TaxTMI 
TaxTMI 
2020 (6) TMI 685
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.... filed by the assessee while holding, inter alia, 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is entitled for the benefit of Clarifications dated 09.11.1989 and 27.12.2000 issued by the revenue till the same were withdrawn prospectively by the Clarification dated 28.01.2002 and therefore, the revenue is not entitled to levy purchase tax for the said turnover of purchase of empty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 ....
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....According to the assessee, these bottles purchased against bought 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 su....
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....to do with its subsequent bottling. 6.3. The PCCT, before passing final 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 dis....
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....ssessee was not entitled to question the proceedings of AO on the basis of the Clarifications 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 ....
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....wed by this Court in APPOLLO SALINE PHARMACEUTICALS (P) LTD., v. DEPUTY COMMERCIAL TAX OFFICER & ANOTHER, [2002] 125 STC 500, and 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 executi....
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....rom the law as enunciated from the decisions referred supra, we are convinced that in view of explanation 2(iii) to Section 2(r) of the Act, the cash or other discount 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....
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....manufactured and such fully manufactured liquor was transferred to the bottling section; that bottles have got their own identity and they remained bottles at all stages, i.e., before 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 bott....
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....ed in the present case, i.e., from 01.04.1996 to 31.03.1997, the requirement for applicability of clause (a) of Section 7-A(1) was stated in the manner that dealer 'consumes or uses such 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....
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....cision itself, the entire I.V. fluid contained in bottle was considered to be a composite unit, which is not the case in relation to the bottles used as container of Beer/IMFL. The learned senior 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 o....
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....estion. In this regard too, the learned senior counsel has referred to and relied upon various decisions including those in H.M. Bags Manufacturer v. CCE: 1997 (94) ELT 3 and Commissioner of Customs, 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.....
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....its (Manufacture) Rules, 1981 the learned AAG has submitted that the use of bottle is imperative in the manufacture of Beer/IMFL as per the rules and guidelines because the product needs resting and proper storing 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 m....
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....because any other manufacturer who had bought the bottles from registered dealers would also be including their cost in the turnover of final goods. 13.2 According to the learned AAG, a natural development of the decisions by the Courts had 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, exempt....
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....rchases of goods (1) Every dealer (other than a casual trader or agent of a nonresident dealer) whose total turnover for a year exceeds three lakhs of rupees and every casual trader or agent of a nonresident dealer, whatever be his turnover for the year, shall pay 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 th....
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.... words "or uses" were inserted. Then, some further amendments were made to this provision by Tamil Nadu Act No. 25 of 1993 with effect from 12.03.1993. With such amendments and modifications, Section 7-A (1) of the Act, as applicable to the present case, has been as under:- "Section 7-A. Levy of purchase tax: (1) Subject to the provisions of sub-section (1) of section 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 ....
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....l High Court in the case of Appollo Saline Pharmaceuticals (supra) but that was rendered after further amendments to Section 7-A including that by Tamil Nadu Act No. 60 of 1997 w.e.f. 06.11.1997. Thus, the specific phraseology of Section 7-A (1) of the Tamil Nadu Act as applicable to the present case has not been dealt with by any of these decisions. Nevertheless, each of these decisions had come under reference in this case at 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 pr....
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....rt observed and held as under (at pp. 503-504 of STC): "7. The submissions made by counsel proceeded on the assumption that the sole object of section 7-A is to ensure recovery of tax on the sale or purchase of goods which tax is required to be paid but had not been paid to the State by reason of the circumstances in which the purchase was made and one of the parties to the transaction is a registered dealer. Though that apparently 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 t....
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....s in bottles by purchasing bottles from another registered dealer on which sales tax was paid, would also still be required to include the turnover of those bottles in the turnover of the I.V. fluids. Section 7-A, as submitted by the learned counsel, was intended to plug loss of revenue. We were initially troubled when the facts of the case were presented before us as though the assessee was being burdened with tax twice over. A closure (sic) examination of the case, 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 deal....
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....e 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. Section 7-A(1) can be invoked if the above ingredients are cumulatively satisfied..... *** *** ***" (emphasis in bold supplied) 21.3. This Court, while applying Section 7-A to the given fact situations, pointed out that this section was at once a charging as also a remedial provision in the following words (at p. 198 of STC): "It may be remembered that section 7-A is at once 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 Secti....
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....l for the assessee has emphatically relied upon the decision of this Court in Hotel Balaji (supra) and particularly on the interpretation put by this Court on the provisions contained in the Haryana Act with the submissions that the said provisions had been in pari materia with Section 7-A of the Tamil Nadu Act. We may, therefore, delve into these two decisions in necessary details. 23. The matter involved in the case of Nandanam Construction Co. (supra) was laid before the Constitution Bench in view of the conflict in two 3Judge Bench decisions of this Court, in Ganesh Prasad 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 relat....
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....ed otherwise. The relevant observations and interpretation by this Court in Ganesh Prasad Dixit could be usefully noticed as under (at pp. 348-349 of STC) :- "Counsel for the appellants urged that in the cases of H. Abdul Bakshi and Bros. and L.M.S. Sadak Thamby & Co., the assessees were carrying on the business of selling goods manufactured by them and for the purpose of manufacturing those goods certain other goods were purchased and consumed in the process of manufacture, but here the goods are not consumed in producing another commodity for sale, and on that account the two cases are 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 pl....
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....manufacture can be said to take place'. As regards the process/es involved in the said matter, the Court accepted the submissions of assessee that the pineapple slices continued to possess the same identity as the original pineapple fruit and there was no consumption of the original pineapple fruit for the purpose of manufacture. It was also contended on behalf of the revenue that even if no manufacturing process was involved, the case fell within Section 5-A(1)(a) of Kerala Act, as the same was speaking not only of goods consumed in the manufacture of other goods for sale but also of goods consumed otherwise. 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 p....
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....on carrying the expression "or otherwise" to mean that the same was speaking, (i) of goods consumed in the manufacture of other goods for sale; or (ii) of goods consumed in the manufacture of other goods for purposes other than sale. In other words, while Ganesh Prasad Dixit gave out the interpretation that the expression "or otherwise" was providing alternative to the action of "manufacture" whereas Pio Food Packers held, in relation to similar provision in other statute, that this expression "or otherwise" provided alternative to the action of "sale". This divergence of the views in Ganesh Prasad Dixit and Pio Food Packers led to the 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....
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....ion 6." 23.3.3. While dealing with the contentions of the parties and finding that subclause (a) of clause (ii) of Section 6-A was applicable, the Constitution Bench pointed out that the object of the said provision was to levy purchase tax on goods consumed either for the purpose of manufacture of other goods for sale or consumed otherwise. The Constitution Bench did not approve the view expressed in Pio Food Packers to that extent while pointing out that the intention of the Legislature was to bring to purchase tax in either event of consumption of goods in the manufacture of goods for sale or consumption of goods in any other manner. The Constitution Bench also indicated the logic 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 o....
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.... in the wake of challenge to the constitutional validity thereof. In the referred paragraphs, this Court took note of the original and amended provisions relating to purchase tax, as contained in Section 9 of the Haryana Act as follows (at pp. 137-139 of STC): "... Section 9 of the Haryana Act, before it was amended by Haryana General Sales Tax (Amendment and Validation) Act, 1983, read as follows: "9. Where a dealer liable to pay tax under this Act purchases goods other than those specified in Schedule B from any source in the State and- (a) uses them in the State in the manufacture of, - (i) goods specified in Schedule B or (ii) any other goodsand disposes of the manufactured goods in 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....
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....t (as amended in 1983). Properly analysed, the following are the ingredients of the section : (i) a dealer liable to pay tax under the Act purchases goods (other than those specified in Schedule B) from any source in the State and (ii) uses them in the State in the manufacture of any other goods and (iii) either disposes of the manufactured goods in any manner otherwise than by way of sale in the State or despatches the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of a inter-State trade or commerce or in the course of export outside the territory of India within the meaning of sub-section (1) of section 5 of the Central Sales Tax Act, 1956. If all the above three ingredients are satisfied, the dealer becomes liable to pay tax on 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 g....
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....eference to other statutes dealing with the same subject or forming part of the same system is a permissible aid to the construction of provisions in a statute. See the following observations contained in Principles of Statutory Interpretation by G.P. Singh (8th Edn.), Syn. 4, at pp. 235 to 239: "Statutes in pari materia It has already been seen that a statute must be read as a whole as words are to be understood in their context. Extension of this rule of context permits reference to other statutes in pari materia i.e. statutes dealing with the same subject-matter or forming part of the same system. Viscount Simonds in a passage already noticed conceived it to be a right and duty to construe every word of a statute in its context and he used the word context in its widest sense including 'other statutes in pari materia'. As stated by Lord Mansfield '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 avoidin....
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....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. Andhra Pradesh Act 6-A. Levy of tax on turnover relating to purchase of certain goods.- Every dealer, who in the course of business- (i) purchases any goods (the sale or purchase of which is liable to tax under this Act) from a registered dealer in circumstances in which no tax is payable under section 5 or under section 6, as the case may be, or (ii) purchases any goods (the sale or purchase of which is liable to tax under this Act) from a person other than a registered dealer, and (a) either consumes such goods in the manufacture of other goods for sale or otherwise, or (b) disposes of such goods in any manner other than 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 s....
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....e of Associated Pharmaceuticals Industries (supra) is concerned, the same was rendered before the relevant amendments to Section 7-A of the Act and particularly when the expression "or uses" was not there in clause (a) of Section 7-A (1). Only the expression "consumes" was considered therein and the High Court held that the bottles were not consumed in manufacture of drugs or syrups. So far the decision of Madras High Court in the case of Appollo Saline Pharmaceuticals (supra) is concerned, as noticed, the same was rendered after further amendment to Section 7-A whereby, the expression "or for" was added to clause (a), which expression was not there in the provision applicable to the present case. This apart, the activity examined in the case of Appollo Saline Pharmaceuticals had been of the sale of I.V. fluid packed in bottles. We shall refer to this decision a little later while dealing with the second limb of contentions on the part of the assessee about 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-....
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....ifference in phraseology, interpretation of one particular State Sales Tax Act cannot be ipso facto imported for interpreting another enactment. Learned senior counsel for the assessee has endeavoured to persuade us that the observations made in Hotel Balaji (supra) in relation to Haryana Act may apply to the present case too but, we are afraid, the submissions cannot be accepted because of a fundamental difference in the ambit and scope of the Haryana Act compared to the ambit and scope of Tamil Nadu Act with which we are concerned in these appeals. We may, therefore move on to the other decisions of this Court for the purpose of interpretation of Section 7-A of the Act and for finding out the principles to be applied to the present case. 30. As noticed, the 3-Judge Bench decision of this Court in the case of M. K. Kandaswami (supra) was rendered in relation to the provision of Section 7-A of the Tamil Nadu Act, as existing at the relevant time. The later amendment 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 ....
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....of inter-State trade or commerce. 32. The analysis as above fairly gives insight as to the ambit and scope of Section 7-A (1) of the Act but it is the expression "or otherwise", as occurring in clause (a) of this provision [point No. 6(a) ibid.] that, perforce, calls for yet deeper exploration to understand the range of coverage of this provision. However, this exploration does not require any lengthy discussion for the directly applicable dictum of the Constitution Bench in the case of Nandanam Construction Co. (supra). 33. As noticed, the relevant clauses in Section 6-A of the Andhra Pradesh Act had been more or less similar to those contained in Section 7-A of the Tamil Nadu Act and while construing the same in Nandanam Construction Co. (supra), the Constitution Bench specifically held that the object of the said provision was to levy purchase tax on goods consumed either for the purpose of manufacture of other goods for sale or consumed otherwise. Be it noted that the additional expression "or uses" was not there in the said Section 6-A of the Andhra Pradesh Act either. In other words, the phraseology examined by the Constitution Bench in Nandanam Construction Co. was aki....
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.... four eventualities are covered thereunder, with reference to the treatment of the goods in question (which had been purchased by the dealer in the circumstances where sales tax had not been paid at the time of their purchase), viz., (i) when they are consumed in manufacture of other goods for sale; or (ii) when they are consumed otherwise; or (iii) when they are used in manufacture of other goods for sale; or (iv) when they are used otherwise. Application of the relevant principles to the case at hand 35. Put in a nutshell, with the discussion foregoing, we have found that for applicability of Section 7-A (1) of the Act, as existing in the statute during the period relevant for the present case, basic ingredients (compiled in paragraph 31 hereinbefore) ought to be cumulatively satisfied; and for coverage of any case under clause (a) of sub-section (1) of Section 7-A of the Act, one or more of the eventualities envisaged therein (catalogued in paragraph 34.1. hereinabove) ought to exist. Having thus deduced the necessary ingredients/elements and relevant principles, we may now embark upon the enquiry as to whether purchase tax under Section....
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....nce to the point of purchase. These indisputable features unfailingly lead to the position that ingredients (1) to (5) of Section 7-A (1) of the Act, as mentioned in paragraph 31 hereinbefore, are satisfied. 37.1. However, as noticed, for applicability of Section 7-A (1) of the Act, all the six ingredients need to be cumulatively satisfied. The ingredient (6) has three alternatives viz., the dealer has either (a) consumed or used the goods in question in the manufacture of other goods for sale or otherwise, or (b) has disposed of such goods in any manner other than by way of sale in the State, or (c) has despatched or carried 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. It is not in dispute that clauses (b) or (c) of this ingredient are not attracted in this case, for the entire manufactured Beer/IMFL, after bottling, having been sold by the assessee only to the Tamil Nadu State Marketing Corporation Limited (TASMAC) within the State of Tamil Nadu. 38. With the filtration foregoing, we have reached to the core of this matter i.e., as to whether the activity in question falls within the ambit of....
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.... something'; and in its verb form 'to employ for the accomplishment of a purpose'. 39.3. Both the expressions "consumes" and "uses", denoting particular form of action, have been employed in clause (a) of Section 7-A (1) of the Act as verbs, which do form the main part of the predicate of the sentence. These verbs co-relate with the word "manufacture". Now, so far the word "manufacture" is concerned, which too is used in the language as verb as also as noun, is defined in Concise Oxford English Dictionary in its verb form to carry the meaning, amongst others, as to 'make (something) on a large scale using machinery' and its noun form to mean 'the process of manufacturing'. 39.3.1. In Black's Law Dictionary , the word "manufacture" is defined, inter alia, to mean 'a thing that is made or built by a human being (or by a machine), as distinguished from something that is a product of nature; esp., any material form produced by a machine from an unshaped composition of matter'. 39.3.2. In P. Ramanatha Aiyar's Advanced Law Lexicon , a vast variety of usages of this expression "manufacture" have been specified, the relevant parts whereof may be extracted as under:- "'MAN....
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....d as preposition but in various phraseologies, it is also used as conjunction and, amongst several meanings, it has also been assigned the meaning 'having as a purpose or function' in the same Concise Oxford English Dictionary. Thus, employing the preposition "for", inter alia, signifies the use of something towards a particular purpose, even without becoming an integral part of the activity leading to the purpose. 39.4.2. We need not enter deeply into the nitty-gritty of semantics but this much is clear that with the said later amendment and modification of prepositions to "in or for", coverage is provided in the provision not only to the activity of use of the particular goods in the manufacture but also to the activity when the particular goods are merely used for the manufacture. However, as noticed, this amendment with insertion of the expressions "or for" is not applicable to the present case. Therefore, for the present purpose, it shall have to be examined if the goods in question (empty bottles) have either been consumed or been used as an integral part of the activity of manufacture of other goods for sale. 40. As noticed, several of the meanings of the expressions "....
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.... "use" and "consumption" has been explained by the Constitution Bench of this Court in the case of Burmah Shell Oil Storage and Distributing Co. (supra) as follows :- "23. It is not the immediate person who brings the goods into a local area who must consume them himself, the act of consumption may be postponed or may be performed by someone else but so long as the goods have been brought into the local area for consumption in that sense, no matter by whom, they satisfy the requirements of the Boroughs Act and octroi is payable. Added to the word "consumption" is the word "use" also. There may be certain commodities which though put to use are not 'used up' in the process. A motor-car brought into an area for use is not used up in the same sense as food-stuffs. The two expressions use and consumption together therefore, connote the bringing in of goods and animals not with a view to taking them out again but with a view to their retention either for use without using them up or for consumption in a manner which destroys, wastes or uses them up." (emphasis in bold supplied) 40.4. Tersely put, the meaning and connotation is clear that while in "consumption", a ....
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....facture or not. This Court held in the case of Union of India v. Delhi Cloth & General Mills: AIR 1963 SC 791 that "manufacture" means to bring into existence a new substance and does not mean merely to produce some change in a substance (emphasis supplied). It is true that etymological word "manufacture" properly construed would doubtless cover the transformation but the question is whether that transformation brings about fundamental change, a new substance is brought into existence or a new different article having distinctive name, character or use results from a particular process or a particular activity. The taxable event under the excise law is "manufacture"......In the instant case it is not disputed that what the respondent did, was to cut the running length fibre (tow) into short length fibre (staple fibre). It indubitably brought a change in the substance but did not bring into existence a new substance. The character and use of the substance (man-made fibre) remained the same....Even by cutting, the respondents obtained man-made fibre. Such cutting, therefore, involved no manufacture and, hence, no duty liability can be imposed upon them." 41.3. In the case of Pan P....
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.... purpose but for the said process. In the given case, by the process of printing names or logos on the bottles, it was held that the basic character of the commodity did not change and they continued to be bottles. In the case of Punjab Aromatic (supra), this Court indicated that the test of irreversibility is an important criterion to ascertain as to whether a given process amounts to manufacture. 42. We need not multiply on the citations as the fundamental principles remain clear that, on the question as to whether manufacture has taken place or not, the relevant enquiry would be to find if a new substance has come into existence which is a different commercial commodity or whereby identity of the original commodity has ceased to exist. Tersely put, it is the test of irreversibility that remains fundamental to a query as to whether manufacture has taken place or not. 43. It has been argued on behalf of the assessee, and rightly so, that in the context of the commodities dealt with by it i.e., Beer/IMFL, the process of bottling is in fact a separate and distinct process than the manufacture of Beer/IMFL. The decision of this Court in the case of Mohan Meakin Breweries Ltd. (....
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....L; and, in fact, use of the bottles in question comes up in the activity of the assessee only after manufacture of liquor (Beer/IMFL) has already been accomplished by brewing or distillation. Needless to reiterate that in relation to the activity of assessee, the action of bottling is a separate process and is undertaken only after the process of manufacture by way of brewing or distillation is complete. Thus understood, we are clearly of the view that the goods in question (empty bottles) cannot be said to have been "used" in manufacture. 45. For what has been discussed hereinabove, we have no hesitation in concluding that the bottles in question have neither been consumed in manufacture of Beer/IMFL nor they could be said to have been used in such manufacture of Beer/IMFL. Hence, elements (i) and (iii) pertaining to clause (a) of sub-section (1) of Section 7-A of the Act do not exist in this case. 46. Taking up elements (ii) and (iv) of clause (a) of sub-section (1) of Section 7-A of the Act, we need to enquire as to whether the goods in question (empty bottles) have been "consumed otherwise" or they have been "used otherwise". This area of examination takes us to the words....
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....hether the context or some principle of construction requires that some qualified meaning should be placed on those words." 48. The aforesaid general principles are also not decisive of the matter because when an expression generally of wide amplitude like "otherwise" is used, the question still arises about its construction, particularly when it is placed after particular/specific words. In this process of construction, one may feel inclined to rely upon and apply the rule of ejusdem generis whereby and whereunder when a particular word pertaining to a class, category or genus are followed by general words, the general words are construed as limited to the things of the same kind as those specified. Even as regards the words "or otherwise", in some of the interpretations, they have been treated as limited in their scope with reference to the context but the Constitution Bench of this Court in the case of Smt. Lila Vati Bai v. State of Bombay: AIR 1957 SC 521, while construing the words "or otherwise" occurring in Explanation (a) to Section 6 of the Bombay Land Requisition Act, held that these words were intended to cover all possible cases of vacancy occurring due to any reason....
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....he object of the provision in question, as regards the words "or otherwise", the rule of ejusdem generis would apply in a very limited sense and only to the extent that the class or category to be covered thereunder may not be dissimilar or incongruent to the particular class or category of the expressions preceding it. As already noticed, in the case of Nandanam Construction Co. (supra), the Constitution Bench has construed these words "or otherwise" in relation to the pari materia provisions of the Andhra Pradesh Act and held that the expression "otherwise" qualifies the word "manufacture" and, therefore, consumption of the goods in question, even if not in manufacture, would lead to coverage for levy of purchase tax. We may usefully reiterate that in Nandanam Construction Co. (supra), the assessee was engaged in the business of building houses/flats and had consumed the goods like bricks and sand in such construction. The Constitution Bench found that such consumption was clearly a consumption otherwise than manufacture but was covered under the provisions for levy of purchase tax. The Constitution Bench also stated the reason for such construction that the goods in question wer....
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....or sale in the form in which they were purchased by the assessee. 49.3. In other words, the process of bottling with the use of bottles in question has been an unalienable part of the complete chain of processes that the assessee was obliged to undertake for its business, i.e., manufacturing and selling the liquor. By this process, the bottles in question were used by the assessee in such a manner that they were no longer available for sale in the form they were purchased from unregistered dealers. That being the position, the bottles in question have indeed been "used otherwise" by the assessee. The assessee cannot avoid operation of the words "or otherwise" so far use of the bottles is concerned by merely establishing that they have not been consumed in manufacture or otherwise and further that they have not been used in manufacture. Even when these three elements viz., "consumed in manufacture"; "consumed otherwise"; and "used in manufacture" do not exist as regards the bottles in question in the business activity of the assessee, it is but apparent the activity of the assessee clearly entails the use of bottles for the purpose of bottling and sale of liquor manufactured by i....
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....osed of only by way of sale to TASMAC within the State of Tamil Nadu itself; and they had been subjected to sales tax at the same rate as that of the contents, purchase tax would not be leviable. This line of submissions on the part of assessee, in our view, remains entirely baseless. 52. As already noticed, the goods in question (empty bottles) have been used to complete the process of making the manufactured goods (Beer/IMFL) marketable. It is also clear that the bottles have not been sold by the assessee simply as bottles. They have been sold as an essential component of the marketable commodity. That being the position, charging of sales tax on these bottles comes into operation by virtue of Section 3 (1) read with Section 3 (7) of the Tamil Nadu Act. As noticed, the assessee is indisputably a dealer covered under sub-section (1) of Section 3 of the Act. By virtue of sub-section (7) of Section 3, when the assessee has sold the goods (Beer/IMFL) together with the bottles as containers or packing material, turnover of Beer/IMFL was bound to include the price, cost or value of such bottles whether such price, cost or value had been charged separately or not; and sales tax was b....
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....tainers or packing materials is charged separately or not, be the same as those applicable to goods contained or packed, and in determining turnover of the goods, the turnover in respect of the containers or packing materials shall be included therein. (6) Where the sale or purchase of goods contained in any containers or packed in any packing materials is exempt from tax, then the sale or purchase of such containers or packing materials shall also be exempt from tax." *** *** *** 22. We shall now deal with another point urged on behalf of the appellant. It has been contended that the cardboard cartons have already borne tax under the entry "paper, other than the newsprint, cardboard and their products" in the First Schedule of the Act. It is a single-point tax. The cardboard cartons cannot be taxed once again when sold along with the beer. 23. There are two answers to this contention. Sub-section (5) of section 5 specifically provides that the rate of tax and point of levy applicable to the containers shall be the same as those applicable to the goods sold. Therefore, even if the cartons have already been subjected to tax by virtue of specific p....
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....ale of the contents with the containers. 52.3 In other words, the fact that the bottles in question were subjected to sales tax at the same rate as applicable to their contents is entirely irrelevant and has no bearing on the exigibility of the turnover in question to purchase tax. In this regard, we may also observe that even though the provision relating to the purchase tax was initially inserted to plug the loss of revenue in relation to the goods that were consumed in manufacture or were consumed otherwise, its scope and amplitude has been widened with insertion of the expression "or uses" and thereby, not only consumption but even use in manufacture or use otherwise of the goods has been made subject to the levy of purchase tax. We need not expand more on these aspects of the matter. Suffice it to observe for the present purpose that merely because the bottles in question were to be subjected to sales tax, when being sold as containers of the liquor, liability of purchase tax cannot be obviated. 52.4. To put it differently, it is apparent that so far as sales tax on the bottles in question at the time of their sale is concerned, the same is leviable by virtue of Section ....
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....der this Act. (3) All persons working under the control of Commissioner of Commercial Taxes shall observe and follow the clarification issued under sub-section (1) and sub-section (2)." 55.1. Prior to the insertion of the aforesaid Section 28-A in the Tamil Nadu Act, the SCCT had issued Clarification dated 09.11.1989 in regard to the issue of levy of purchase tax on empty bottles in the following terms : "The Spl. Commissioner and Commissioner of Commercial Taxes, Madras 5 letter No. Acts Cell I/D. Dis. 105980/88 dated 9.11.1989. Sub : TNGST ACT 1959 - Amendment of Section 7A-Levy of Purchase tax on empty bottles for backing (sic) IMFL - Whether attracts - clarified. Ref: Your letter No.9142/88 B2 dated 23.9.88. As it is stated that sale value of the bottles is subjected to tax at the time of sale of the contents there is no liability to tax under Section 7(A). 2. This cancels the clarification issued in this office D.Dis. Acts cell I/136907/88 dated 17.1.89. Sd/- S. Savarkar, For Spl. Commr. And Commr of Comml Taxes." 55.2. After insertion of the aforesaid Section 28-A and in relation to the request further made by ....
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....cial Commissioner and Commr. of Commercial Taxes, Chepauk, Chennai - 5. To Tvl. Mohan Breweries and Distilleries Limited, Rayala Towers, IInd Floor, 781-85 Anna Salai, Chennai-2. -------------------------------------------------------------------------------- Acts Cell - II/6914/2002, Dt. 28.1.2002 Sir, SUB : TNGST ACT 1959 - Clarification on rate of tax for purchase of old/used bottles for filling beer/IMFL Products - Issued - Modified. Ref : PC & CCT. Chennai - 6, D. Dis. Acts CellI/52900/2000, Dated :27.12.2000. In this office reference cited it was clarified to Tvl. Mohan Breweries and Distilleries Limited, Chennai-2 as follows : "In this Office Ref. D. Dis. Acts Cell-I/105980/88 Dated : 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 make it clear that the sale value of bottle was also included in the price of the product. Now that you have clarified this point specifically, that the value of empty bottles also has been included ....
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....h unused re-rollable scrap if appropriate amount of duty had already been paid. In the context of such questions and the exemption notification calling for interpretation, though the Constitution Bench placed the interpretation in favour of the revenue but also observed as follows (at p. 125 of STC): "11. We need to make it clear that, regardless of the interpretation that we have placed on the said phrase, if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue." 57.2. The aforesaid observations in Dhiren Chemical Industries led to certain misunderstanding as regards operation and effect of the circulars and as to whether effect can be given to the circular of the Government in preference to the binding precedents of High Court and of this Court. This led to the other reference to the Constitution Bench and the issue came to be resolved in the case of Ratan Melting & Wire Industries (supra). 57.3. In Ratan Melting & Wire Industries (supra), the Constitution Bench referred to the above-quoted observations in Dhiren Chemica....
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.... and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the court to declare what the particular provision of statute says and it is not for the executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law." (emphasis in bold supplied) 58. In view of the aforesaid pronouncement by the Constitution Bench of this Court in Ratan Melting & Wire Industries (supra), there remains hardly any doubt on the principles that Clarifications/Circulars/Instructions issued by the competent authority are binding on the authorities under the respective statutes but....
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....at a circular which is contrary to the statutory provisions has really no existence in law. In India Cements Limited, the circular in question was not found to be in conflict with any statutory provision or the applicable schemes and, therefore, the same was held binding on the adjudicating authority in the following words: - "30. In the present case, it is not the case of the Revenue that the Circular dated 1-5-2000 is in conflict with either any statutory provision or the deferral schemes announced under the aforementioned government orders. We, therefore, hold that the said circular is binding in law on the adjudicating authority under the TNGST Act." 60. The aforesaid and other decisions, essentially dealing with exemption notifications, have no application to the present case; and in any event, none of the decisions, as referred on behalf of the assessee or as referred by the High Court, could be read for any principle contrary to that laid down by the Constitution Bench in Ratan Melting & Wire Industries (supra). 61. For what has been discussed hereinabove, we need not examine as to whether the Clarifications/Circulars in question could be said to be such clari....
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....t stand in conformity with the statutory provision and its interpretation by the Courts. 63. Hence, the impugned order of the High Court, on the second question as regards the operation and effect of Clarifications/Circulars dated 09.11.1989 and 27.12.2000, cannot be approved. 64. The net result of the discussion foregoing is 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 Act; and the assessee cannot escape such liability on the strength of the Clarifications/Circulars dated 09.11.1989 and 27.12.2000 which do not stand in conformity with the statutory provision as also declaration of law by the Courts. Other Question 65. So far as the other question regarding taxability of cash discount on the price offered by the assessee to the Tamil Nadu State Marketing Corporation Limited is concerned, the High Court has ruled in favour of the assessee with reference to the decision in the case of Neyvli Lignite Corporation Ltd. and the clear expressions in Explanation 2(iii) to Section 2(r) of the Act. 65.1. The relevant provision reads as un....
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....ct against the assessee. 68. Briefly put, the relevant background aspects relating to theseappeals had been that by the respective assessment order pertaining to the said assessment years 1986-87, 1987-88, 1988-89 and 1989-90 the AO held the assessee liable for purchase tax against the purchase of empty bottles from unregistered dealers and also levied penalty on various scores like turnover relating to excise duty and vend fees as also the turnover relating to purchase tax. After the respective orders passed by the Appellate Authority, the matters ultimately travelled to the Tribunal in cross appeals preferred by the assessee and by the State. The Tribunal, by its common order dated 09.09.2002, decided various issues including those relating to purchase tax under Section 7-A of the Act and levy of penalty in relation to the turnover pertaining to excise duty, vend fee and purchase tax. So far the issue relating to purchase tax was concerned, the Tribunal took the view that the assessee was liable for purchase tax under Section 7-A of the Act while relying upon the decision of the High Court in Appollo Saline Pharmaceuticals (supra) and of this Court in Premier Breweries (supra)....