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G. Sriramulu Naidu and I. Chengama Naidu and ors. Vs. Commercial Tax Officer and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case Number Writ Appeal Nos. 398 to 410, 454, 462 and 1029 of 1973
Judge
Reported in[1975]35STC531(AP)
AppellantG. Sriramulu Naidu and I. Chengama Naidu and ors.
RespondentCommercial Tax Officer and anr.
Appellant Advocate S. Dasaratharama Reddy, Adv.
Respondent Advocate The Government Pleader for Commercial Taxes
DispositionAppeal dismissed
Excerpt:
.....subsequently in 1963 adds altogether a new case which does not legitimately come within the main definition of 'dealer',as it stood prior to the said amendment, the explanation should be held as bad. in the alternative, it was argued that if the explanation is considered to be good, even then it must also satisfy the requirement of the main definition. , sugarcane, and sell the jaggery after the sugarcane was converted into jaggery by the well-known process. when a particular class of cases does not come within the purview of the main provision, nevertheless, the legislature, if intends clearly to bring such a class of cases within its fold, the legislative device of adding an explanation of the kind we have in the instant case is often employed. 252 at 258. 19. if the above..........was that the second explanation to section 2(e) is invalid as it goes beyond the scope of the main definition of the term 'dealer' found in section 2(e) of the act. the definition together with the said explanation reads as under :'dealer' means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration and includes....explanation ii.-where a grower of agricultural or horticultural produce sells such produce grown by himself or grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, in a form different from the one in which it was produced after subjecting it to any.....
Judgment:

Gopal Rao Ekbote, C. J.

1. The appellants, who are the writ petitioners, are commission agents. The ryots raise sugarcane crops in their lands. The ryots for the purpose of early marketability and transport convert their sugarcane into jaggery by crushing the same and boiling it with lime. The ryots then sell the jaggery through the petitioners, who charge them 4 per cent commission on such sales.

2. Admittedly, the liability of the commission agent is co-extensive with that of the principal.

3. In the assessment proceedings for the relevant years, the petitioners contended that their principals are not liable to tax on jaggery as they are not dealers within the meaning of the Andhra Pradesh General Sales Tax Act, hereinafter called the 'Act'. Since the principals cannot be taxed, the commission agents are not exigible to tax.

4. The commercial tax authorities rejected the said contention and assessed the petitioners to sales tax. It is to challenge the correctness of the assessment orders for the relevant years that the petitioners filed a bunch of writ petitions.

5. M. Krishna Rao, J., who heard the writ petitions (Tholasi Venkata-munuswamy Chetty & Sons v. Commercial Tax Officer [1974] 33 S.T.C. 497) dismissed them on the ground that the ryots are dealers within the definition of 'dealer' given in Section 2(e) read with the second explanation.

6. In these appeals, the contention of Sri Dasaratharama Reddy, the learned counsel for the appellants, was that the second explanation to Section 2(e) is invalid as it goes beyond the scope of the main definition of the term 'dealer' found in Section 2(e) of the Act. The definition together with the said explanation reads as under :

'Dealer' means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration and includes....

Explanation II.-Where a grower of agricultural or horticultural produce sells such produce grown by himself or grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, in a form different from the one in which it was produced after subjecting it to any physical, chemical or any process other than mere cleaning, grading or sorting, he shall be deemed to be a dealer for the purposes of this Act.

7. The second explanation was inserted by Section 2(i) of Amendment Act No. 16 of 1963 and came into effect from 1st August, 1963.

8. The contention was that an explanation to a provision is not expected to add. In this case, since the explanation enacted subsequently in 1963 adds altogether a new case which does not legitimately come within the main definition of 'dealer', as it stood prior to the said amendment, the explanation should be held as bad. In the alternative, it was argued that if the explanation is considered to be good, even then it must also satisfy the requirement of the main definition. Accordingly, it was submitted that since the ryots do not carry on the business in jaggery, they cannot be treated as dealers for the purposes of the Act.

9. Now, it was not disputed that if the explanation is read without in any manner influenced by its title, then it leaves no ambiguity, and in clear terms it applies to the principals of the petitioners, who are growers of agricultural produce, i. e., sugarcane, and sell the jaggery after the sugarcane was converted into jaggery by the well-known process.

10. The submission, however, was that since the provision carries the title of explanation, it cannot add to the main definition of dealer anything which was not within its ambit. Reliance in support of this contention was placed on the following two decisions of the Supreme Court: S.S. Works v. Assistant Registrar, Co-operative Societies A.I.R. 1962 S.C. 1367 and Bihta Co-operative Development and Cane Marketing Union Limited v. Bank of Bihar A.I.R. 1967 S.C. 389.

11. What then are the functions of an explanation in a legislative enactment ?

12. It is true that the abovesaid decisions of the Supreme Court held that an explanation added to the section does not enlarge the scope of the section. These decisions, however, have to be read in the context of the facts of those cases. In some other cases, it is also held that the explanation does not restrict the operation of the main provision. But these are not inflexible or rigid rules which must be applied universally to every case. It is all a matter of construction of the relevant statute, which, in the ultimate analysis, depends upon the intention of the legislature. There is no general rule nor there can be any, that an explanation can in no case enlarge the scope of the section to which it is appended. The purpose of the explanation ordinarily is not to limit the scope of the main provision.

13. It is plain that when any phrase, word, expression or provision in an enactment is explained by the legislature, the provision has to be applied with the authoritative explanation ; for the very object of the authoritative explanation is to enable the court to understand the provision in the light of the explanation : see Balaji Singh v. Chakka Gangamma A.I.R. 1927 Mad. 85 at 88.

14. In fact when an explanation is appended to a section to explain its meaning, it becomes a part and parcel of the section : see Bengal Immunity Co. v. State of Bihar A.I.R. 1955 S.C. 661 at 733.

15. An explanation very often, as here, introduces a legal fiction and treats the legal fiction as a reality contained in the section itself: see United Motors (India) Ltd. v. State of Bombay 55 Bom. L.R. 246 at 259 and Public Prosecutor v. Gladstone (1963) 2 An. W.R. 388.

16. It would therefore follow that an explanation enacting a legal fiction can add to the cases falling within the main provision. When a particular class of cases does not come within the purview of the main provision, nevertheless, the legislature, if intends clearly to bring such a class of cases within its fold, the legislative device of adding an explanation of the kind we have in the instant case is often employed.

17. An explanation to a section makes plain or intelligible or clears from obscurity something which may arise from the section. What is plain is that an explanation has to be interpreted within the scope of what it purports to be, i. e., something which 'explains' the section and it may do so by clarification of some doubt or by way of an addition or subtraction, either expressly or by introducing a legal fiction: see South Indian Cooperative Insurance Society v. Bapi Raju A.I.R. 1955 Mad 694 at 696.

18. It follows therefore that the meaning to be given to the explanation must depend upon its own terms. It must be interpreted according to its own tenor. If the language of the provision is clear and unambiguous it should be unhesitatingly accepted without any demur, whatever may be the caption or title given to such a provision. The mere description of a certain provision such as explanation is not decisive of its true meaning. If the language of the provision is clear it will prevail over the title if it is wrongly given. The interpretation must obviously depend upon the words used in the provision. The safest course in such cases is to apply the fundamental general rule to construe the explanation according to its own terms having regard to its context and setting. It is of course true that if the provision is capable of two interpretations, one in accordance with the title and the other inconsistent with it, then the one in accordance with the title must be accepted : see State of Bombay v. United Motors (India) Ltd. A.I.R. 1953 S.C. 252 at 258.

19. If the above principles are borne in mind and the provision entitled explanation is read, no one would be left in the slightest doubt that the growers of sugarcane like the principals of the petitioners clearly come within the deeming clause incorporated in it and are consequently dealers for the purposes of the Act. Since this is clear from the provision, it is immaterial what is the title given to such a provision.

20. It was, however, contended that if the legislature wanted to add to the main definition a new category of the growers, such as the principals of the petitioners, then instead of entitling the provision as explanation, the legislature could have used 'proviso' as the title of the provision and not the explanation. We cannot agree with this contention. An explanation is quite different in nature from a proviso, for the latter excepts, excludes and restricts while the former explains, clarifies or subtracts or includes something by introducing a legal fiction such as here. The normal function of a 'proviso' is thus to except something out of the preceding portion of the enactment or to qualify something contained therein, which, but for the proviso, would be within the purview of the enactment. No such thing arises in the instant case. It is the converse of it. The growers, such as the principals of the petitioners, would not come within the definition as it stood originally and that is why the second explanation was added to bring such growers within the definition of a 'dealer'. That could not have been done by entitling the provision as a proviso. It would have been inappropriate and misleading.

21. The argument that a non obstante clause could have been used instead of explanation is equally devoid of substance. A clause beginning with 'notwithstanding anything contained in the section' is appended with a view to give the enacting part of the section, in case of conflict, an overriding effect over the section mentioned in the non obstante clause. It is equivalent to say that in spite of the provision mentioned in the non obstante clause, the provision following it will have its full operation or that the provision embraced in the non obstante clause will not be an impediment for the operation of the enactment. Neither there is conflict between the main definition of a dealer and a legal fiction created in explanation II, nor there could arise any question of giving overriding effect to explanation II over the main definition. Moreover, we fail to see how it would benefit the petitioners. A device of non obstante clause to be used in drafting was therefore utterly unsuited.

22. It was also contended that the legislature could have added the provision as Clause (v) to the main definition instead of adding it as explanation. Since the four clauses include certain cases within the definition of 'dealer', this explanation could have very well been drafted as Clause (v), which would have included the growers within the definition of 'dealer'. It may be such a drafting also would have been appropriate, but that would not make the addition of explanation II bad in law. The new class, such as growers, can well be included even by adding an explanation as it provides for a legal fiction. In any case, it is a question of form and not of substance.

23. In view of what we have said about the varied functions of an explanation in a legislative enactment, the legislature, in our view, has rightly used the title of explanation II to the provision under consideration. There is thus no conflict whatsoever between the title of the second explanation and the body of it. They are in complete harmony with each other. We therefore do not experience any difficulty in rejecting the contention of the appellants.

24. The alternative argument that over and above the requirement of explanation II, the grower referred to in explanation II must also satisfy the requirements of the main definition of 'dealer' is without any substance. A deeming provision such as explanation II creates a legal fiction. It must therefore logically be taken to its conclusion. The second explanation does it. It is a self-contained and a complete provision in regard to the kind of growers mentioned therein. It stands apart from the main definition, but by a legal fiction is made part of it. Once such a grower is considered to be a dealer for the purpose of the Act, as is clear from explanation II, then the matter concludes there. It is not necessary for such a deemed dealer to further satisfy the requirements of the main definition which is not meant for a grower covered by explanation II. The argument, if accepted, would defeat the very purpose of enacting explanation II. The main definition does not apply to a grower who is deemed to be a dealer under explanation II for the purposes of the Act. The alternative argument therefore has to be rejected.

25. In Writ Appeal No. 1029 of 1973, we would like to observe that if the appellant therein feels that he is entitled to an exemption under Section 9 of Act 9 of 1970, he may, if so advised, file an application with the concerned authority, if it is permissible now and is in accordance with law. We have no reason to suppose that the authority concerned will not decide such an application, if filed, in accordance with law. We cannot, however, give any direction in that behalf.

26. For the reasons given above, the appeals fail and are dismissed with costs. Advocate's fee Rs. 100 in each case.


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