Full Judgment Text
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PETITIONER:
ALLADI VENKATESWARLU & ORS.
Vs.
RESPONDENT:
GOVT. OF ANDHRA PRADESH & ANR.
DATE OF JUDGMENT21/02/1978
BENCH:
BEG, M. HAMEEDULLAH (CJ)
BENCH:
BEG, M. HAMEEDULLAH (CJ)
UNTWALIA, N.L.
CITATION:
1978 AIR 945 1978 SCR (2) 190
1978 SCC (2) 552
ACT:
Interpretation of taxing statute--If the language is clear,
it will be unfair to interpret against the assessee.
Andhra Pradesh General Sales Tax Act, 1957 S. 5 r/w Entry 66
of Schedule I to the Act--When "Paddy" was already taxed
under item 8 Schedule II, Whether "Atukulu" (Parched Rice)
and "muramuralu" (Puffed rice) are exigible to tax for the
second time as rice falling under Item 66(a) of Schedule
I--Whether "Atukulu" (Parched rice) and "muramuralu" (Puffed
rice) are "rice" within the meaning of entry 66(b) of
Schedule I.
Andhra Pradesh General Sales Tax Act, 1957, Section
5(2)--Difference between taxation u/s 5(2)(a) and 5(2)(b).
HEADNOTE:
Section 5 of the Andhra Pradesh General Sales Tax Act, 1957
regulates the levy of tax on sales or purchase of goods. S.
5(1) enjoins that every dealer (other than a casual trader
and an agent of a non-resident dealer) whose total turnover
is Rs. 25,000 and upwards and every agent of a nonresident
dealer irrespective of his turnover shall pay a tax for each
year at the rate of four paise on every rupee of his
turnover. "Paddy" is subjected to sales tax under item 8 of
the 2nd schedule @ the rate of five paise in the rupee at
the point of first purchase in the State. A rebate, of 2
paise in the rupee shall be allowed on the paddy purchased
and consumed in the State. Under s. 5(2)(a) r/entry 66 of
Schedule I to the Act, rice is subject to sales tax at the
rates specified at the point of the sale effected by the
dealer selling them. "Paddy" is either parched or heated
and sold as Atukulu (parched rice) and "muramuralu" (puffed
rice). When the sales tax authorities sought to levy once
over again on the sale of paddy which has already been taxed
at the purchase point, after making it edible in the form of
"atukulu" and "Muramuralu" the appellants challenged the
said action. ’ The Andhra Pradesh High Court held that
parched rice and puffed rice not being rice at all,
falling within either of the two parts of entry 66 were
taxable as separate kinds of goods altogether u/s 5, sub-
section 1 of the Act.
Allowing the appeals by special leave the Court,
HELD. 1. Where two interpretations of a provision are
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possible, courts should apply the principle that the
interpretations which favours the assessee should be
preferred. Unless the language of the taxing statute was
absolutely clear, it should not be given an obviously unfair
interpretation against the assessee. [195-G-H]
2. Commonly accepted sense of a term should prevail in
construing the description of an article of food. [195D]
Kalyani & Co. v. Commissioner of Sales Tax, [1953] (4)
S.T.C. 387 @ 390’ (Hyd.) referred to.
3. Court must give a broad enough interpretation to the
term ’.rice" in accordance with the common sense rule of
interpretation laid down by this Court in M/s Tungabhadra
Industries Ltd. v. Commercial Tax Officer, Kurnool, [1961] 2
S.C.R. 14 @ 23. [196 C-D]
4. The term rice is wide enough to include rice in its
various forms whether edible or unedible. Rice in the form
of grain is not edible. Parched rice an& puffed rice are
edible. But the entry rice covers both forms of rice. At
any rate it is wide enough to cover them. [194H, 195A]
191
5. There is a distinction between "paddy" as found in item
8 of the 2nd schedule and "rice" as mentioned under item 66
of the first schedule. The view that, if paddy has been
taxed in the hands of the purchaser, who is a dealer the
same individual was made to pay tax on it again as rice
falling within item 66(a) and not as "rice" falling under
item 66(b) cannot be accepted because such a view would run
counter to the express provisions of item 66(b). If what is
taxed is "rice", it would obviously fall under item 66(b)
because it has already been taxed in the form of paddy. It
could certainly not fall under item 66(a) which is for
"rice" not so taxed. To urge that it falls under item 66(a)
is to concede that it is "rice". [194A]
6. On a parity of reasoning the term ’rice’ as ordinarily
understood in English language would include both parched
and Puffed rice. Atukulu (parched rice) and "muramuralu"
(puffed rice) are "rice." within the meaning of entry 66(b)
of Schedule 1 of the Andhra Pradesh General Sales Tax Act,
1957. [197 A-B]
7. The difference between taxation under the schedule u/s
5(2)(a) and under the 11 schedule u/s 5 (2) (b) is that
whereas the first is a tax at the point of sale, the second
is a tax at the point of purchase. The II schedule is meant
for goods in respect of which a single point tax is leviable
u/s 5 (2) (b) of the Act. The dealer’s turnover may include
purchases as well as sales. In the instant case the dealer
has paid a tax at the time of purchase of rice under item 8
of the 11 schedule when it was paddy. [193F-G]
8. It is not the intention of the legislature to tax u/s
5(1) as well as under section 5(2) of the Act.
Simultaneously s. 5(2) does not say that a "further" tax
would be levied u/s 5(2). It only talks of levying ’the
tax’ in accordance with s. 5(2) of the Act in cases falling
within the ambit of the 2nd schedule to which reference is
made in s. 5(2) of the Act. It is not fair to so interpret
a taxing statute, as to impute an intention to the
legislature to go on taxing what is virtually the same
product in different forms over and over again. Such a
result wouId be contrary to basic axioms of taxation. [194B-
D]
9. Keeping in view the various provisions of the Act,
together with the history of exemption of "palalu" and
"muramuralu" and its cancellations it was not the intention
of the State Govt. suddenly to make the incidence of tax so
heavy. [196C]
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JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 391 and
392 of 1977.
(Appeals by Special Leave from the Judgment and Order dated
the 24-8-1976 of the Andhra Pradesh High Court in W.A. Nos.
1/75 & 61/76).
S. C. Manchanda and B. Kanta Rao for the appellants.
P. Parameshwara Rao and T. V S. Narasimhachari for the
Respondents.
The Judgment of the Court was delivered by
BEG, C.J.-The question before us in these appeals by special
leave was framed as follows :
"Whether ’Atukulu’ (parched rice), and ’Muramuralu (puffed
rice) are ’rice’ within the meaning of Entry 66(b) of
Schedule 1 to the Andhra Pradesh General Sales Tax Act.
1957"
192
This question arose before the Andhra Pradesh high Court in
appeals from single Judge decisions of the High Court, out
of provisions of Andhra Pradesh General Sales Tax Act, 1957
(hereinafter referred to as ’the Act’).
Section 5 (1 ) of the Act provides
"5.Levy of Tax on Sales or Purchases of Goods
: (1) Every dealer (other than a casual trader
and an agent of a non-resident dealer) whose
total turnover for a year is not less than Rs.
25,000 and every agent of a non-resident
dealer whatever be his turnover for the year,
shall pay a tax for each year, at the rate of
four paise on every rupee of his turnover."
Section 5(2) enacts
"Notwithstanding anything contained in sub-
section (1) the tax under this Act shall be
levied-
(a) in the case of the goods mentioned in
the first Schedule, at the rates and only at
the point of the sale specified as applicable
thereof effected in the State by the dealer
selling them, on his turnover of sales in
each year relating to such goods irrespective
of the quantum of turnover,
(b) in the case of the goods mentioned in
the Second Schedule, at the rates and only at
the point of the purchase specified as
applicable thereto, effected in the State by
the dealer purchasing them, on his turnover of
the purchase in each year relating to such
goods irrespective of the quantum of
turnover."
The first Schedule to the Act dealing with matters provided
by S. 5 (2) (a) contains the entry 66 which runs as
follows:
------------------------------------------------------------
Description of goods point of levy Rate of tax
------------------------------------------------------------
66. Rice :(a) not Covered by At the point of sale by
(b) below the first wholesale dealer in
the state effecting the sale
6 Paise in the rupee
Provided that a rebate of two paise in the rupee shall be
allowed on the rice sold and consumed in the State in
accordance with such rules as may be prescribed.
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-------------------------------------------------------------
(b) Rice obtained from At the point of sale by the first
wholesale dealer in the
state effecting the sale.
1 Paise in the rupee
It seems that tax on paddy which was converted into
’Atukulu’ (parched rice), and ’Muramaralu’ (puffed rice) had
already been
------------------------------------------------------------
193
levied in the form in which it comes to the market as a
crop. The Division Bench of the High Court in the judgment
under appeal before us stated
"It is common case that the paddy out of which
these commodities have been made in all the
three cases has been subjected to tax".
On this assumption, the only question before us is whether
the parched rice and the puffed rice are covered by item
66(b) which reads : "rice obtained from paddy that has met
tax under the Act". ’Paddy’ is defined in the dictionary as
"rice in the husk". The question is : Does it cease to be
even "rice" when it is converted into parched rice and
puffed rice ? It is true that it is no longer rice grain as
it emerges from the husk. To make it edible as parched rice
and puffed rice it has to go through further processes.
These are only products obtained by converting rice grain
into a different form of it by heating or parching. if such
rice is still rice, even if we confine the term rice" to
grain, is it by going through these processes of heating or
parching converted into separate items for the purposes of
entry 66 in the 1st Schedule of the Act ?
We find that considerable argument was advanced in the High
Court on the question whether if parched rice and puffed
rice are not covered at all by entry 66 of the 1st Schedule
it would still be taxable. We find that the answer given by
the High Court was that, in any case, such rice would be
taxable under Section 5,_ sub-section (1) of the Act set
out above.
It was also pointed out before us that paddy out of which
the products in question become available, had already been
taxed, as admitted by both sides, under item 8 of the 2nd
Schedule which imposes a tax of 5 paise in the rupee on
paddy at the point of first purchase in the State. The
entry also says :
"Provided that a rebate of 2 paise in the
rupee shall be allowed on the paddy purchased
and consumed in the State in accordance with
such rules as may be prescribed’.
The 2nd schedule is meant for goods in respect of which a
single point tax is leviable under section 5(2) (b) of the
Act. The difference between taxation under the 1st schedule
under section 5(2)(a) and under the 2nd schedule under
section 5(2) (b) appears to be that whereas the first is a
tax at the point of sale the second is a tax at the point of
purchase. The dealer’s turnover may include purchases as
well as safes. Therefore, as is assumed in the instant
case, the dealer had paid a tax at the time of purchase of
rice under item 8 of the 2nd schedule, when it was "paddy",
could it be contemplated that he must pay a tax again on
the- same item as "rice" not covered by item 66(b), that is
to say, as "rice" falling under item 66(a)? It Is
impossible to accept the view that, if paddy has been taxed
in the hands of the purchaser, who is a dealer, the same
individual was made to pay tax on it again as rice falling
within item 66(a) and not
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194
as "rice" falling under item 66(b) because such a view would
run counter to the express provisions of item 66(b). If
what is taxed is ’rice’, it would obviously fall under item
66(b) because it has already been taxed in the form of
paddy. It could certainly not fall under item 66(a) which
is for "rice" not so taxed. To urge that it falls under
item 66(a) is to concede that it is "rice".
We find that the High Court had come to the conclusion that
parched rice and puffed rice, not being rice at all, falling
within either of the two parts of item 66 were taxable as
separate kinds of goods altogether. This meant that,
although, the dealer had paid a tax of five paise per rupee
on paddy as item 8 in schedule 2 he will have to pay again a
tax at the rate of 4 paise on every rupee of his turnover
under section 5(1) if his total turnover was not less than
Rs. 25,000/- per year. We do not think that the intention
of the legislatures could be to tax under section 5(1) as
well as under section 5 (2) of the Act simultaneously.
Section 5(2) does not say that a "further" tax would be
levied under section 5(2). It only talks of levying "the
tax" in accordance with section 5(2) of the Act in cases
falling within the ambit of the 2nd schedule to which refer-
ence is made in section 5(2) of the Act. We do not think
that it is fair to so interpret a taxing statute as to
impute an intention to, the legislature to go on taxing what
is virtually the same product in different forms over and
over again. Such a result would be contrary to basic axioms
of taxation. Unless the language of the taxing statute was
absolutely clear, it should not be given an obviously unfair
interpretation against the assessee.
It may be that an item may be taxed once as raw material,
and, after it is manufactured and converted into separately
taxable goods, taxed again as another taxable item
altogether. But, in such cases, the identity of the goods
sold would be deemed to be different even though the raw
materials may have been taxed already in a different form
earlier. The question, therefore, before us is whether
"rice", which obtained from paddy, already taxed under item
8 of the 2nd schedule, ceases to be "rice" falling "prima
facie" under item 66(b) as rice on which a tax was already
paid when it was in the form of paddy ? Does heating or
parching only to make it edible have that effect ?
It is clear that there is a distinction between "paddy", as
found in item 8 of the 2nd schedule, and "rice", as
mentioned under item 66 of the first schedule. Apparently,
the removal of the husk makes this difference. It is true
that the 1st schedule, which contains as many as 136 items,
includes a number of separate fairly detailed entries.
Entry 58 is for bran or husk of "rice;’, and entry 59 is for
"deviled bran of rice". It appears, therefore, that "rice
in husk" is "paddy". When it is removed from husk, the husk
and rice become separately taxable. But, there are no
separate entries for rice and rice reduced into an edible
form by heating or parching without any addition of
ingredients or appreciable changes in chemical composition.
The term "rice" is wide enough to include rice in its
various forms whether edible or unedible. Rice in the form
of grain is not.
195
edible. Parched rice and puffed rice are edible. But, the
entry "rice" seems to us to cover both forms of nice. At
any rate, it is wide enough to cover them
The High Court bad relied on a judgment of the Division
Bench of the Hyderabad High Court in Kalyani & Co. v.
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Commissioner of Sales Tax(1), where it was held, inter alia
(at p. 390) that :
"Rice in all forms would mean all kinds or
variety of rice or species of rice such as
broken rice, kichidi rice, pichodi rice or
rice flour, etc. In this view of the matter
we find no justification in holding that
"rice" in item No. 1 of the exempted articles
in Schedule I of the, Hyderabad General Sales
Tax Act dealing with cereals should be
interpreted as meaning cooked rice or biriyani
or pulao".
But, in that very case, Jaganmohan Reddy, J.,
delivering the judgment of the Division Bench,
had held in dealing with the term bread".
"When the Legislature uses a term relating....
to a particular kind, such as ’double roti’ ".
The judgment in Kalyani & Co.’s case (supra) related to
items in a different schedule of a different enactment. The
only principle deducible from it is that the commonly
accepted sense of a term should prevail in construing the
description of an article of food. While dealing with an
item meant for rice, as a cereal, the Court had accepted a
more limited meaning of the term "rice" so, as to exclude
cooked rice in all its forms. Of course, the case before us
is not a case of rice, cooked and prepared in the form of
"pulao" or "biryani" or any (Aber type of cooked rice which
may have undergone changes of character by additions or
chemical transformation which may convert it into a food
product with a substantially different identity. It was
only converted from unedible grain into an edible form by
parching or puffing through a heating process.
Even if parched rice and puffed rice could be looked upon as
separate in commercial character from rice as grain offered
for sale in a market, yet, keeping in view the other matters
mentioned above, it could not be presumed that it was
intended to exclude from entry 66 ,.rice", which at any
rate, bad not so changed its identity as not to be
describable as "rice" at all. ’Muramaralu’ was after all
rice even though it was puffed. ’Atukulu’ even though
parched was still called rice. We must also remember that
the schedule which we have to interpret is in the English
language where the term rice is still found in the rendering
or description of ’palalu’ as well as that of ’muramamlu’ in
the English language. And, in any case, if two
interpretations of a provision are possible, we think that
we ought to, in such a case, apply the principle that the
interpretation which favours the assessee should be
preferred.
(1) [1953] (4) S.T.C. 387 @ 3290.
196
It was possible for the Government to lay down a separate
category for parched rice and puffed rice, but it has not
done so. Section 40 of the Act lays down the power of the
State Government to modify, to alter or to cancel any item
in the Schedule.. It can also notify, under section 9 of the
Act, exemptions and reductions of tax. In this connection,
it is worth remembering that both "palalu" and "muramuralu"
were previously exempted completely from tax under a
notification of the State Government probably because they
are largely consumed by the poorer sections of the public.
But, the exemption had been withdrawn before the assessment
years under consideration. If that be so, it. could not be
the intention to suddenly put these items in a category
where they will become unusually or doubly taxed items in
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substance. We, therefore, think that, keeping in view the
various provisions of the Act, together with the history of
exemption of "palalu" and "muramuralu" and its cancellation,
it could not be the intention of the State Government
suddenly to, make the incidence of tax so heavy as it would
be if the view of the High Court is allowed to stand.
Keeping in view all the matters mentioned above, we think
that we must give a broad enough interpretation to the term
"rice", in accordance with what may perhaps be best
described as the "commonsense" rule of interpretation, laid
down by this court in M/s. Tungabhadra Industries Ltd. v.
the Commercial Tax Officer, Kurnool.(1)
That was a case of taxation of ground nut oil. A question
arose whether dehydrogenated oil called Vanaspati was still
ground nut oil or a product of ground nut oil. This Court
held inter alia :
"To be ground nut oil two conditions had to be
satisfied-it must be from groundnut and it
must be "oil". That the hydrogenated oil sold
by the appellants was out of the groundnut not
being in dispute, the only point is whether it
continues to be oil even after hydrogenation.
Oil is a chemical compound of glycerine with
fatty acids or rather a glycerine of a mixture
of fatty acids principally oloic, linoleic,
stearic and palmitic, the proportion of the
particular fat varying in the case of the oil
from different oilseeds and it remains a
glyceride of fatty acids even after the
hardening process, though the relative
proportion of the different types of acids
undergoes a slight change. In its essential
nature therefore no change has occurred and it
remains an oil--a glyceride of fatty acids-
that it was when it issued out of the press".
In Tungabhadra Industries case (supra) this
Court rejected the argument, based on an
analysis of chemical changes produced by the
absorption of hydrogen atoms in the process of
hardening and on the consequent intermolecular
changes in the oil. It said :
"But neither mere absorption of other matter
nor intermolecular changes necessarily affect
the identity of a substance as ordinarily
understood".
(1) [1961] 2 S.C.R. 14 at 23.
197
We think that, on a parity of reasoning the term "rice" as
ordinarily ’understood in English language would include
both parched and puffed rice.
For the reasons given above, we set aside the judgment of
the High, Court and we answer the question framed above as
follows : ’Atukulu parched rice, and ’muramaralu’ (puffed
rice) are rice within the meaning of entry 66(b) of Schedule
1 of the Andhra Pradesh Central Sales Tax Act, 1957.
Parties will bear their own costs.
Appeal allowed.
198