TaxTMI 
TaxTMI 
TaxTMI 
2020 (6) TMI 685
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...., that though the purchase turnover, with respect to the purchase of empty bottles from unregistered dealers under bought note, is exigible to purchase tax under Section 7-A of the Tamil Nadu General Sales Tax, 1959 but, the assessee is entitled for the benefit of Clarifications dated 09.11.1989 and 27.12.2000 issued by the revenue till the same were withdrawn prospectively by the Clarification dated 28.01.2002 and therefore, the revenue is not entitled to levy purchase tax for the said turnover of purchase of empty bottles for the assessment year 1996-97. 2.1. The assessee has filed another set of appeals in Civil Appeal Nos. 4416-4419 of 2014 against the order of the High Court dated 05.12.2013, passed in Tax Case (Revision) Nos. 1667,1669, 1857 of 2008 and 13 of 2009, wherein the High Court has held that the assessee is liable to pay purchase tax under Section 7-A of the Act for the assessment years 1986-87 to 1989-90 on the turnover of purchase of empty bottles from the unregistered dealers while following its aforesaid earlier order dated 10.09.2004. 3. Put in a nutshell, these matters involve the interpretation of Section 7-A of the Tamil Nadu Act, providing for levy of pur....
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....ought notes were the bottles which were already used, filled and sold for a price and continued to be available for re-use and further trading. 5.2. It had also been the case of assessee that as per Rule 29 of the Tamil Nadu Brewery Rules,1983, the manufacturer had the option of filling the Beer either in bottles or casks or even kegs; that the entire Beer and IMFL manufactured by assessee was sold only to TASMAC, who had the exclusive privilege of supplying the liquor by wholesale for the entire State of Tamil Nadu. The assessee had also been offering cash discount for early settlement of bills by TASMAC. 6. For the assessment year 1996-97, the assessee was assessed on the files of the revenue on a total turnover of Rs. 2,52,33,32,932/- and Rs. 2,49,65,22,854/- respectively by the assessment order dated 21.10.1998. Thereafter, the Assessing Officer, by a notice dated 30.04.1999, proposed to levy purchase tax under Section 7-A of the Act on the purchase of empty bottles from unregistered dealers under bought note through salesman permits, on a sum of Rs. 24,78,20,465/- at the rate of 16% with surcharge, additional surcharge as also additional tax at the rate of 2.50%. 6.1. In hi....
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....inal orders on the aforesaid notice dated 30.04.1999 by the AO, issued his Clarification dated 27.12.2000 that purchase of empty bottles could not be made liable to be charged under Section 7-A of the Act during the assessment years 1991-92,1993-94, 1994-95 and 1995-96 as the Clarification dated 09.11.1989 was in force at the relevant time. 6.4. However, the PCCT later on re-examined the issue in light of the decision of Tamil Nadu Taxation Special Tribunal, Chennai in the case of Appollo Saline Pharmaceuticals (P) Limited v. State of Tamil Nadu: reported in (2000) 120 STC 493, and stated by his Clarification dated 28.01.2002, in modification of the earlier Clarifications, that the assessee was liable to tax under Section 7-A of the Act for the purchase of empty bottles from unregistered dealers that were used for packing of Beer/IMFL manufactured by it. 6.5. Apart from the above, the AO, by his notice dated 05.02.2002, proposed to revise the earlier assessment for the assessment year 1996-97 by disallowing the exemption on cash discount allowed by the assessee to TASMAC and to levy tax on the said cash discount, with surcharge and additional surcharge @ 15% and 5% respectively a....
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....rifications issued earlier. It was also observed that the rule applicable for tax on the bottles could be extended to casks and kegs too and, by exclusion of casks and kegs, the tax applicable on bottles alone cannot be set aside or withdrawn. The Tribunal further observed that the decision of the jurisdictional High Court in Associated Pharmaceutical Industries Private Ltd. v. The State of Tamil Nadu: (1986) 63 STC 316 was not applicable as the same was rendered prior to the amendment of Section 7-A(1)(a) of the Act by the Tamil Nadu Act No. 78 of 1986 effective from 01.01.1987; and with insertion of the word "use" by way of amendment, the meaning conveyed by the said section was different from the meaning conveyed earlier. Thus, while proceeding in tune with the Clarification dated 28.01.2002, the Tribunal refused to interfere with the order dated 27.03.2002. 8. Being aggrieved by the Tribunal's order dated 26.06.2002, the assessee filed the writ petition, being W.P. No. 25081 of 2002, before Madras High Court, seeking a writ of certiorarified mandamus for quashing the proceedings in question while directing the AO to pass fresh orders giving effect to the Clarifications/Circular....
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....d keeping in mind the object of Section 7-A of the Act, as amended, as observed in STATE OF TAMIL NADU v. M.K. KANDASWAMI & OTHERS, [1975] 36 STC 191, viz., to plug the leakage and prevent evasion of tax with respect to purchase of empty bottles purchased from unregistered dealers under the bought note, we reject the contention of Mr. C.Natarjan that the purchase turnover for the purchase of empty bottles from unregistered dealers under the bought note is not attracted for levy of purchase tax under Section 7-A of the Act." 8.3. However, with respect to the second question, the High Court, inter alia, observed that the Clarification dated 27.12.2000 gained statutory force in view of Section 28-A of the Act, which was inserted by the amendment with effect from 06.11.1997. Further, while relying on various decisions including that of the Constitution Bench of this Court in the case of Collector of Central Excise, Vadodra v. Dhiren Chemical Industries : (2002) 126 STC 122, it was also observed that even though the Clarification dated 09.11.1989 was executive in nature, the same was binding on the authorities till the concessions given to the assessee under the Clarification were with....
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....count on the price of goods sold cannot be included in the turnover for levy of tax." 8.5. Therefore, the High Court, particularly in view of its answers to question Nos. (ii) and (iii) as above, allowed the writ petition filed by the assessee. 9. Being aggrieved by the order dated 10.09.2004 so passed by the High Court in W.P. 25081 of 2002, the revenue has filed the appeal by special leave, being Civil Appeal No. 7164 of 2013 questioning the grant of relief to the assessee. On the other hand, the assessee has also filed the appeal by special leave, being Civil Appeal No. 7165 of 2013, against this very order insofar as the High Court has decided the principal question relating to the applicability of Section 7-A of the Act against it. Rival Submissions The Assessee 10. As regards the question as to whether the purchase turnover of empty bottles purchased from unregistered dealers is exigible to purchase tax, the learned senior counsel for the assessee has submitted that the question of levy of purchase tax on this purchase turnover does not arise while making elaborate reference to the object and scheme of Section 7-A of the Tamil Nadu Act; to the process of bottling of Beer....
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....efore being used for filling the liquor, after being used for this purpose, after liquor was consumed by the consumers, and even when these were cleaned and re-used by the assessee; and that the character and identity of bottles as bottles was never lost, they were capable of repeated use, and the assessee was cleaning and re-using such bottles. The learned senior counsel has referred to the Tamil Nadu Brewery Rules, 1983 and the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981 to submit that it is manufactured Beer/IMFL, which is filled in bottles in a separate bottling section and, so far as the manufacture of Beer/IMFL is concerned, the same had already taken place before bottling and hence, bottles are not 'consumed or used in the manufacture' of liquor for sale. The learned senior counsel has also referred to the decision of this Court in the case of State of Uttar Pradesh and Ors. v. Mohan Meakin Breweries Ltd. and Anr.: (2011) 13 SCC 588 to submit and re-emphasize that process of bottling commences only after completion of manufacturing of Beer when bulk Beer is transferred from the brewery for bottling; and manufacturing of liquor and putting manufactured co....
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....ch goods in the manufacture of other goods for sale or otherwise'; and the scope of clause (a) was subsequently widened w.e.f. 06.11.1997 when new clause (a) was substituted by the Tamil Nadu General Sales Tax (Sixth Amendment) Act 1997 to read as 'consumes or uses such goods in or for the manufacture of other goods for sale or otherwise' but, during the period relevant for the present case, the expression "or for" was not there in the statute. According to the learned counsel, when Beer/IMFL had already been manufactured before bottling, the bottles were neither consumed nor used in manufacture of the contents; and nothing turns upon the expressions "consumes" or "uses" inasmuch as in both the situations, such consumption or use was required to be 'in the manufacture of other goods', which is not the case here. 10.3 As regards the decisions referred to in the impugned orders, the learned senior counsel for the assessee has submitted that the said decisions do not operate against the contentions of the assessee. 10.3.1. The learned senior counsel would submit that in the case of M. K. Kandaswami (supra), this Court had only analysed the scheme of Section 7-A of the Act, as then e....
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....enior counsel has further submitted that the phraseology considered in the matter of Appollo Saline Pharmaceuticals (supra) was 'in or for the manufacture', which was the position obtainable after the amendment of Section 7-A of the Act w.e.f. 06.11.1997 whereby, the expression "or for" was inserted in clause (a) thereof but, that was not the position during the period involved in the present case. The learned counsel has also submitted that in the said matter, the High Court did not even consider the relevant decisions of this Court wherein the relevant expressions have been considered and interpreted by this Court including that in the case of Hotel Balaji (supra) wherein, according to the learned counsel, this Court had considered the provisions of Haryana Act which are in pari materia with the provisions of the Tamil Nadu Act in relation to the levy of purchase tax. The learned counsel has further submitted that in Appollo Saline Pharmaceuticals (supra), reference was only made to decision of this Court in the case of J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur and Ors.: (1965) 16 STC 563 though the issue involved in the said matter was completely....
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....ms, Mumbai v. Ashish Bajpai: 2007 (217) ELT 163. The revenue 12. The learned Additional Advocate General appearing for the revenue has countered the submissions made on behalf of the assessee while again making elaborate reference to the object and scheme of Section 7-A of the Tamil Nadu Act as also its interpretation and application in various decisions. 12.1 It has been argued on behalf of the revenue that the amendment to Section 7-A of the Act and addition of the words "or uses" in clause (a) thereof had broaden the scope of this provision as also the jurisdiction of assessing authorities to levy purchase tax on any commodity, which had not suffered tax earlier and which has been used in the process of manufacturing any good to be sold. Therefore, the assessee is liable to pay purchase tax under Section 7A of the Act because the bottles purchased from unregistered dealers were not taxed at the purchase point and charging of such purchase tax does not amount to double taxation. 12.2 The learned AAG has referred to the decision in M.K. Kandaswami (supra) to submit that therein, this Court has made it clear that Section 7-A of the Act is a charging section and has explained t....
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....toring before it is fit to be sold. In regard to Beer bottle, several of its unique characteristics have been recounted on behalf of revenue to submit that the same would identify it only as Beer bottle and nothing else, for example, (i) the thickness of the glass used in the Beer bottle; (ii) the colour of the glass of the bottle, which is a quality attached to specific brands; (iii) the grooves on the neck of the bottle, which are made only for an aluminium cap and not for any other covering, thereby making the bottle fit only for refilling of Beer; and (iv) the length, width, breadth, etc. of the bottle, which is specific to every Beer brand. 12.5 The learned AAG for revenue has further relied upon the interpretation of Section 6-A(ii)(a) of the Andhra Pradesh General Sales Tax Act, 1957 by the Constitution Bench of this Court in the case of Nandanam Construction Co. (supra) with the submissions that the said provision has been in pari materia with Section 7-A(1)(a) of the Tamil Nadu Act and this Court held that, when the goods cease to exist in the original form or cease to be available in the State for sale or purchase, the purchasing dealer of such goods is liable to....
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.... been that the Clarifications dated 09.11.1989 and 27.11.2000 became contrary to the law declared; and it had been in this background that the Clarification dated 28.01.2002 came to be issued. The learned AAG would submit that the interpretation given by the High Court of Madras in Appollo Saline Pharmaceuticals (supra), which is in line with the law declared by this Court in Premier Breweries (supra), gave clarity to the application of Section 7-A of the Act and hence, to give effect to the real meaning of Section 7-A of the Act, the Clarification dated 28.01.2002 ought to be considered applicable because the law as declared would apply across the board and not only prospectively. 14. We may notice another ground taken by the revenue in the petition seeking leave to appeal that the High Court has erred in holding that the socalled 'cash discount' falls under the ambit of Explanation (2)(iii) of Section 2(r) of the Act and therefore, exemption is to be allowed thereupon. The Points for Determination 15. In comprehension of what has been noticed hereinabove, the principal point calling for determination in these appeals is as to whether purchase tax under Section 7-A of the Act i....
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.... a tax for each year in accordance with the provisions of this Act. *** *** *** (7) Notwithstanding anything contained in sub-sections (2), (2A), (2B) or (3) but subject to sub-sections (1) and (8), where goods are sold or purchased together with the containers or packing materials the turnover of such goods shall include the price, cost or value of such containers or packing materials, and the packing charges, whether such price, cost or value or packing charges, are charged separately or not, and tax shall be levied thereon at the rate applicable to the goods contained or packed as if such containers or packing materials were the parts of the goods sold or purchased. (8) Where the sale or purchase of goods contained in any container or packed in any packing material is exempt from tax at the hands of the dealer, then the price, cost or value of such container or packing material and the charges for packing forming part of the turnover of the goods under sub-section (7) shall not be liable to tax. Explanation: For the purposes of sub-sections (7) and (8), "containers" includes gunny bags, tins, bottles or any other containers." 17.2. As noticed, Section 7-A was inserted i....
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....3, every dealer who in the course of his business purchases from a registered dealer or from any other person, any goods, (the sale or purchase of which is liable to tax under this Act) in circumstances in which no tax is payable under sections 3 or 4, as the case may be, not being a circumstance in which goods liable to tax under sub-section (2) of section 3 or section 4, were purchased at a point other than the taxable point specified in the First or the Second Schedule and either, (a) consumes or uses such goods in the manufacture of other goods for sale or otherwise; or (b) disposes of such goods in any manner other than byway of sale in the State; or (c) despatches or carries them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, shall pay tax on the turnover relating to the purchase as aforesaid at the rate mentioned in sections 3 or 4, as the case may be." 17.2.3. Another aspect of amendment to the provision aforesaid by Tamil Nadu Act No. 60 of 1997 w.e.f. 06.11.1997 may also be taken note of with a caveat that this amendment is not directly applicable to the present case pertaining to the asses....
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....every stage and, having regard to the questions involved, appropriate it would be to take note of the relevant ratio decidendi from these decisions. 19. As regards the decisions of jurisdictional High Court dealing with Section 7-A (1) of the Act, in the case of Associated Pharmaceutical Industries (supra), the assessee had purchased and used the bottles for manufacture and sale of medicines, drugs or syrups. It was held by the High Court that though without bottling, the drugs and syrups manufactured could not be sold but, that could not be a reason for holding that the process of manufacture of drugs and syrups was not complete unless they were bottled or put in suitable containers and hence, it cannot be said that the bottles had been used up in the process of manufacture; and consequently, the purchase turnover of empty bottles could not be brought to charge under Section 7-A (1) (a) of the Act. 20. The other decision concerning the provision contained in Section 7-A (1) of the Act but after yet another amendment to clause (a) had been by the Madras High Court in the case of Appollo Saline Pharmaceuticals (supra). Therein, the assessee was engaged in manufacturing and marketi....
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....was the original purpose of the provision, the subsequent amendment to that section in the year 1987 by addition of the words used in section 7-A(1) (a) and enlarging it further by a further amendment with effect from November 6, 1997 would indicate that the object of the Legislature is not confined to mere recovery of tax, which was not recovered by reason of the circumstances in which the purchase was made. After the amendment to section 7-A(1) (a) recovery of purchase tax is permissible even in cases where the goods which had not suffered tax, at the time of purchase are used by the dealer and are subsequently disposed of by the dealer in circumstances where the value of the turnover relating to those goods is also subject to tax by deeming the same as forming part of the turnover of other taxable goods. 8. It is no doubt true that the turnover of the bottles is, byreason of section 3(7), deemed to be part of the turnover of the assessee relating to the I.V. fluids and by reason of the inclusion of such turnover of the bottles in that turnover, the turnover relating to these bottles is also subjected to tax. Such inclusion of the turnover relating to bottles, however, does not....
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....se, however, demonstrated that no such additional burden is cast on the assessee. On the other hand, not levying the tax would only amount to the assessee gaining an advantage, which the law did not intend to provide." (emphasis in bold supplied) 21. Turning over to the cited decisions of this Court, it may be observed that the 3-Judge Bench decision of this Court in the case of M.K. Kandaswami (supra) has a material bearing and is of utmost significance because the root purpose as also the sweep of this provision for levy of purchase tax have been succinctly explained by this Court while illuminating several of its basic and essential ingredients. 21.1. In the case of M. K. Kandaswami (supra), the respondent dealers had purchased a variety of goods, namely, arecanuts, gingelly seeds, turmeric, grams, castor seeds and butter in such circumstances where their sales were not liable to tax in the hands of the respective sellers although the goods were such, whose sale or purchase was generally liable to tax under the Act. Against the respondent dealers, either pre-assessment proceedings had been initiated or assessments had been made under Section 7-A of the Act on the purchase tur....
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....e a charging as well as a remedial provision. Its main object is to plug leakage and prevent evasion of tax. In interpreting such a provision, a construction which would defeat its purpose and, in effect, obliterate it from the statute book, should be eschewed. If more than one construction is possible, that which preserves its workability and efficacy is to be preferred to the one which would render it otiose or sterile. The view taken by the High Court is repugnant to this cardinal canon of interpretation." 21.4. This Court further referred to the decision in the case of Ganesh Prasad Dixit (supra) and observed that Section 7 of the Madhya Pradesh Act, as considered therein, though not carrying exact language as that of Section 7-A of the Tamil Nadu Act but their substance and object were the same. This Court also noticed that in Ganesh Prasad Dixit, it was held that the appellants (building contractors), who were purchasing building materials which were taxable under the Act and had been using them in the course of their business, had consumed the materials otherwise than in the manufacture of goods for sale and for a profit motive and hence, purchase price was taxable on the ....
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....d Dixit (supra) on one hand and CST v. Pio Food Packers: 1980 (Supp) SCC 174 on the other. 23.1. For proper comprehension of the ratio of Nandanam Construction Co. (supra), pertinent it shall be to first take note of the decisions in Ganesh Prasad Dixit and Pio Food Packers (supra) and the area of conflict therein. 23.1.1. As noticed hereinbefore, in the case of Ganesh Prasad Dixit, the appellant, a firm of building contractors and registered as dealer under the Madhya Pradesh Act, was assessed to tax with respect of goods purchased by it for use in its construction business. As regards the issue relating to the imposition of purchase tax under Section 7 of the Madhya Pradesh Act, a 3Judge Bench of this Court examined the relevant part of Section 7 of the Madhya Pradesh Act that read as under (at pp. 346-347 of STC):- "Every dealer who in the course of his business purchases any taxable goods, in circumstances in which no tax under section 6 is payable on the sale price of such goods and either consumes such goods in the manufacture of other goods for sale or otherwise or disposes of such goods in any manner other than by way of sale in the State or despatches them to a place o....
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....distinguishable. The answer to that argument must be sought in the terms of section 7. The phraseology used in that section is somewhat involved, but the meaning of the section is fairly plain. Where no sales tax is payable under section 6 on the sale price of the goods, purchase tax is payable by a dealer who buys taxable goods in the course of his business, and (1) either consumes such goods in the manufacture of other goods for sale, or (2) consumes such goods otherwise, or (3) disposes of such goods in any manner other than by way of sale in the State, or (4) despatches them to a place outside the State except as a direct result of sale or purchase in the course of interState trade or commerce. The assessees are registered as dealers and they have purchased building materials in the course of their business; the building materials are taxable under the Act, and the appellants have consumed the materials otherwise than in the manufacture of goods for sale and for a profit-motive. On the plain words of section 7 the purchase price is taxable. Mr Chagla for the appellants urged that the expression "or otherwise" is intended to denote a conjunctive introducing specific alternativ....
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....The Court did not accept this contention of revenue while observing that on true construction, the clause in question was only speaking of goods consumed in the manufacture of other goods for sale or of goods consumed in the manufacture of other goods for purposes other than sale. The Court, inter alia, observed, held and concluded as follows (at pp. 66-67 of STC):- ".....Although a degree of processing is involved in preparing pineapple slices from the original fruit, the commodity continues to possess its original identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it on adding sugar to preserve it. It is contended for the revenue that pineapple slices have a higher price in the market than the original fruit and that implies that the slices constitute a different commercial commodity. The higher price, it seems to us, is occasioned only because of the labour put into making the fruit more readily consumable and because of the can employed to contain it. It is not as if the higher price is claimed because it is a different commercial commodity. It is said that pineapple slices appeal to a different sector of the trade and that when a c....
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.... matter being placed before the Constitution Bench. 23.3. Keeping the aforesaid background in mind, we may now revert to the decision in Nandanam Construction Co. wherein, the Constitution Bench of this Court resolved the divergence while approving the view in Ganesh Prasad Dixit. 23.3.1. In Nandanam Construction Co. (supra), the background factual aspects had been that the respondents, who were engaged in building of flats and houses, had bought the material such as sand, bricks and granite from unregistered dealers and without payment of sales tax. The Assistant Commissioner of Commercial Taxes called upon the respondents to produce their books of accounts while proposing to hold them liable for purchase tax under Section 6-A of Andhra Pradesh Act. On the proposed action being challenged, the High Court held that in order to attract Section 6-A of the Andhra Pradesh Act, there ought to be consumption of the original goods for the purpose of manufacture of other goods for sale or for purposes other than sale; and in the absence of such consumption, the respondents were not liable to purchase tax. For this proposition, the High Court relied on the decision in Pio Food Packers (su....
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....ic that once the goods were utilized in construction of buildings, they ceased to exist or ceased to be available in the original form for sale or purchase so as to attract the tax. The Constitution Bench observed and held as under (at p. 431 of STC): "10. We are concerned in this case only with clause (a) of sub-section (ii) of section 6-A, that is, either consumption of such goods in the manufacture of other goods for sale or otherwise. Clause (ii) of section 6-A of the Act postulates levy of tax on purchase of goods from a person other than a registered dealer for consumption or disposal or despatch of goods outside the State. So the scheme of clause (ii) of section 6-A of the Act is that when the goods cease to exist in the original form or cease to be available in the State for sale or purchase, the purchasing dealer of such goods is liable to tax if the seller is not or cannot be taxed. To our mind, it appears that the object of section 6-A(ii)(a) of the Act is to levy purchase tax on goods consumed either for the purpose of manufacture of other goods for sale or consumed otherwise. If the view in Pio Food Packers [1980] 46 STC 63 (SC) ; [1980] 3 SCR 1271, is accepted the r....
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....any manner otherwise than by way of sale whether within the State or in the course of inter-State trade or commerce or within the meaning of subsection (1) of section 5 of the Central Sales Tax Act, 1956, in the course of export out of the territory of India, (b) exports them, in the circumstances in which no tax is payable under any other provision of this Act, there shall be levied, subject to the provisions of section 17, a tax on the purchase of such goods at such rate as may be notified under section 15." *** *** *** After it was amended by the aforesaid amendment Act, sub-sections (1) and (2) of section 9 read as follows: "9. Liability to pay purchase tax.- (1) Where a dealer liable to pay tax under this Act,- (a) purchases goods, other than those specified in Schedule B, from any source in the State and uses them in the State in the manufacture of goods specified in Schedule B; or (b) purchases goods, other than those specified in Schedule B, from any source in the State and uses them in the State in the manufacture of any other goods and either disposes of the manufactured goods in any manner otherwise than by way of sale in the State or despatches the manufactu....
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....n the purchase of such goods at such rate, as may be notified under section 15. Now, what does the above analysis signify? The section applies only in those cases where (a) the goods are purchased (for convenience sake, I may refer to them as raw material) by a dealer liable to pay tax under the Act in the State, (b) the goods so purchased cease to exist as such goods for the reason they are consumed in the manufacture of different commodities and (c) such manufactured commodities are either disposed of within the State otherwise than by way of sale or despatched to a place outside the State otherwise than by way of an inter-State sale or export sale. It is evident that if such manufactured goods are not sold within the State of Haryana, but yet disposed of within the State, no tax is payable on such disposition; similarly, where manufactured goods are despatched out of State as a result of an inter-State sale (sic) or export sale, no tax is payable on such sale. Similarly again where such manufactured goods are taken out of State to manufacturers' own depots or to the depots of his agents, no tax is payable on such removal..... *** *** *** ...... To repeat, the scheme of sec....
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....'where there are different statutes in pari materia though made at different times, or even expired, and not referring to each other, they shall be taken and construed together, as one system and as explanatory of each other'. * * * The application of this rule of construction has the merit of avoiding any apparent contradiction between a series of statutes dealing with the same subject; it allows the use of an earlier statute to throw light on the meaning of a phrase used in a later statute in the same context; it permits the raising of a presumption, in the absence of any context indicating a contrary intention, that the same meaning attaches to the same words in a later statute as in an earlier statute if the words are used in similar connection in the two statutes; and it enables the use of a later statute as parliamentary exposition of the meaning of ambiguous expressions in an earlier statute." 26.1. We may, however, usefully add a caveat in regard to the application of the doctrine of pari materia, as entered in the same classic Principles of Statutory Interpretation by Justice G.P. Singh20 as follows: "It is settled law that words used in a particular statute cannot ....
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....an by way of sale in the State, or (c) despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, shall pay tax on the turnover relating to purchase aforesaid at the same rate at which but for the existence of the aforementioned circumstances, the tax would have been leviable on such goods under section 5 or section 6 Madhya Pradesh Act Section 7 Every dealer who in the course of his business purchases any taxable goods, in circumstances in which no tax under section 6 is payable on the sale price of such goods and either consumes such goods in the manufacture of other goods for sale or otherwise or disposes of such goods in any manner other than by way of sale in the State or despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, shall be liable to pay tax on the purchase price of such goods at the same rate at which it would have been leviable on the sale price of such goods under section 6...... Haryana Act 9. Liability to pay purchase tax.- (1) Where a dealer liable to pay tax under this Act,- (a) purc....
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....the effect of charging sales tax on bottles at the time of sale by the assessee, at the rate applicable to its contents but cannot take any assistance from the same for the purpose of deducing the basic ingredients of Section 7-A of the Tamil Nadu Act, as in force during the assessment year in question. Having said so, we may look at the principles available in the decisions of this Court dealing with either Section 7-A of the Tamil Nadu Act as earlier existing or the provisions in other enactments dealing with the same subject of the levy of purchase tax. 29. Now reverting to the cited decisions of this Court, we may at once observe that so far the decision in Hotel Balaji (supra) is concerned, reliance on the above extracted paragraphs on behalf of assessee has been entirely misplaced because the provision of purchase tax in the Haryana Act, as interpreted in Hotel Balaji, cannot be said to be in pari materia with Section 7A of the Tamil Nadu Act inasmuch as, in the phraseology of Section 9 of the Haryana Act, the expression "or otherwise", qualifying the action of "manufacture" (as available in Tamil Nadu Act) had not been there. To be more specific, the referred observations i....
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....dment of this provision (w.e.f. 01.01.1987), with which we are concerned in this case, has only enlarged its width by insertion of the expression "or uses" after the expression "consumes" and thereby, not only consumption but even use in the manner envisaged by the provision would provide coverage thereunder. Therefore, when the later amendment has not altered the basics of Section 7-A of the Act and had only enlarged its scope, the principles applicable to the present case could be culled out from the enunciation in M. K. Kandaswami, with necessary variation, rather enlargement. 31. As held in M. K. Kandaswami (supra), Section 7-A of the Act is a charging as well as a remedial provision, its main object being to plug leakage and prevent evasion of tax; and in interpreting such a provision, a construction which would defeat its purpose or render it otiose should be eschewed. As regards workability of Section 7-A of the Act, this Court catalogued its ingredients in a point-wise break up and pointed out that it would apply only if all such ingredients are cumulatively satisfied. We have extracted the analysis so made by this Court hereinbefore . The same analysis shall apply to the ....
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....aid Section 6-A of the Andhra Pradesh Act either. In other words, the phraseology examined by the Constitution Bench in Nandanam Construction Co. was akin to that of Section 7-A of the Tamil Nadu Act as existing earlier and as examined in M.K. Kandaswami. Further, noticeably, in M.K. Kandaswami, the 3-Judge Bench held that the decision in Ganesh Prasad Dixit, wherein the provision contained in Section 7 of the Madhya Pradesh Act had been interpreted by this Court, was apposite guide for construing Section 7-A of the Tamil Nadu Act; and then, in Nandanam Construction Co., the Constitution Bench approved the enunciation in Ganesh Prasad Dixit as regards the interpretation of the expression "or otherwise" while making it absolutely clear that this expression "or otherwise" provided alternative to the expression "manufacture" and not to the expression "sale"; and the converse interpretation as regards this expression "or otherwise" in Pio Food Packers was overruled. The provision in Section 7 of the Madhya Pradesh Act had also been similar to the original Section 7-A of the Tamil Nadu Act. 33.1. As noticed, by the amendment with effect from 01.01.1987, the scope of Section 7-A (1) has....
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....ients/elements and relevant principles, we may now embark upon the enquiry as to whether purchase tax under Section 7-A of the Act is leviable over the turnover in question. 36. As noticed, for the purpose of its business of manufacture and sale of Beer and IMFL, the assessee had purchased empty bottles from unregistered dealers situated outside the State as well as from non-dealers for the bottling of Beer and IMFL. The assessee would assert that purchase tax on the turnover in question is not leviable for the reason the said empty bottles were recycled after use by the consumers and were re-filled with Beer/IMFL; and that the said bottles had not been consumed or used in the manufacture of liquor and they were only used as containers in which already manufactured liquor was bottled for carrying and sale. The counter stand of revenue is that use of the said bottles is imperative in the manufacture of Beer/IMFL and packaging of Beer/IMFL in glass bottles has to be seen as an inseparable composite unit; and therefore, purchase tax on the turnover of purchase of such empty bottles is leviable, for being covered by Section 7-A (1) (a) of the Act. 36.1. The assessee has urged another....
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....i.e., as to whether the activity in question falls within the ambit of clause (a) of Section 7-A (1) of the Act? As already noticed, as per the language used, this provision comes in operation when the dealer 'consumes or uses such goods in the manufacture of other goods for sale or otherwise'. Hence, the activity in question would be so covered if any one of the four elements of clause (a) exists, i.e., (i) if the goods in question are consumed in manufacture of other goods for sale; or (ii) if they are consumed otherwise; or (iii) if they are used in manufacture of other goods for sale; or (iv) if they are used otherwise. 39. In view of their intrinsic connectivity, we may first examine the elements (i) and (iii) and shall examine the other elements a little later. Now, in order to examine as to whether any of these elements (i) or (iii) exists or not, we may look at the meaning and connotation of the expressions "consume", "use" and "manufacture" employed in clause (a) of sub-section (1) of Section 7-A of the Act with a little reference to the etymology related with these expressions as also to the semantics related with the preposition "in". 39.1. As per Concise Oxford English....
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....parts whereof may be extracted as under:- "'MANUFACTURE' implies a change, but every change is not manufacture and yet every change of an article is the result of treatment labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use.... Conversion of raw materials into a finished product, e.g. converting iron ore into steel plate. Manufacture is : (1) The application, to material, of labour or skill, whereby the original article is changed to a new, different, and useful article, provided the process is of a kind popularly regarded as manufacture, or (2) the product of such process. "Whatever is made by human labour, either directly or through the instrumentality of machinery." (Abott L. Dict.) *** *** *** Every alteration in an article does not confer on it a new character as a manufacture. To constitute a new and different article and a manufactured article, it must be so changed as to have a positive and specific use in its new state. *** *** ***" 39.4. As noticed, the co-relation of verbs "consumes" and "uses" with "manufacture" is framed in cla....
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....consumption" denote using up a particular thing in a way that results in complete exhaustion of that thing. On the other hand, the expression "use" denotes the application or deployment of a particular thing as a means of achieving something or for accomplishment of a purpose. Undoubtedly, the word "use" is of wider import than "consumption". 40.1. In regard to the expressions in question, we may usefully recount that the earlier existing Entry 52 of List II of the Seventh Schedule to the Constitution of India provided for "Taxes on the entry of goods into a local area for consumption, use or sale therein". While taking up interpretation of the State enactment made under the said Entry 52, this Court dealt with the matter in the case of Mafatlal Industries Ltd. (supra), where cloth pieces of particular length were brought within the octroi limits of the Municipality concerned and were cut into smaller pieces of different sizes. This action was held by this Court not amounting to use or consumption of the cloth within the octroi limits. In that context, this Court took note of the relevant entry as also the relevant provision of the State enactment and said,- "14.....we hold that....
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....ot be used up as such. To put it in different words, in "use", a thing shall be employed for the accomplishment of a purpose but in "consume", the thing shall not only be employed but shall also get absorbed or devoured in accomplishment of the purpose. 41. As noticed, clause (a) of sub-section (1) of Section 7-A of the Act covers both the eventualities i.e., of consumption and of use but when they take place "in the manufacture of other goods for sale". Therefore, now it is necessary to delve into the salient features related with the expression "manufacture". 41.1. As noticed, the relevant dictionary meanings fairly give out that by "manufacture" what is basically meant is the process by which a thing is made or built by human or by machine in contradistinction to what is produced by nature. Ordinarily, it denotes the application of labour or skill to material so as to bring out a new, different and useful article in place of the original one. In regard to this expression "manufacture", it shall also be profitable to make a brief reference to the relevant decisions. 41.2. In the case of Kiran Spinning Mills (supra), this Court dealt with the issue in relation to the Excise Law....
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....er printing/decorating of duty-paid plain glazed ceramic tiles amounted to manufacture in terms of Section 2(f) of Central Excise Act, 1944. In that context, the Court said that manufacture implies a change but, every change is not a manufacture; and, for "manufacture", there must be transformation and a new article, having distinct name, character or use, ought to come into existence. Such requirements of "manufacture" were held not satisfied in the given case. This Court said : "5. The point which falls for consideration in this case is whether printing/decorating of duty-paid plain glazed ceramic tiles amounts to manufacture or not in terms of Section 2(f) of the Central Excise Act, 1944. The process for amounting to manufacture must be one which brings into being a new substance known to the market. Manufacture implies a change but every change is not a manufacture and yet every change in an article is the result of some treatment, labour and manipulation. For manufacture, something more is necessary. There must be transformation and a new article must result, having a distinct name, character or use. These conditions are not satisfied in the instant case because ceramic glaz....
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.... held that bottling takes place after brewing of Beer is complete. This Court said as under :- "62. It is not in dispute that the process of brewing beer and the process of bottling beer are considered to be distinct and separate processes governed respectively by the Brewery Rules and the Bottling Rules. The operations connected with bottling are required to be conducted in a separate premises under a different licence. The process of bottling begins with the transfer of bulk beer from the brewery for bottling. Subsection (2) of Section 28-A refers to an allowance to an extent of 10% not only in regard to losses within the brewery but also to cover losses in bottling and storage. As noticed above, Rule 53 of the Brewery Rules and Rule 7(11) of the Bottling Rules when read conjointly show that the said Rules are supplementary to each other and together implement Section 28-A of the Act. At all events, the validity of neither Rule 53 of the Brewery Rules nor Rule 7(11) of the Bottling Rules is under challenge. Be that as it may." 43.1. What has been observed in relation to brewing and bottling of Beer would equally apply to distillation and bottling of IMFL. 44. Applying the rel....
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....regard, we need again to look at etymology related with the expression in question. 46.1. The expression "otherwise" is essentially used in the texts as an adverb or as an adjective. Out of the numerous meanings assigned to this expression in the Concise Oxford English Dictionary, some of the relevant meanings are: 'in other respects; in a different way, alternatively.' 46.2. Similarly, in Black's Law Dictionary, the expression "otherwise" is assigned several meanings including 'in a different way; in another manner; except for what has just been mentioned; to the contrary; differently'. 47. The variety of meanings assigned to the expression "otherwise" makes one aspect absolutely clear that this expression is intended to denote something different than the thing/s to which it is employed; and that this expression is essentially general in nature. In the phraseology of clause (a) of sub-section (1) of Section 7-A of the Act, the words "or otherwise" have been placed after the particular words "consumes", "uses" and "manufacture". Obviously, these words "or otherwise" are intended to convey that not only the activities envisaged by the particular words preceding but, even the oth....
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....eceding clauses, the Legislature had used them in an all-inclusive sense; and, in the given context and looking to the object and the mischief sought to be dealt with by the enactment, there was no room for application of the rule of ejusdem generis. The Court, inter alia, said as under : "11....The legislature has been cautious and thorough-going enough to bar all avenues of escape by using the words "or otherwise". Those words are not words of limitation but of extension so as to cover all possible ways in which a vacancy may occur. Generally speaking, a tenant's occupation of his premises ceases when his tenancy is terminated by acts of parties or by operation of law or by eviction by the landlord or by assignment or transfer of the tenant's interest. But the legislature, when it used the words "or otherwise", apparently intended to cover other cases which may not come within the meaning of the preceding clauses, for example, a case where the tenant's occupation has ceased as a result of trespass by a third party. The Legislature, in our opinion, intended to cover all possible cases of vacancy occurring due to any reasons whatsoever...." 48.1. Likewise, in the case of Western....
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....ple aforesaid in view, we may now take up elements (ii) and (iv) of clause (a) of sub-section (1) of Section 7-A of the Act. Thus, the question is as to whether the bottles in question have been "consumed otherwise" or "used otherwise". 49.1. As already noticed, consumption requires the thing in question being exhausted or ceasing to exist for being used up. The bottles in question, even when used as containers of the liquor manufactured by the assessee, had neither been exhausted nor had ceased to exist; they have rather continued to exist while retaining their basic identity and character as bottles. Of course, they (empty bottles) had been filled up with liquor but such filling up has not resulted in the bottles themselves being used up. Hence, the activity in question does not fall within the ambit of element (ii). However, the very same logic does not apply to element (iv) because it cannot be said that the bottles in question have not been "used otherwise". 49.2. As noticed, the expression "use" is of wide amplitude and it refers to the usage or engagement of an article for the accomplishment of a purpose irrespective of whether the article itself undergoes a visible change....
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.... the bottles in question have not been "consumed otherwise", they have indeed been "used otherwise"; and therefore, the activity of assessee in relation to the bottles in question is clearly covered by element (iv) of clause (a) of sub-section (1) of Section 7-A of the Act. 50. To summarise the discussion aforesaid and to put our views in a nutshell, the goods in question (empty bottles) have not been consumed in the manufacture of other goods for sale nor they have been consumed otherwise because of having retained their identity. They have also not been used in the manufacture of other goods for sale because manufacture of Beer/IMFL was complete without their use. However, they have been used for bottling and when bottling remains an integral part of the business activity of the assessee, i.e., of manufacturing the liquor by the process of brewing/distillation and then, selling the manufactured liquor by putting the same in bottles, they have been "used otherwise". That being the position, use of the goods in question for bottling takes the turnover of their purchase within the net of Section 7-A of the Act. 50.1. To put it more simply, if we read clause (a) of sub-section (1) ....
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....s it beyond doubt that the expression "containers" includes bottles. 52.1 Another relevant feature of the provisions in question is that applicability of Section 7-A of the Act has not been made dependent on the event of levy of sales tax on the goods for which purchase tax is to be levied. As noticed, levy of purchase tax is dependent on cumulative existence of the necessary ingredients of Section 7-A of the Act; and no exception or exclusion is provided with reference to the factum of levy of sales tax on the goods in question at the time of their sale. In fact, not much of elaborate discussion in this regard appears requisite, for a direct answer being available in a 3-Judge Bench decision of this Court in the case of Premier Breweries (supra) wherein, pari materia provisions of the Kerala Act as regards levy of sales tax were considered. In the said case of Premier Breweries, the appellant had sold liquor packed in cardboard cartons. It was contended that such cardboard cartons had already borne tax under the entry "paper other than the newsprint cardboard and their products" and hence, such cartons could not have been taxed again when sold along with Beer. This Court examined....
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....ing taxed under sub-section (5) of section 5 of the Act. The subject-matter of tax are the goods packed in the containers. In calculating the turnover of the goods, packing materials will have to be taken into account. The packing materials will be taxed at the same rate and at the same point as the goods contained in the packing material. This is because the goods are sold packed in containers and are charged accordingly. This is a rule of computation of the turnover of the goods. If no tax is ultimately found leviable on the goods then no tax can be levied on the containers in which the goods are contained." 52.2 As already noticed, this question was also examined by the High Court in the case of Appollo Saline Pharmaceuticals (supra) although the said decision was rendered in relation to the bottles used for packing of I.V. fluid and the provision examined therein was that as existing after amendment of clause (a) of sub-section (1) of Section 7-A with insertion of the words "or for" but, such amendment is of no effect so far as this limb of contentions is concerned. In the said decision, the High Court repelled such a contention against levy of purchase tax on bottles because ....
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....eing the position, the second limb of submissions on the part of assessee turns out to be hollow and baseless, and cannot be accepted. 53. Therefore, the final result of the discussion aforesaid is that purchase tax under Section 7-A of the Act is leviable on the purchase turnover of empty bottles purchased by the assessee in the course of its business of manufacture and sale of Beer and IMFL. OPERATION AND EFFECT OF DEPARTMENT'S CLARIFICATIONS/CIRCULARS 54. As noticed, the High Court in its impugned order dated 10.09.2004 did reach to the conclusion that purchase tax was leviable on the purchase turnover of the empty bottles but found the assessee entitled to the benefit of Clarifications/Circulars issued by the revenue on 09.11.1989 and 27.12.2000. The revenue has questioned this part of the order of the High Court on the grounds and contentions as noticed hereinabove. In order to examine the rival contentions in this regard and the correctness of proposition adopted by the High Court, we may take note of the statutory provision in the Tamil Nadu Act on the power of the Commissioner of Commercial Taxes to issue clarification as also the particular Clarifications/Circulars rele....
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....axes Chepauk, Chennai - 600 005 Tvl. Mohan Breweries and Distilleries Ltd., Rayala Towers, II Floor, 781-85 Anna Salai, Chennai - 600 002. -------------------------------------------------------------------------------- D. DIS. ACTS CELL II/52900/2000 DATED : 27.12.2000 CLARIFICATION NO.192/2000 Sir, Sub : TNGST Act 1959 - Clarification on rate of tax for purchase of old/used bottles for filling beer/IMFL products - requested - reg. Ref : From Tvl. Mohan Breweries and Distilleries Ltd., Chennai-2. Lr. Dt. 13.7.2000. Tvl. Mohan Breweries and Distilleries Ltd., Chennai-2, in their letter cited have requested clarification for the years 1991-92, 93-94, 94-95 and 95-96 in respect of purchase of old bottles assessed to tax under section 7-A of the TNGST Act, 1959. The details furnished by the petitioners have been perused and the following clarification on rate of tax is issued : In this office reference D.Dis.Acts Cell.I/105980/88, dt.9.11.89, it has been clarified that "if the sale value of bottles is subjected to tax at the time of sale of the contents. there is no liability to tax under section 7-A". Perhaps, your company did not made it clear that the sale value o....
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....ty bottles from un-registered dealers used for the packing of Beer/IMFL manufactured by Tvl. Mohan Breweries and Distilleries Limited, Chennai is liable to tax under section 7-A as per decision reported in 120 STC Page 493. (Sd.) Arun Ramanathan, Special Commissioner and Commissioner of Commercial Taxes." (underlining in original) 56. As noticed, in support of its conclusion that the revenue cannot refusethe benefit of Clarifications dated 09.11.1989 and 27.12.2000 to the assessee, the High Court has relied upon various decisions including that of the Constitution Bench of this Court in the case of Dhiren Chemical Industries (supra). The learned counsel for the assessee has additionally relied upon several other decisions as mentioned hereinbefore. On the other hand, it is contended on behalf of the revenue that Clarifications dated 09.11.1989 and 27.12.2000 were merely administrative in nature and had no binding force on a Quasi-judicial Authority or a Court of law; and that as per dictum of the Constitution Bench in Ratan Melting & Wire Industries (supra), the law declared by the Court as regards the issue at hand would remain binding and not the said Clarifications. 57. H....
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....Chemical case. One of us (Variava, J.) was a party to the judgment of Dhiren Chemical case and knows what was the intention in incorporating para 11. It must be remembered that law laid down by this Court is law of the land. The law so laid down is binding on all courts/tribunals and bodies. It is clear that circulars of the Board cannot prevail over the law laid down by this Court. However, it was pointed out that during hearing of Dhiren Chemical case because of the circulars of the Board in many cases the Department had granted benefits of exemption notifications. It was submitted that on the interpretation now given by this Court in Dhiren Chemical case the Revenue was likely to reopen cases. Thus para 11 was incorporated to ensure that in cases where benefits of exemption notification had already been granted, the Revenue would remain bound. The purpose was to see that such cases were not reopened. However, this did not mean that even in cases where the Revenue/Department had already contended that the benefit of an exemption notification was not available, and the matter was sub judice before a court or a tribunal, the court or tribunal would also give effect to circulars of ....
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.... the case of Trans Asian Shipping (supra), reference to the circular was made by this Court only after declaration of law while indicating that the circular clarified the need and essence of the provisions when such circular was issued contemporaneously by the Central Board of Direct Taxes with introduction of the provisions of Section 115-VF and 115-VG in the Income Tax Act, 1961. As regards the circular, this Court observed as under :- "30. We would also like to refer to Circular No.05/2005 dated 15-7-2005 explaining the need and essence of the introduction of these provisions which was issued contemporaneously by the Central Board of Direct Taxes (CBDT). The Circular clarifies that the Scheme is a "preferential regime of taxation". It also clarifies that "charging provision is under Section 115-VA read with Section 115-VF and Section 115-VG". Circulars of CBDT explaining the scheme of the Act have been held to be binding on the Department repeatedly by this Court in a series of judgments ......" 59.2. In Signode India (supra), the circular concerned was explanatory of the expression "cargo handling services" as defined in Section 65(23) of the Finance Act, 1994 and was standi....
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....dated 09.11.1989 and 27.12.2000 had not been of explaining the meaning of any doubtful term or expression in the statutory provision nor they were explaining the object and purport of the provision concerned. The said Clarifications/Circulars had merely been the expression of the understanding of the concerned officer, be it SCCT or PCCT, about operation of Section 7-A of the Act vis-à-vis the purchase turnover of the empty bottles purchased by the assessee. However, such understanding of the officer concerned turns out to be a pure misunderstanding, when it stands at contradiction or incongruous to the declaration of law by the Courts; and could only be ignored. The latest Circular of the year 2002, issued after decision of the jurisdictional Tribunal in the case of Appollo Saline Pharmaceuticals (supra) could also be read only to the extent it is in conformity with the decision of the Tribunal (that came to be approved by the High Court) and in any case, even this circular cannot be decisive of the interpretation of Section 7-A of the Act. The decisive interpretation shall only be the one which is rendered in the binding decision/s of the Court. In continuity, we may also ....
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....State by himself or on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover. *** *** *** Explanation (2) Subject to such conditions and restrictions, if any, as may be prescribed in this behalf- *** *** *** (iii) any cash or other discount on the price allowed in respect of any sale and any amount refunded in respect of articles returned by customers shall not be included in the turnover; *** *** ***" 65.2. In view of the clear phraseology of the above extracted Explanation, not much of discussion appears requisite as regards this issue that has rightly been decided by the High Court in favour of the assessee and not much of serious contentions have been put forward by the revenue in this regard. The impugned order of the High Court, to this extent, calls for no interference. CONCLUSION 66. In view of the above, the appeal filed by the revenue (Civil Appeal No. 7164 of 2013) is partly allowed by holding that the purchase turnover of the empty bottles purchased by the assessee from the unregistered dealers under bought note is exigible to purchase tax under Section 7-A of the Tamil Nadu ....