TaxTMI 
TaxTMI 
2009 (3) TMI 934
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....003. The brief facts are that both the present respondents manufacture ethyl alcohol from molasses. They applied for eligibility certificate for exemption of sales tax under rule 28A of the Haryana General Sales Tax Rules, 1975 (for short, "the Rules"). However their claims for exemption were rejected by the authorities, at various levels on different dates, on the ground that their units fell within the scope of entry 10 of negative list contained in Haryana Government notification dated February 11, 1994 (annexure P 4B). Feeling aggrieved, the respondents herein filed writ petitions, which have been allowed by a learned single judge of this court, leading to filing of the present appeals by the State of Haryana. Thus the sole question, which arose for the consideration of learned single judge and which we are required to examine in these appeals is: "Whether the respondents herein who are manufacturers of ethyl alcohol from molasses falls within entry 10 of the notification dated February 11, 1994, so as to disentitle them from claiming exemption from sales tax under rule 28A of the Rules?" The entries 10 of the notification dated March 9, 1992 and notificat....
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....tation sought to be placed by present appellant, State of Haryana, to the contrary, is accepted it would render the word "based" in the entry totally redundant, which would be contrary to the well-settled principles of interpretation. The learned single judge relied upon the judgment of the honourable Supreme Court in Aswini Kumar Ghose v. Arabinda Bose reported in [1953] SCR 1, wherein it was held that it is not a sound principle of construction to brush aside words in a statute as being inapposite surplusage, if they can have appropriate application in circumstances conceivably within the contemplation of the statute. Regarding the question, as to what does the exception contained in part (ii), i.e., "except non-molasses alcohol industries" exclude from the main clause in part (i), learned single judge held that it excludes only such non-molasses industries, which in the first place are covered by the main clause. The exception was held to take out industries, based on alcohol manufactured from non-molasses, from the ambit and scope of the main clause and the entry was held to include industries based on ethanol or ethyl alcohol manufactured from molasses. The learned single j....
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....lude manufacture of ethyl alcohol in the negative list. Relying on the judgment of the honourable Supreme Court in the case of Manickam and Co. v. State of Tamil Nadu reported in [1977] 39 STC 12; [1977] 1 SCC 199, learned counsel argued that the subsequent notification can be looked into to interpret and construe the earlier provision. We are not impressed by the argument of the learned D.A.G. In Manickam and Co.'s case [1977] 39 STC 12 (SC); [1977] 1 SCC 199 what the honourable Supreme Court held is that subsequent legislation can be looked into, if the amendment is by way of clarification of an earlier ambiguous provision and clarified what was implicit in the earlier provisions, even if the amendment is not given retrospective effect. The relevant portion of the judgment is reproduced hereunder for the facility of reference: (page 18 of STC) "... As already mentioned above, the Legislature as a result of the amendment, clarified what was implicit in the provisions as they existed earlier. An amendment which is by way of clarification of an earlier ambiguous provision can be a useful aid in construing the earlier provision, even though such amendment is not given retro....
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.... respondents-assessees claiming the relief under the exemption provision have to show that they come within the language of the exemption. In order to deal with contention of the learned counsel we deem it proper to refer to the following observations of the honourable Supreme Court in the said case: (page 230 of 82 STC) "6. We are of opinion that the view taken by the excise authorities as well as by the Tribunal proceeds upon too narrow in interpretation of the notification. It is true, as Mr. Ganguli contended, that an assessee claiming relief under an exemption provision in a taxing statute has to show that he comes within the language of the exemption. But, in trying to understand the language used by an exemption notification, one should keep in mind two important aspects: (a) the object and purpose of the exemption and (b) the nature of the actual process involved in the manufacture of the commodity in relation to which exemption is granted. So far as (b) is concerned, it is common ground before us that rice bran oil as such is not directly used in the manufacture of soap. Rice bran oil contains glycerol and other impurities which have to be removed by a process of hyd....
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....is 'soap made from indigenous rice bran oil' and is entitled to the exemption under the notifications to the extent permissible thereunder." (emphasis Here italicised. supplied) We are of the considered opinion that what the honourable Supreme Court held in the aforementioned case is that while ordinary meaning of the words used should be taken into account and words should be construed literally but they should be given their fullest amplitude and interpreted in the context in which they are used. Further in trying to understand the language used by an exemption notification, one should keep in mind inter alia the object and purpose of the exemption. From the aforementioned observations of the honourable Supreme Court it cannot be deduced, that the intention of the State be read into the enactment by doing violence to the plain and clear meaning of the words used, so as to import what actually is not part of the entry, solely on the basis of the intention of the State. In the present case the words used in the notifications are clear and unambiguous. The learned single judge has rightly interpreted the words on the basis of their literal meaning without adding or subtra....
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....cted therein which but for the proviso would be within the purview of the enactment. In other words, a proviso cannot be torn apart from the main enactment nor can it be used to nullify or set at naught the real object of the main enactment." The learned counsel for the State further argued that as per the law laid down by the honourable Supreme Court in the case of Pardeep Aggarbatti v. State of Punjab reported in [1997] 107 STC 561; AIR 1998 SC 171, when some articles are grouped together in the list under the Schedule of sales tax, each word of the entry draws colour from the other words therein. On the basis of the said judgment it is averred that first part of entry 10, viz., "ethanol (ethyl alcohol) based industries" would draw colour from the second part, i.e., "except non-molasses alcohol industries". The paras 9 and 10 (paras 10 and 11 of STC) of the aforementioned judgment relied upon by the appellants reads as under: "9. Entries in the Schedules of sales tax and excise statutes list some articles separately and some articles are grouped together. When they are grouped together, each word in the entry draws colour from the other words therein. This is the principle ....
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....ovision under consideration". Leaned counsel emphasized that it must be inferred that any industry which is based on the fundamental ingredient used in the industries, i.e., molasses, cannot be exempted from the liability of paying sales tax. We cannot accept this contention of the learned counsel for the appellant-State of Haryana. The words "based" is derived from word "base" which as per Oxford Dictionary means "main or important ingredient". Thus literally construed the entry means an industry of which the main or important ingredient is ethanol or ethyl alcohol. We agree with the learned single judge that it refers to a stage subsequent to the manufacture of ethanol or ethyl alcohol. Entry thus refers to only such industries which consume ethyl alcohol as an input and not industries which manufacture ethyl alcohol. Any other interpretation would render the word "based" in the entry totally redundant, which cannot be accepted as correct interpretation. The learned State counsel relying on the judgments of the honourable Supreme Court in State Level Committee v. Morgardshammar India Ltd. reported in [1996] 101 STC 1, Commissioner, Trade Tax, U.P. v. Dhampur Sugar Mills ....
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.... Jain, learned Senior Counsel for the respondent in LPA No 413 of 2003, has supported the judgment of the learned single judge by arguing that words in taxing statute have to be interpreted as such and there is no scope for presumptions, assumptions or intendments as was sought to be done by the appellant, State of Haryana. He relied upon the following observations of the honourable Supreme Court in different cases in this regard: "11. . . . In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed: it cannot imply anything which is not expressed; it cannot import provisions in the statutes so as to supply any assumed deficiency." (Commissioner of Sales Tax, U. P. v. Modi Sugar Mills Ltd. [1961] 12 STC 182 (SC); AIR 1961 SC 1047) "29. It is no doubt true that in construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of....
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....e-Cochin and Coorg, Bangalore v. Indo-Mercantile Bank Ltd. reported in [1959] 36 ITR 1 (SC); AIR 1959 SC 713: "10. The territory of a proviso therefore is to carve out an exception to the main enactment and exclude something which otherwise would have been within the section. It has to operate in the same field and if the language of the main enactment is clear it cannot be used for the purpose of interpreting the main enactment or to exclude by implication what the enactment clearly says unless the words of the proviso are such that that is its necessary effect. " The learned counsel also contended that a proviso cannot be referred to as independent of the subject-matter of main clause and is always subordinate to the main enactment. He relied upon the following observations of the honourable Supreme Court in this regard: "18. . . . A proviso must be limited to the subject-matter of the enacting clause. It is a settled rule of construction that a proviso must prima facie be read and considered in relation to the principal matter to which it is a proviso. It is not a separate or independent enactment. 'Words are dependent on the principal enacting words, to w....