Full Judgment Text
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2240 OF 2006
STATE OF JHARKHAND & ORS. ..APPELLANTS
VERSUS
M/S.LA OPALA R.G. LTD. ..RESPONDENT
O R D E R
1. This appeal is directed against the
judgment and order passed by the High Court of
Jharkhand at Ranchi in W.P. [T] No.4572 of
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2004, dated 22.06.2005. By the impugned
judgment and order, the High Court has set
aside the letter issued by the Assistant
Commissioner of Commercial Taxes, Deogarh
Circle, dated 13.05.2004, whereby the
Assessing Authority has rejected the stand of
the respondent-dealer that it is eligible to
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pay reduced rate of tax under the notification
S.O. No.25 (for short, “the notification”)
issued by the Government of Jharkhand, dated
25.06.2001 and directed the respondent-dealer
to deposit taxes in relation to inter-State
sales at the rate of 4%.
2. The possible construction that could be
placed on the aforesaid notification is the
subject matter of this appeal.
3. The conspectus of facts is: the
respondent-dealer is a Public Limited Company
incorporated under the provisions of the
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Companies Act, 1956 engaged in the manufacture
of glass and glassware made of Opal glass. The
industrial unit of the respondent-dealer is
situated at Madhupur in Deoghar district,
Jharkhand.
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4. The respondent-dealer is a dealer
registered under the provisions of the Bihar
Finance Act, 1981 and the Central Sales Tax
Act, 1956 (“the Act”, for short).
5. The State Government, in exercise of its
powers under clause (b) of sub-section 5 of
Section 8 of the Act has issued the
notification. Since the construction of the
notification is in issue, we deem it
appropriate to extract the notification. It
reads as under:
th
“S.O.25, dated the 25 June, 2001 –
In exercise of the powers conferred
by clause (b) of sub-section (5) of
Section 8f of the Central Sales Tax
Act, 1956 (Act 74 of 1958) the
Governor of Jharkhand is pleased to
direct that tax payable under sub-
section (1) or (2) of Section 8 of
the said Act in respect of Sale of
all types of glass and glass sheets
in the course of interstate sale or
commerce from any place of business
in the State of Jharkhand shall be
calculated at the rate of three per
centum and no statutory form in this
regard shall be required.
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2. This notification shall come into
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force with effect from 16 June,
2001.”
6. Immediately after issuance of the
notification, the respondent-dealer by letter
dated 27.05.2002 had informed the authorities
under the Act, that, since the respondent-
dealer would be covered by the notification,
the rate of tax payable on glassware in inter-
state sales would be at the reduced rate of
3%. Unfortunately, the authorities did not
respond to the request so made by the dealer.
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7. Later, the authorities issued a letter
dated 09.01.2004 to the respondent
manufacturer, inter alia, directing him to
deposit the tax in relation to its
transactions in respect of the inter-state
sales to registered and unregistered dealers
at the rate of 4% and 12%, respectively. The
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respondent was also directed to show-cause as
to why a penalty under Sections 16 and 16(9)
of the Bihar Finance Act, 1981 and the Act
should not be imposed and the respondent not
be directed to correct the returns and deposit
tax at the rate of 4%, if the sales is
effected to registered dealers and at the rate
of 12% if the inter-state sale is effected to
un-registered dealers.
8. The respondent-dealer had filed its
reply, dated 16.01.2004, wherein it took the
stand that it was liable to charge and deposit
tax at the rate of 3 per cent on sale in the
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course of inter-state trade in respect of its
products; that the returns had been correctly
filed and that the tax was validly deposited
at the rate of 3 per cent.
9. After the issuance of the aforesaid
letter/notice, the authorities by their letter
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dated 13.05.2004, rejected its stand and
informed that the respondent would be liable
to pay tax at the rate of 4 per cent on its
inter-state sales if made to a registered
dealer and at the rate of 12 per cent if made
to an unregistered dealer.
10. Further, the respondent-assessee was
informed by the authorities that the product
manufactured by him is glassware and,
therefore, not covered under the notification
by letter dated 13.07.2004.
11. The respondent-dealer, being aggrieved
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by the communications dated 09.01.2004,
13.05.2004 and 13.07.2004 had filed a Writ
Petition before the High Court, inter alia,
requesting the Court to issue a writ in the
nature of certiorari to quash the aforesaid
letters and direct the authorities under the
Act to extend the benefit of the notification,
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which has come into force with effect from
16.06.2001.
12. The High Court, after a detailed
consideration of the issue before them, has
come to the conclusion that the glassware
manufactured by the respondent-dealer is a
type of glass and therefore, it is entitled to
the benefit of reduced rate of tax under the
notification and, accordingly, has quashed the
said letters.
13. Being aggrieved by the said order of the
Division Bench of the High Court, the State is
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before us in this appeal.
14. We have heard Shri Jayesh Gaurav,
learned counsel for the appellant-State and
Shri S.D. Sanjay, learned senior counsel for
the respondent-dealer. We have carefully
perused the documents on record and the
judgment and order impugned herein.
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15. Shri Gaurav would submit that the
expression “types of glass” as used in the
notification would not include the product in
question as it is merely a “form of glass”. He
would provide us with some information in
respect of types of glasses being classified
into nine types: 1)Soda glass or soda-lime
glass, 2)Coloured glass, 3)Plate glass,
4)Safety glass, 5)Laminated glass, 6)Optical
glass, 7)Pyrex glass, 8)Photo-chromatic glass,
and 9)Lead crystal glass. He would therefore
contend that the product, “glassware” not
being any of the aforesaid types of glass but
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another form of glass would not be entitled to
benefit of the notification and that the High
Court has erred in its conclusion.
16. Per contra, Shri S.D. Sanjay, learned
senior counsel would justify the judgment and
order passed by the High Court and submit that
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the products of the respondent-dealer are
covered by the notification as “glassware” is
the product in which different components are
fused together to give glass its final form in
accordance with the moulds in which they are
manufactured, such as crockery, vases, etc.
and therefore, would fall in the category of
“types of glass”. He would further submit that
in taxing statutes, a notification in the
nature of granting tax incentives for the
promotion of economic growth and development
ought to be liberally construed and given a
purposive interpretation.
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17. As we have indicated earlier, the short
point that falls for our consideration and
decision in the case is the possible
construction that could be placed on the
expression “types of glass and glass-sheets”
as contained in the notification issued by the
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State Government in exercise of its powers
under Section 8(5)(b) of the Act.
18. It is relevant to notice the contents of
the notification issued by the State
Government. A dissection of the notification
would indicate the following, namely :
a) the Governor of Jharkhand in exercise of
his powers under clause (b) of sub-section (5)
of Section 8 of the Act has issued the
notification;
b) the notification speaks of reduction of
the rate of tax under the Act;
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c) the reduced rate of tax is from 4% to
3%;
d) the notification further provides that no
statutory forms are required for the sale of
the types of glass or glass sheets which are
made to the registered dealers under the Act;
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e) if the sales of “all types of glass and
glass-sheets” are made to unregistered dealers
then the rate of tax would be at 12 per cent.
19. We do not concur with the proposition
put forth by Shri S.D. Sanjay, learned senior
counsel that a notification which grants tax
incentives should to be liberally construed in
support of his submission. It is settled rule
of construction of a notification that at the
outset a strict approach ought to be adopted
in administering whether a dealer/
manufacturer is covered by it at all and if
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the dealer/manufacturer falls within the
notification, then the provisions of the
notification be liberally construed.
20. Literally speaking, an exemption is
freedom from any liability, payment of tax or
duty. It may assume different applications in
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a growing economy such as provisioning for tax
holiday to new units, concessional rate of tax
to goods or persons for a limited period under
specific conditions and therefore, in Union of
India v. Wood Papers Ltd., (1990) 4 SCC 256
this Court has observed that construction of
an exemption notification or an exemption
clause in contrast with the charging provision
has to be tested on different touchstone and
held that the eligibility clause in relation
to an exemption notification is given strict
meaning and the notification has to be
interpreted in terms of its language, however,
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once an assessee satisfies the eligibility
clause, the exemption clause therein may be
construed literally. This Court has explained
the rationale of adopting the said approach as
under:
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“4. … In fact an exemption provision
is like an exception and on normal
principle of construction or
interpretation of statutes it is
construed strictly either because of
legislative intention or on economic
justification of inequitable burden
or progressive approach of fiscal
provisions intended to augment State
revenue. But once exception or
exemption becomes applicable no rule
or principle requires it to be
construed strictly. Truly speaking
liberal and strict construction of an
exemption provision are to be invoked
at different stages of interpreting
it. When the question is whether a
subject falls in the notification or
in the exemption clause then it being
in nature of exception is to be
construed strictly and against the
subject but once ambiguity or doubt
about applicability is lifted and the
subject falls in the notification
then full play should be given to it
and it calls for a wider and liberal
construction…”
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21. This Court in Gammon (I) Ltd. v. Commr.
of Customs, (2011) 12 SCC 499 while rejecting
the plea of the appellant that the exemption
notification should receive a liberal
construction to further the object underlying
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it relied upon the decision of a Three-Judge
Bench of this Court in Novopan India Ltd. ,
which stated the aforesaid principle and the
object behind adopting literal interpretation
in determining eligibility for claiming
exemption or exception from tax as follows:
“ 16 . …The principle that in case of
ambiguity, a taxing statute should be
construed in favour of the assessee—
assuming that the said principle is
good and sound—does not apply to the
construction of an exception or an
exempting provision; they have to be
construed strictly. A person invoking
an exception or an exemption
provision to relieve him of the tax
liability must establish clearly that
he is covered by the said provision.
In case of doubt or ambiguity,
benefit of it must go to the State.
This is for the reason explained in
Mangalore Chemicals and other
decisions viz. each such
exception/exemption increases the tax
burden on other members of the
community correspondingly. Once, of
course, the provision is found
applicable to him, full effect must
be given to it. As observed by a
Constitution Bench of this Court in
Hansraj Gordhandas v. CCE and Customs
that such a notification has to be
interpreted in the light of the words
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employed by it and not on any other
basis. This was so held in the
context of the principle that in a
taxing statute, there is no room for
any intendment, that regard must be
had to the clear meaning of the words
and that the matter should be
governed wholly by the language of
the notification i.e. by the plain
terms of the exemption.”
(emphasis supplied)
22. In CCE v. Mahaan Dairies this Court has
observed that:
“ 8 . It is settled law that in order
to claim benefit of a notification, a
party must strictly comply with the
terms of the notification. If on
wording of the notification the
benefit is not available then by
stretching the words of the
notification or by adding words to
the notification benefit cannot be
conferred.”
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23. CCE v. Bhalla Enterprises laid down a
proposition that notification has to be
construed on the basis of the language used. A
similar view has been expressed by a Division
Bench of this Court in Tata Iron & Steel Co.
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Ltd. v. State of Jharkhand, Kartar Rolling
Mills v. CCE, Eagle Flask Industries Ltd. v.
CCE, Govt. of India v. Indian Tobacco Assn.,
(2005) 7 SCC 396, Collector of Customs
(Preventive) v. Malwa Industries Ltd., (2009)
12 SCC 735 and CCE v. Rukmani Pakkwell
Traders.
24. Having said that, we would now examine
whether the notification would at all be
applicable to the sale of product in question.
25. In the instant case, the State
Government has issued a notification and has
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used the expression “types of glass” and not
the expression “forms of glass”. Therefore,
what requires to be examined is whether the
two terms would be identical in their
connotation and import.
26. It is a settled law that in taxing
statutes the terms and expressions must be
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seen in their common and popular parlance and
not be attributed their scientific or
technical meanings. In common parlance, the
two words “type” and “form” are not of the
same import. According to the Oxford
Dictionary , whereas the meaning of the
expression “types” is “kind, class, breed,
group, family, genus”; the meaning of the word
“form” is “visible shape or configuration of
something” or the “style, design, and
arrangement in an artistic work as distinct
from its content”. Similarly, Macmillian
Dictionary defines “type” as “ a group of
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people or things with similar qualities or
features that make them different from other
groups ” and “form” as “the particular way in
which something appears or exists or a shape
of someone or something .” Therefore, “types”
are based on the broad nature of the item
intended to be classified and in terms of
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“forms”, the distinguishable feature is the
particular way in which the items exist. An
example could be the item “wax”. The types of
wax would include animal, vegetable,
petroleum, mineral or synthetic wax whereas
the form of wax could be candles, lubricant
wax, sealing wax, etc.
27. Admittedly, glassware is a form of glass
and it is contended by the assessee that forms
of glass are also covered by the said
notification. The term glassware would
generally encompass ornaments, objects and
articles made from glass. The New Oxford
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Dictionary, the Merriam-Webster Dictionary and
the Macmillian Dictionary refer to the said
general meaning while defining it. Glassware
would include crockery such as drinking
vessels (drinkware) and tableware and general
glass items such as vases, pots, etc.
Therefore, it cannot be accepted that the
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expression “types of glass” could have been
intended to refer to or include “forms of
glass”.
28. In the present case, the respondent-
dealer is a manufacturer of glassware. In our
considered view, the glassware so manufactured
by the respondent-dealer though made of glass
cannot be considered or called as a “type of
glass” in light of the aforesaid discussion
and since the notification only provides for
the reduction in the rate of tax of types of
glass and not for “forms of glass” which is
manufactured by the respondent as glassware,
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the respondent would not be covered by the
notification. Keeping that aspect in mind, we
hold that the respondent-dealer, a
manufacturer of articles of glass, is not
entitled to derive the benefit of the
notification issued by the State Government,
dated 25.06.2001. In that view of the matter,
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we cannot sustain the impugned judgment and
order passed by the High Court.
29. In the result, we allow this appeal and
set aside the judgment and order passed by the
High Court.
30. Since the matter was pending for quite
some time, we direct the appellants not to
levy penalty while recovering the difference
of tax payable only for the assessment years
2002-2003 to 2005-2006.
No order as to costs.
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Ordered accordingly.
.....................J.
(H.L. DATTU)
.....................J.
(S.A. BOBDE)
NEW DELHI;
MARCH 27, 2014.
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