Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6
PETITIONER:
RAINBOW STEELS LTD. AND ANR.
Vs.
RESPONDENT:
COMMISSIONER OF SALES TAX, UTTAR PRADESH AND ANR.
DATE OF JUDGMENT30/01/1981
BENCH:
TULZAPURKAR, V.D.
BENCH:
TULZAPURKAR, V.D.
PATHAK, R.S.
CITATION:
1981 AIR 2101 1981 SCR (2) 727
1981 SCC (2) 141 1981 SCALE (1)229
CITATOR INFO :
RF 1991 SC 754 (12)
ACT:
Uttar Pradesh Sales Tax Act 1948 S. 3A-State Government
notifying "Sale of old discarded, unserviceable or obsolete
machinery" as liable to tax-Sale of thermal power plant in
running condition-Whether exigible to tax.
Interpretation of Statutes-Principle of noscitur a
sociis-When can be invoked.
HEADNOTE:
In exercise of the power under section 3A of the U.P.
Sales Tax Act, 1948 the State Government, issued a
notification dated May 30, 1975 which provided that the
turnover in respect of "old, discarded, unserviceable or
obsolete machinery, stores or vehicles etc." shall be liable
to tax at the point of sale at the rate of five per cent.
A Thermal Power Plant together with its associate
auxiliaries, components and accessories belonging to the
State Electricity Board was sold in a working condition to
the Appellant No. 1, who paid sales tax on the sale under
protest. The power plant was used by Appellant No. 1 and as
the power position in the State improved, Appellant No. 1
discontinued the generation of electricity through this
power plant and negotiated its sale to Appellant No. 2.
Since there was difference of opinion between the
parties as to the payment of sales tax on the machinery the
question was referred for clarification to the Commissioner
of Sales Tax under section 35 of the Act. The Commissioner
was of the view that the four words, "old, discarded,
unserviceable or obsolete" had been used disjunctively and
each adjective had its own meaning and sense and that since
the power plant had been used before its sale it was "old"
machinery and the sale was liable to tax under the said
Entry.
The order of the Commissioner was confirmed by the High
Court.
In the appeal to this Court, on behalf of the
Appellants it was submitted invoking the principle of
noscitur a sociis that the expression ‘old’ which is more
general should be restricted to a sense analogous to that of
the less general expressions, namely "discarded,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6
unserviceable or obsolete" and read in this manner the sale
of the power plant could not be regarded as sale of "old"
machinery falling within the Entry.
On behalf of the Respondents it was contended that the
four adjectives occurring in the Entry have been used
disjunctively and each must be given its own separate
meaning, and that the principle of noscitur a sociis would
not apply to the construction of the expression ‘old’.
728
Allowing the appeal,
^
HELD : 1. The thermal power plant was in perfect
running condition and was sold as such. It would not fall
within Entry No. 15 of the Notification. [733D]
2. The four adjectives "old, discarded, unserviceable
or obsolete" which are susceptible to analogous meaning are
clubbed together while qualifying machinery in the Entry.
The first adjective ‘old’ is clearly more general than the
other three and as such all the four would take their colour
from each other, the meaning of the more general adjective
‘old’ being restricted to a sense analogous to that of the
less general namely "discarded, unserviceable or obsolete".
All the four adjectives which qualify the word "machinery"
have been used disjunctively. The adjective ‘old’ by itself
is vague, imprecise ambiguous for there is no indication as
to how much old the machinery should be before it could be
described as ‘old machinery’-one day old, one month old, one
year old, five years old or even ten years old (the degree
of oldness being a relative concept). [732F-733A]
3. In the absence of any indication that the adjective
‘old’ has been deliberately used in a wider sense when the
expression ‘old’ is by itself vague, imprecise and
ambiguous, being too general, the principle of noscitur a
sociis will have to be applied i.e. all the associated words
will take colour from each other. [733B]
4. (i) The principle of noscitur sociis is clearly
applicable to the construction of the expression ‘old’
occurring in Entry No. 15, and that expression will have be
given a restricted meaning-a sense analogous to that of the
less general words clubbed with it. [732A]
(ii) If the wider words used are in themselves vague
imprecise or ambiguous and there is no indication that these
have been deliberately used to infuse wider meaning then the
rule of noscitur a sociis can be invoked. [732E]
State of Bombay & Ors. v. The Hospital Mazdoor Sabha &
Ors. [1960] 2 S.C.R. 866 and The Corporation of the City of
Nagpur v. Its Employees [1960] 2 S.C.R. 942 referred to.
Lelang v. Cooper [1965] 1 Q.B. 232 distinguished.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 337 of
1981.
Appeal by Special Leave from the Judgment and Order
dated 18-4-1979 of the Allahabad High Court (Lucknow Bench)
in F.A.F.O. No. 39/77.
V. M. Tarkunde and B. R. Sabharwal for the Appellant.
S. Markandey for the Respondent.
The Judgment of the Court was delivered by
TULZAPURKAR, J. This appeal by special leave raises the
question whether on true construction of Entry No. 15 of the
Notification No.
729
ST-4949/X-10(2)-74 dated May 30, 1975 issued under S.3A of
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6
U.P. Sales Tax Act 1948, the negotiated sale of a Thermal
Power Plant by appellant No. 1 to appellant No. 2 is
exigible to sales tax thereunder?
The short facts giving rise to the question may be
stated : A Thermal Power Plant at Rampur comprising seven
boilers, five turbines together with its associate
auxiliaries components and accessories originally belonged
to the U.P. State Electricity Board. The Board, after
selling it in working condition to appellant No. 1 on May
29, 1974 for Rs. 41.31 lakhs called upon the latter to pay
sales tax thereon which was paid under protest. Appellant
No. 1 used it for generating electricity from May 29, 1974
to September 30, 1975. As the power position improved in the
State of U.P. appellant No. 1 discontinued the generation of
electricity through this power plant and finding it
expedient to realise its investment negotiated a sale
thereof in perfect working condition to appellant No. 2.
Appellant No. 1 desired to charge sales tax on the said
negotiated sale but appellant No. 2 informed appellant No. 1
that it had obtained considered opinion that no sales tax on
such a transaction was leviable inasmuch as the sale was not
of "old, discarded, unserviceable or obsolete machinery,"
falling within Entry No. 15 of the concerned Notification
dated May 30, 1975. Both the appellants thereupon referred
the question for clarification to the Commissioner of Sales
Tax U.P., Lucknow under Section 35 of the U.P. Sales Tax Act
1948. It was contended on their behalf that the word
(adjective) "old" occurring in the Entry would take colour
from the other words (adjectives) that follow it and the
cumulative effect of all the words taken together showed
that those words were either synonymous or near synonymous
suggesting that the machinery in order to fall within the
Entry should become non functional or non usable and that
since the power plant in question had not become "old" in
that sense and was in perfect working condition it would not
fall within the Entry and the sale thereof by appellant No.
1 to appellant No. 2 was not exigible to tax. The
Commissioner by his order dated February 19, 1977 negatived
the contention holding that the four words "old, discarded
unserviceable or obsolete" had been used disjunctively and
each adjective had its own meaning and sense and that since
the power plant had been used before its sale by appellant
No. 1 to appellant No. 2 it was old machinery and the sale
thereof was liable to tax under the said Entry.
Feeling aggrieved by that order the appellants
preferred an appeal to the Allahabad High Court being
F.A.F.O. No. 39 of 1977 and a learned single judge of the
Lucknow Bench on April 18, 1979 dis-
730
missed the appeal and confirmed the Commissioner’s view that
since the concerned power plant had been purchased by
appellant No. 1 long ago and had been put to use it was "old
machinery" within the meaning of the Entry, observing that
"the degree of oldness has to be greater than recently
manufactured machinery used only for the some time". The
Commissioner’s view as confirmed by the High Court is
challenged by the appellants before us in this appeal.
Section 3A of the U.P. Sales Tax Act, 1948 empowers the
State Government to specify the rates of taxes and the point
at which the tax can be imposed, subject to a maximum of 12
per cent, on the turn over in respect of the goods specified
in the First Schedule to the Act and clause (b) empowers the
State Government to amend the entries in the Schedule. In
exercise of the aforesaid power the State Government issued
the Notification No. ST-II-4949/X-10(2)-74 dated May 30,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6
1975 which provided that with effect from June 1, 1975 the
turn over in respect of the goods specified in column II of
the Schedule to this Notification shall be liable to tax at
the point of sale and at the rate specified respectively in
columns III and IV thereof :
Schedule
‘M’ Stands for sale by manufacturer in Uttar Pradesh.
‘I’ stands for sale by the importer in Uttar Pradesh.
------------------------------------------------------------
Sl. Description of goods Point at which Rate of tax
No. tax shall be
levied.
------------------------------------------------------------
I II III IV
------------------------------------------------------------
15. Old, discarded, unservice- Sale to consu- 5 per
able or obsolete machinery, mer cent
stores or vehicles includ-
ing waste products except
cinder, coal ash and such
items as are included in
any other notification
issued under the Act.
------------------------------------------------------------
The question is whether the negotiated sale of the Thermal
Power Plant at Rampur by appellant No. 1 to appellant No. 2
falls within the aforesaid Entry so as to attract sales tax
at 5 per cent on the sale price charged by appellant No. 1
to appellant No. 2 ? In other words the question is whether
it is a sale of "old machinery" within the meaning of the
Entry and what is the true meaning of the expression "old
machinery". It is undisputed that the Thermal Power Plant in
question when it was sold by U.P. State Electricity Board to
appellant No. 1 on May 29, 1974 was in perfect running
condition and the sales tax on that transaction was paid
under protest. It is
731
further undisputed that appellant No. 1 used that power
plant for generating electricity for about a year and four
months and because the power position improved in the State
of U.P. the appellant No. 1 negotiated the sale thereof to
appellant No. 2 with the view to realise back its investment
and the power plant had been kept in perfect running
condition with periodical checks by the Inspector of
Factories as also by the Inspector of Boilers and when sold
it was in perfect working and running condition. Question is
whether such power plant could be regarded as "old
machinery" within the meaning of Entry 15.
Counsel for the appellants contended that it could not
be regarded as old machinery in the sense that it had become
non-functional or non-usable which meaning should be given
to the expression ‘old’ occurring in the Entry. In other
words, he sought to invoke the principle of noscitur a
sociis for construing expression ‘old’ because of its
association with the other expressions like "discarded,
unserviceable or obsolete" occurring in the Entry. According
to the counsel the expression ‘old’ which is more general
should be restricted to a sense analogous to that of the
less general expressions, namely, "discarded, unserviceable
or obsolete" and read in this manner the sale of the power
plant in question could not be regarded as sale of old
machinery falling within the Entry. On the other hand
counsel for the respondents supported the view taken by the
Commissioner of Sales Tax as well as by the High Court, for,
according to him the principle of noscitur a sociis would
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6
not apply to the construction of the expression ‘old’
occurring in the Entry. He urged that the four adjectives
have been used disjunctively and each must be given its own
separate meaning and pointed out that in two decisions,
namely, State of Bombay & Ors. v. The Hospital Mazdoor Sabha
& Ors. and The Corporation of the City of Nagpur v. Its
Employees this Court refused to apply the said principle
while construing the definition of ‘industry’ given in
s.2(j) of Industrial Disputes Act, 1947 and in s.2(14) of
the C.P. and Berar Industrial Disputes Settlement Act, 1947
respectively, and that in Letang v. Cooper Diplock, L. J.,
has observed thus : "The maxim noscitur a sociis is always a
treacherous one unless you know the societas to which the
socii belong." According to him further the ejusdem generis
principle would be clearly inapplicable inasmuch as it was
not a case where some general words follow any particular,
generic or specific words.
732
Having given our anxious consideration to the rival
contentions urged before us, we are clearly of the view that
the principle of noscitur a sociis is clearly applicable to
the construction of the expression ‘old’ occurring in Entry
No. 15, and that expression will have to be give a
restricted meaning-a sense analogous to that of the less
general words clubbed with it. The principle is explained in
Maxwell on the Interpretation of Statutes (12th Edn.) at
page 289 thus :
"Where two or more words which are susceptible of
analogous meaning are coupled together, noscitur a
sociis, they are understood to be used in their
cognate sense. They take, as it were, their colour from
each other, the meaning of the more general being
restricted to a sense analogous to that of the less
general."
Moreover, even in the two decisions relied upon by counsel
for the respondents where this Court refused to apply the
principle of noscitur a sociis while construing the
definition of ‘industry’ in the two concerned enactments
because the Legislature had deliberately used wider words in
order to make the scope of defined word correspondingly
wider, the Court has observed that "it is only when the
intention of the Legislature in associating wider words with
words of narrower significance is doubtful or is otherwise
not clear that the present rule of construction can be
usefully applied." In other words if the wider words used
are in themselves vague, imprecise or ambiguous and there is
no indication that these have been deliberately used to
infuse wider meaning then this rule of construction can be
invoked.
Dealing with the Entry in question, in the first place
it cannot be disputed that the four adjectives which are
susceptible to analogous meaning are clubbed together while
qualifying ‘machinery’ in the Entry. Secondly, it cannot be
disputed that the first adjective ‘old’ is clearly more
general than the other three and as such all the four would
take their colour from each other, the meaning of the more
general adjective ‘old’ being restricted to a sense
analogous to that of the less general, namely, "discarded,
unserviceable or obsolete". Thirdly, it is true that all the
four adjectives which qualify the word ‘machinery’ have been
used disjunctively but it is precisely for that reason that
the adjective ‘old’ becomes vague, imprecise and ambiguous,
being too general. The adjective ‘old’ by itself is
certainly vague, imprecise and ambiguous, for there is no
indication as to how much old the machinery should be before
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6
it could be described as
733
old machinery. A machinery could be one day old, one month
old, one year old, five years old or even ten years old,
(the degree of oldness being a relative concept) and which
one is intended to be included in the Entry has not been
made clear at all. And, lastly, there is nothing in the
Entry to indicate that the adjective ‘old’ has been
deliberately used in a wider sense. In the absence of any
indication to that effect and when the expression ‘old’ is
by itself vague, imprecise, and ambiguous, being too
general, the principle of noscitur a sociis will have to be
applied i.e. all the associated words will take colour from
each other, the meaning of the more general, adjective viz.
‘old’ being restricted to a sense analogous to the less
general adjectives "discarded, unserviceable or obsolete".
In other words in order to fall within the expression ‘old
machinery’ occurring in the Entry, the machinery must be old
machinery in the sense that it has become nonfunctional or
non-usable. In our view, therefore, on true construction the
sale of the Thermal Power Plant which at the time of sale by
appellant No. 1 to appellant No. 2 was in perfect running
condition and which was sold as such would not fall within
the aforesaid Entry No. 15 of the concerned Notification
dated May 30, 1975.
The English decision of the Court of Appeal in Letang
v. Cooper (supra) relied upon by counsel for the respondents
is clearly distinguishable inasmuch as it dealt with a
statute which referred to "negligence, nuisance or breach of
duty (whether the duty exists by virtue of a contract or of
provision made by or under a statute or independently of any
contract or any such provision)," and when it was argued
that because the cause of action in both nuisance and
negligence included the infliction of actual damage as an
essential element, "breach of duty" should also be
understood as confined to causes of action in which actual
damage was likewise essential the said contention was
rejected by Diplock, L.J., by observing thus :
"It is clear, however, that ‘breach of duty’
cannot be restricted to those giving rise to causes of
action in which the infliction of actual damage is an
essential element, for the words in parentheses
expressly extend to a duty which exists by virtue of a
contract and the infliction of actual damage is not an
essential element in an action for breach of
contractual duty."
In other words, it was a case of a statute where the
parenthetical portion occurring therein expressly indicated
the contrary intention-contrary to the contention urged and,
therefore, the principle of noscitur a sociis was not
applied.
734
In the result the appeal is allowed and the view of the
lower authorities is set aside and the sale in question is
declared to be not exigible to tax under Entry No. 15 of the
concerned Notification dated May 30, 1975. In the
circumstance, there will be no order as to costs.
N.V.K. Appeal allowed.
735