for first five years as envisaged in Section 4A
of the UP Sales Tax Act, 1948 available to new units as defined under
Explanation (i) to sub section (2) of section 4A of the Act. But the claim of Morgardshammar
India Ltd was declined by the Divisional Level Committee as the Committee
failed to recognize it as a new unit as a part of the machinery acquired by it
for setting up its factory was purchased from M/s. Modi Steels who has
purchased the said machinery earlier for their own use. A review application
filed by the respondent was rejected by the State Level Committee also on the
same ground. A writ petition was filed by the respondent before Allahabad High
Court which allowed the writ by holding that in case M/s. Modi Steels has not
put the said machinery to any use as contended by the respondent, the
respondent-unit cannot be denied the eligibility certificate under Section 4-A.
the Bench purported to follow an earlier decision of the High Court in Amit
Plastic Industry, Ghaziabad v. Divisional Level Committee, Meerut 1994 UPTC 121.
The High Court has set aside the orders impugned in the writ petition and
remitted the matter to the State Level Committee with a direction to re-examine
the material on record and to record a categorical finding as to whether or not
the machinery purchased by the petitioner form M/s.Modi Steels was actually
used in any other factory or workshop in India. If it is found that the said
machinery was not actually used in any factory or workshop before its
installation in the respondent-unit, the High Court opined, that the
respondent-unit would be entitled to be treated as a new unit for the purpose
of Section 4-A.
Being aggrieved by this judgment the
appellant has filed this civil appeal to reverse the judgment of the lower
court and to uphold the order of the appellant.
05 .ISSUES INVOLVED
The only issue arising in this
appeal, preferred against the judgment of the Allahabad High Court, is whether
the respondent-unit qualifies as a “new unit” within the meaning of Explanation
(i) to sub-section (2) of Section 4-A of the U.P. Sales Tax Act.
06. QUESTIONS OF LAW
The basic question of law involved was the
interpretation of the phrase “already
used or acquired for use”
included in clause (i) (a) of Explanation to Section 4A(2) of the U.P. Sales
Tax Act, 1948.
07. ARGUMENTS OF THE APPELLANT
The Appellant did not bring in many
arguments, but contented on a plain and literal meaning of the phrase as
follows.
Section 4-A is an elaborate one. A
new unit staring production on or after first day of October, 1982 is entitled
to exemption from sales tax provided the unit satisfies the requirements and
conditions prescribed by Section 4A. Inter alia, it must furnish to the
assessing authority an eligibility certificate granted by the prescribed
officer/authority in accordance with the procedure specified. Explanation (i)
to sub-section (2) of Section 4A defines the expression “new unit.” One of the
grounds upon which a new factory or workshop is disqualified from being called
a “new unit” is if such factory or workshop uses “machinery, accessories or
components already used or acquired for use in any other factory or
workshop in India.” The clause uses both the expressions “already used’ and
“acquired for use” in any other factory or workshop in India. Surely both the
expressions cannot mean one and the same thing. It is a disqualification if the
new factory or workshop uses machinery/accessories/components already used in
any other factory or workshop in India. It is a disqualification if the new
factory or workshop uses machinery /accessories/components which were acquired
for use in any other factory or workshop in India. When the clause uses both
the said expressions simultaneously, it would not be reasonable or proper to
construe the word “acquired for use” as meaning the same thing as “already
used”. Such a construction would make the words “acquired for use” superfluous
and a surplusage. The words “acquired for use” must be understood in their
plain and ordinary meaning. It is enough that the
machinery/accessories/components which are used in the factory or workshop
(claiming the benefit of Section 4-A) are acquired for use in any other factory
or a workshop in India. It is not necessary to go further and enquire whether
that machinery/accessories/components were actually used in any other factory
or workshop in India. In this case, admittedly, a part of the machinery
installed in the respondent’s unit was acquired by M/s. Modi Steels for use in
the factory or workshop proposed to be set up by them. According to the
certificate issued by M/s.Modi Steels, their project did not materialize
because it was found to be not viable. For that reason, the machinery purchased
by them for the said purpose was lying in packed and un-used condition and was
sold to the respondent. Thus, on their own showing, the respondents case is
directly hit by clause (a) in the Explanation (i) and is not entitled to the
exemption provided by Section 4-A.
08. ARGUMENTS OF THE RESPONDENT
The Respondent’s counsel Sri. S.K. Dhaon put
forth many arguments of which the most important are the following.
An interpretation would not be a
reasonable one unless it is not consistent with the object underlaying Section
4-A. Section 4-A is devised to encourage new industries. Disqualifying a unit
from the benefit of the section on the mere ground that part of the machinery
installed in the unit was acquired by another person for setting up a unit,
which in fact he never did, would not be consistent with the object underlying Section
4A.
The words “acquired for use in any
other factory or workshop in India” must be read and understood as “acquired
for use in any other existing factory or workshop in India”. It should be so
read to give effect to the idea underlying the said clause.
The respondent unit has
substantially complied with the requirement of the said clause in the
definition inasmuch as the value of the machinery acquired from M/s.Modi Steels
is only about Rs.4.5 lakhs as against the value of the entire machinery at
Rs.25 lakhs.
Section 4-A must be literally
construed to further the object underlying it. In case of any ambiguity, the
construction favouring the assessee should be adopted.
The decision in Collector of
Central Excise. Bombay v. M/s.Parle Exports (P) Ltd. (1989 (1) S.C.R. 345
rendered by Supreme Court observes, “17. How then should the courts proceed?
The expressions in the Schedule and in the notification for exemption should be
understood by the language employed therein bearing in mind the context in
which the expressions occur. The words used in the Provision, imposing taxes or
granting exemption should be understood in the same way in which these are
understood in ordinary parlance in the area in which the law is in force or by
the people who ordinarily deal with them. It is, however, necessary to bear in
mind certain principles. The notification in this case was issued under R.8 of
the Central Excise Rules and should be read along with the Act.”
09. DECREE
The Supreme Court held that the phrase “already used or acquired for use” meant two different things and it is not
necessary that the purchased machinery should be used and hence the respondent cannot
claim the tax benefits available to ‘new units’ under Section 4A of the U.P.
Sales Tax Act, 1948.
Supreme Court allowed the appeal and
the judgment of the High Court was set aside. The writ petition filed by the
respondent in the High Court was dismissed. No costs were ordered.
10. RATIO DECIDENDI
The Apex Court bought in whole the arguments
of the appellant and rejected one by one those brought in by the respondents.
The reasons of the Supreme Court for the
judgment can be summarized as follows.
1. The clause uses both the expressions “already used’ and
“acquired for use” in any other factory or workshop in India. Surely both the
expressions cannot mean one and the same thing. It is a disqualification if the
new factory or workshop uses machinery/accessories/components already used in
any other factory or workshop in India. It would not be reasonable or proper to
construe the word “acquired for use” as meaning the same thing as “already
used”. Such a construction would make the words “acquired for use” superfluous
and a surplusage. The words “acquired for use” must be understood in their
plain and ordinary meaning. It is enough that the
machinery/accessories/components which are used in the factory or workshop
(claiming the benefit of Section 4A) are acquired for use in any other factory
or a workshop in India.
2. The Legislature wanted to avoid
an enquiry into the factual issue of actual user where the machinery (which
expressions means machinery, accessories or components) is acquired for use in
any other factory or workshop in India. Once it is shown that such machinery
was acquired for use in any other factory or workshop in India, the Legislature
presumes use as a case of conclusive presumption. The idea was to shut out
enquires of the type now ordered by the High Court. One person may say that
though the machinery was acquired by him, he never installed it or used it;
another may say that he only installed the machinery but did not use or operate
it; a third person may say that the machinery was used only for trial run but
not on a regular basis, and so on and so forth. The authorities in charge of
issuing eligibility certificates would thus be caught in endless factual
disputes. The idea was to lessen the room for factual controversies. It must be
remembered that no unit has a right to claim exemption from tax as a master of
right. His right is only insofar as it is provided by Section 4-A. While
providing for exemption, the Legislature has hedged it with certain conditions.
It is not open to the Court to ignore those conditions and extend the
exemption.
3. Section 4-A provides for
exemption from tax. It is repeatedly held by the Apex Court that a provision
providing for an exemption or an exception as the case may be, has to be
construed strictly. In Mangalore Chemicals and Fertilizers Limited v.
Deputy Commissioner of Commercial Taxes, (1992 Supp. (i) S.C.C.21
referring to CCE v. Parle Exports (P) Ltd., [(1989) 1SCC 345: 1989 SCC
(Tax) 84 Supreme Court had held exemptions from taxation have a
tendency to increase the burden on the other unexempted class of tax payers and
should be construed against the subject in case of ambiguity. It is an equally
well known principle that a person who claims an exemption has to establish his
case. In Novopan India Ltd., Hyderabad v. Collector of Central Exercise
and Customs, Hyderabad (1994 Suppl. (3) S.C.C.606 Supreme Court held
that the Mangalore Chemical case and Union of India v. Wood Paper
case represent the correct view of law. The principle that in case of
ambiguity, a taxing statute should be construed in favour of the assessee
assuming that the said principle is good and sound – does not apply to the
construction of an exception or an exempting provision; they have to be
construed strictly. A person invoking an exception or an exemption provision to
relieve him of the tax liability must establish clearly that he is covered by
the said provision. In case of doubt or ambiguity, benefit of it must go to the
State.
4. Referring to the respondent’s
argument that inasmuch as the value of the machinery acquired from M/s.Modi
Steels is only about Rs.4.5 lakhs as against the value of the entire machinery
at Rs.25 lakhs tax benefit should be given, Supreme court answered that there
is no room for such a contention in view of the specific language of clause
(a). The clause uses all the three words – machinery, accessories or
components. The use of the word “or” indicates that use of either of them,
which are already used or acquired for use in any other factory or workshop in
India, would disqualify the factory or workshop from being called a “new unit”
within the meaning of Section 4-A. The clause does not say or indicate in any
manner that only where the entire machinery installed in the unit (claiming to
the new unit) has already been used or was acquired for use in any other
factory or workshop in India, that the disqualification contained therein gets
attracted. In the face of the clear language of the clause, it is not possible
to entertain the submission of the respondent.
5. The respondent claimed that in Collector
of Central Excise, Bombay v. M/s.Parle Exports (P) Ltd. (1989 (1) S.C.R. 345
Supreme Court has held that “the notification for exemption should be
understood by the language employed therein bearing in mind the context in
which the expressions occur. The words used in the Provision, imposing taxes or
granting exemption should be understood in the same way in which these are
understood in ordinary parlance in the area in which the law is in force or by
the people who ordinarily deal with them.”
Supreme Court answered the above claim as hereunder.
“See in this connection the
observations of this Court in Orient Weaving Mills (P) Ltd. v. Union of
India 1962 Supp (3) SCR 481 : (AIR 1963 SC 98). See also Kailash
Nath v. State of U.P. (AIR 1957 SC 790). The principle is well settled
that when two views of a notification are possible, it should be construed in
favour of the subject as notification is part of a fiscal enactment. But in
this connection, it is well to remember the observations of the Judicial
Committee in Caroline M. Armytage v. Frederic Wilkinson (1878) 3 AC 355 at
p. 370 that it is only, however, in the event of there being a real
difficultly in ascertaining the meaning of a particular enactment that the
question of strictness or of liberality of construction arises. The Judicial
Committee reiterated in the said decision at pate 369 of the report that in a
taxing Act Provisions establishing an exception to the general rule of taxation
are to be construed strictly against those who invoke its benefit.”
Thus the Apex Court arrived at the
above mentioned decree.
11. INTERPRETATION OF LAW RESORTED BY THE COURT
Some selected tools and principles of
interpretation used in this judgment are discussed below under various heads
01. Intrinsic Aids / Internal Aids Used
Some examples of intrinsic aids are
given below.
1. Context.
2. Title.
3. Preamble.
4. The
interpretation clause.
5. Headings.
6. Marginal notes.
7. Punctuations.
8. Illustrations.
9. Schedules.
10. Proviso.
11. Exceptions and
saving clause.
12. Explanations.
In
this judgment the following intrinsic aids also are discussed
among others.
Title
The
long title of the Act involved was Uttar Pradesh Sales Tax Act, 1948. Its Short
Title was U.P. Sales Tax Act, 1948. The Act is also called as Uttar Pradesh
Trade Tax Act, 1948 (U.P. Act No. XV of 1948).
The
title proves that the Act is a law of taxation.
Explanations
An Explanation is added
to a section to elaborate upon and explain the meaning of the words appearing
in the section. An Explanation to a statutory provision has to be read with the
main provision to which it is added as an Explanation. An Explanation appended
to a section or a sub-section becomes an integral part of it and has no
independent existence apart from it.
The purpose of an
Explanation is not to limit the scope of the main section. An Explanation is
quite different in nature from a proviso; the latter excludes, excepts and
restricts while the former explains, clarifies or subtracts or includes
something by introducing a legal fiction.
The
question in issue was the interpretation of clause (i) of the Explanation to
Section 4A (2) of the Act.
Interpretation Clause
The Explanation (i) of the Explanation to Section 4A (2) of the Act is in
the nature of a definition which is considered as an interpretation clause.
Exception Clause
The Supreme Court held
that the definition of ‘new unit” in
Explanation (i) comprises of two clauses (mentioned as (a) and (b) of Explanation
(i)) to which three exceptions (mentioned as (c), (d) and (e)) are appended.
02. Extrinsic Aids / External Aids Used
Some examples of extrinsic aids are
given below.
1. Parliamentary
History.
2. Foreign
Decisions.
3. Dictionaries.
4. Text books.
5. Statement of
Objects and Reasons.
6. Social,
Economic, Political and Scientific Inventions.
7. Reference to
other statute - Codification and Consolidation Statutes.
8. Contemporaneous
exposition, usage and practice.
9. Ratio decidendi
and obiter dicta.
10. Terms of Trade
and Commerce.
In this judgment the Supreme Court has
relied on the following extrinsic aids also among others.
Foreign Decisions
The Supreme Court referred in this case
to the Caroline M. Armytage v.
Frederic Wilkinson, [(1878) 3 AC 355, a decision of the Privy Council
to uphold the principle that in a taxing Act Provisions establishing an
exception to the general rule of taxation are to be construed strictly against
those who invoke its benefit. However a Privy Council decision cannot strictly
be called a Foreign Judgment as it was the Apex Court of all Common Wealth
Countries including India.
Reference to Other Statutes
In Central Excise. Bombay v. M/s.Parle Exports (P) Ltd. 1989
(1) S.C.R. 345
the validity of a notification issued under R.8 of the Central Excise Rules was
discussed it was held that the Rules should be read along with the Act. This
principle was extended to the present case also.
Ratio Decidendi and Obiter Dicta
The Supreme Court basically relied on
the ratio decidendi of other cases, but not on the obiter dicta.
03. Rules of Interpretation Applied
01. Primary Rules of Interpretation
,1. Literal or Grammatical Interpretation: It depends upon the letter of enacted law. It gives plain sense and are used frequently in the courts.
2. Logical
Interpretation: It is also called functional interpretation. It depends
upon the spirit of enacted law. It looks beyond the 'litera legis'
3. Golden
Rule of Interpretation: It is applied when meaning is plain. Some logical defect in the literal legis has been considered. The
text leads to a result so unreasonable that it is self- evident that the legislature could not have meant what it has said.
4. Mischief
rule of Interpretation I Rule of Hydens ' case / Smith v. Hughes Case[i]:
The
main aim of the rule is to determine the "mischief and defect" that
the statute in question has set out to remedy, and what ruling would
effectively implement this remedy. In applying the mischief rule, the court is
essentially asking what part of the law did the law not cover, but was meant to
be rectified by Parliament in passing the bill.
5.
Statute must be read as whole: Statute
must be read as whole and not as parts.
6.
Harmonious Construction: When there is a conflict between
two or more statues or two or more parts of a statute then the rule of
harmonious construction needs to be adopted. The rule follows a very simple
premise that every statute has a purpose and intent as per law and should be
read as a whole. The interpretation consistent of all the provisions of the
statute should be adopted. In the case in which it shall be impossible to
harmonize both the provisions, the court’s decision regarding the provision
shall prevail.
7. Strict
and Liberal Constructions: Strict construction is a very
hard-bound system which does not involve any scope of flexibility or plasticity
and just averts in one single direction without paving out any ways of
alternations or inter-lineation in the meaning of a provision. A liberal
construction is one which expands the meaning of the statute to meet the
cases which are clearly within the spirit or reason of the law or within the evil
which it was designed to remedy, provided that such an interpretation is not
inconsistent with the language used in the legislation.
8.
Beneficial Construction: Beneficial Construction rule is a part
of Harmonious construction. It is an advantageous rule of interpretation for
the members of the society which preserves them from any kind of hardships
being created through the law on the subject- matter they are fighting for.
02. Subsidiary Rules of Interpretation
1.
Noscitur a sociis : A doubtful word may be ascertained by reference to the meaning of words
associated with it.
2. Lta scriptum est: Letter of enacted law
3. Ejusdem generis: It means of the same kind or nature. The rule that where particular words are
followed by general words. The general words are limited to the same kind as the particular words.
4. Reddendo singula singulis: It is a Latin term that means by referring
each to each; referring each phrase or expression to its corresponding object.
It is a rule of construction used typically in distributing property. For
example, when a will says "I devise and bequeath all my real and personal
property to A", the principle of reddendo singula singulis would apply as
if it read "I devise all my real property, and bequeath all my personal
property, to B", since the word devise is appropriate only to real
property and the term bequeath is appropriate only to personal property.
5. Rule of Bonam Partem: The maxim “Construction in Bonam
Partem” connotes that words must be taken in a lawful and rightful sense. The word
"lawful" connotes anything sanctioned or recognized by law. When, therefore
in execution of a decree or order of the court some properties are attached, it
has to be seen that the seizure is lawful and that the property belongs to the
debtor. Further, the act must be rightfully done, done in a lawful manner. A statutory
authority to abate nuisances would not justify an order to abate one when it
could not be obeyed without committing a trespass.
6. Non obstante clause: Non-obstante
clause in legal parlour is the notwithstanding
clause in a Statute makes the provision independent of other provisions
contained in the law, even if the other provisions provide to the contrary.
7. Same
word & same meaning: Where
a Legislature uses same expression in the same statute at two places or more,
then the same interpretation should be given to that expression unless the
context otherwise requires. But the application of the rule of "same word,
same meaning" may be excluded by the context.
8. posteriores
leges priores contrarias abrogant
This Latin maxim means that the later
law abrogates earlier laws not consistent with it. This principle has been
applied by the Supreme Court in several cases.
9. Repugnancy Rule: Repugnancy is an inconsistency or contradiction between
two or more parts of a legal instrument or instruments. It is Article 254 of
the Constitution of India that firmly entrenches the Doctrine of
Repugnancy in India.
10.
Mandatory & Directory Provisions: A mandatory statute may is one whose provisions or
requirement, if not complied with, will render the proceedings to which it
relates illegal and void, while a directory statute is one where non -
compliance will not invalidate the proceedings to which it relates.
03. Interpretations used in this judgment
In this judgment the Supreme Court has
applied the following primary rules of interpretation also among others.
LITERAL INTERPRETATION
The Supreme Court has held in this case
that “When the clause uses both the said
expressions simultaneously, it would not be reasonable or proper to construe
the word “acquired for use” as meaning the same thing as “already used”. Such a
construction would make the words “acquired for use” superfluous and a
surplusage. No such interpretation ought to be adopted by a Court. The words
“acquired for use” must be understood in their plain and ordinary meaning.
It is enough that the machinery/accessories/components which are used in the
factory or workshop (claiming the benefit of Section 4-A) are acquired for use
in any other factory or a workshop in India. It is not necessary to go further
and enquire whether that machinery/accessories/components were actually used in
any other factory or workshop in India.” The maxim ‘Lta scriptum est’ had an
application in this case.
STRICT INTERPRETATION
The Supreme Court has held in this case
that “It is repeatedly held by this Court
that a provision providing for an exemption or an exception as the case may be,
has to be construed strictly.” It is also declared that “in support of strict
construction of a provision concerning exemptions there is support of judicial
opinion to the view that exemptions from taxation have a tendency to increase
the burden on the other unexempted class of tax payers and should be construed
against the subject in case of ambiguity. It is an equally well known principle
that a person who claims an exemption has to establish his case.”
Again
the Supreme Court held that “A person invoking an exception or an exemption
provision to relieve him of the tax liability must establish clearly that he is
covered by the said provision. In case of doubt or ambiguity, benefit of it
must go to the State.”
The Supreme Court also observed, “The choice between a strict and a
liberal construction arises only in case of doubt in regard to the intention of
the legislature manifest on the statutory language. Indeed, the need to resort
to any interpretative process arises only where the meaning is not manifest on
the words are plain and clear and directly convey the meaning, there is no need
for any interpretation.” However it has on the contrary invented the
legislative intent as, “Indeed, there appears to be good reason behind the use
of both the said expression in the clauses. The Legislature, it is obvious,
wanted to avoid an enquiry into the factual issue of actual user where the
machinery (which expressions means machinery, accessories or components) is
acquired for use in any other factory or workshop in India. Once it is shown
that such machinery was acquired for use in any other factory or workshop in
India, the Legislature presumes use – a case of conclusive presumption. The
idea was to shut out enquires of the type now ordered by the High Court.”
LOGICAL INTERPRETATION
The
last said observation is also an example of logical interpretation as the
intention of legislature is logically deducted by the Court and as there is no
such wordings in the Act, its objects or reasons or elsewhere, and yet the
Court has held that, “The Legislature, it is obvious, wanted to avoid an
enquiry into the factual issue of actual user where the machinery (which
expressions means machinery, accessories or components) is acquired for use in
any other factory or workshop in India. Once it is shown that such machinery
was acquired for use in any other factory or workshop in India, the Legislature
presumes use – a case of conclusive presumption.”
OTHER FEATURES OF INTERPRETATION
The
Supreme Court also observed the following.
1.
“All the words used in the clause have to be give their due meaning. None of
them can be treated as a surplusage. It is not also possible to ignore the
words expressly employed in the said clause or to explain them away on notions
of one’s own reasonableness.”
2.
“Indeed, the need to resort to any interpretative process arises only where the
meaning is not manifest on the words are plain and clear and directly convey
the meaning, there is no need for any interpretation.”
3.
“The very definition contained in Explanation (i) uses both the expression
“factory or workshop” and “existing factory or workshop” at more than one place
which fact would be evident from a bare perusal of the said definition.
Wherever the Legislature wanted to refer to an existing factory or workshop, it
is not possible to read the words “acquired for use in any other factory or
workshop in India” to mean “acquired for use in any other existing factory or
workshop in India”. We see no reason to add any words to those employed in the
clause. It cannot also be said that such addition of word(s) is necessary to
avoid an absurdity.”
4.
“The clause uses all the three words – machinery, accessories or components.
The use of the word “or” indicates that use of either of them, which are
already used or acquired for use in any other factory or workshop in India,
would disqualify the factory or workshop from being called a “new unit” within
the meaning of Section 4-A. The clause does not say or indicate in any manner
that only where the entire machinery installed in the unit (claiming to the new
unit) has already been used or was acquired for use in any other factory or
workshop in India that the disqualification contained therein gets attracted.”
12. CONCLUSION
The interpretation used in this judgment is primarily a
literal but strict interpretation with a logical construction to determine the
true intent of the legislature. This case is basically a simple case wherein
the judges have not gone deep into the complexities of interpretation by
resorting to the ground of conclusive presumption available in exemption to tax
legislations in favour of the State. However, unlike judgments based on
adversarial arguments, the Court seems to counter the arguments of the
respondent with a presupposition that there is not much legal matter to dispute
in the subject-matter, in spite of the lower court having adjudged in favour of
the respondent.
Though this is a simple case of literal interpretation,
the core of the ratio decidendi of this judgment however, is the logical
interpretation that the legislative intent of the construction of the phrase in
the Explanation is to prevent the authorities in charge of issuing eligibility certificates from
being caught in endless factual disputes and to lessen the room for factual
controversies. By inventing such an interpretation, the Supreme Court
successfully curtailed the very scope of the litigation and adjudged in favour
of the State Committee, the appellant.
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