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Ateesee (Agro-industrial Trading Corporation) Vs. State of Kerala - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKerala High Court
Decided On
Case NumberT.R.C. Nos. 61 and 62 of 1976
Judge
Reported in[1978]41STC1(Ker)
AppellantAteesee (Agro-industrial Trading Corporation)
RespondentState of Kerala
Appellant Advocate V. Rama Shenoy and; R. Raya Shenoi, Advs.
Respondent AdvocateGovernment Pleader
DispositionPetition allowed
Cases ReferredState of M.P. v. M.V. Narasimhan A.I.R.
Excerpt:
- - 149 at 151-152. one of the questions there considered was whether a further appeal lay to the judicial committee from an award of the tribunal constituted under the calcutta improvement act, 1911, referred to, in the opinion of the board, as the 'local act',in contradistinction to the land acquisition act of 1894, referred to as the 'general act'.under the general act, it is well-known that the value of the land acquired is determined, in the first instance, by the collector by his 'award' against which, there is provision for objection or reference before a court, terminating again, in an award, from which an appeal lies to the high court under section 54. on these provisions, it was ruled in rangoon botatoung co. in the light of the above principles, it was pointed out that the.....v.p. gopalan nambiyar, c.j.1. tax revision cases relate to the claim for exemption from sales tax under the kerala general sales tax act, 1963, in respect of the turnover on sales of 'p.v.c. cloth' (rexine). t.r.c. no. 61 of 1976 relates to the year 1971-72 and the claim is in respect of an amount of rs. 1,33,840.34; t. r. c. no. 62 of 1976 is in respect of 1972-73 and the claim is for rs. 1,56,181.04. the genesis and the statutory background of the claim is as follows :under article 286(3) of the constitution of india:any law of a state shall, in so far as it imposes, or authorises the imposition of, a tax on the sale or purchase of goods declared by parliament by law to be of special importance in inter-state trade or commerce, be subject to such restrictions and conditions in regard to.....
Judgment:

V.P. Gopalan Nambiyar, C.J.

1. tax revision cases relate to the claim for exemption from sales tax under the Kerala General Sales Tax Act, 1963, in respect of the turnover on sales of 'P.V.C. cloth' (Rexine). T.R.C. No. 61 of 1976 relates to the year 1971-72 and the claim is in respect of an amount of Rs. 1,33,840.34; T. R. C. No. 62 of 1976 is in respect of 1972-73 and the claim is for Rs. 1,56,181.04. The genesis and the statutory background of the claim is as follows :

Under Article 286(3) of the Constitution of India:

Any law of a State shall, in so far as it imposes, or authorises the imposition of, a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify.

In accordance with the above constitutional provision, the Central Sales Tax Act, 1956, was passed by Parliament. Section 14 declared goods of special importance in inter-State trade or commerce. Sub-clause (iia) of the said section is :

Cotton fabrics, as defined in item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944).

And item 19 of the First Schedule to the Central Excises and Salt Act, 1944, in so far as it is material, read :

Cotton fabrics' mean all varieties of fabrics manufactured either wholly or partly from cotton and include dhoties, sarees, chadras, bed-sheets, bed-spreads, counter-panes and table-cloths, but do not include any such fabric....

This was the definition till it was amended by the Finance Act of 1969. The amended definition (to notice only its relevant portion) reads:

19. Cotton fabrics-

Cotton fabrics' means all varieties of fabrics manufactured either wholly or partly from cotton and includes dhoties, sarees, chadders, bed-sheets, bed-spreads, counter-panes, table-cloths, embroidery in the piece, in strips or in motifs and fabrics impregnated or coated with preparations of cellulose derivatives or of other artificial plastic materials but does not include any such fabric if it contains....

The underlined words are new. The claim for exemption has to be adjudged in the light of the above provisions.

2. This legislative device (by no means uncommon), of referring to the definition in another Act, is repeated in Sub-clauses (vii), (viii) and (ix), all of which refer back to the definition of the relevant expressions contained in the Central Excises and Salt Act, 1944. The claim for exemption from sales tax was based on the provisions of Sections 3 and 4 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, read with the Second Schedule, Parts II and III, of the said Act. Schedule III authorises the levy and collection in respect, inter alia, of cotton fabrics, rayon or artificial silk fabrics produced or manufactured in India, of duties of excise at the rates specified in the First Schedule. These are to be in addition to the duties of excise chargeable under the Central Excises and Salt Act, 1944. The provisions of the said Act of 1944 and the Rules thereunder, including those relating to refunds and exemptions are to apply in relation to the levy and collection of additional duties in the same way in which they apply to the levy and collection of duties of excise. Under Section 4, during each financial year, payment is to be made out of the Consolidated Fund of India to the States in accordance with the provisions of the Second Schedule, of such sums representing a part of the proceeds of the additional duties levied and collected during the financial year. Part III of the Second Schedule shows Rs. 38,00,000 (Rs. 38 lakhs) against Kerala. There is a proviso in Clause (vi)(b)(ii) of Part III of the Second Schedule that, if during the financial year, there is levy and collection in any State specified (Kerala is one such State) on the sale and purchase of cotton fabrics, etc., by or under any law of the State, no sums shall be payable to that State under Clause (b) in respect of that financial year. By the Kerala General Sales Tax (Amendment) Ordinance of 1957, mill-made textiles and sugar and tobacco were exempt with effect from 14th December, 1957, from the levy' of sales tax under the General Sales Tax Act, 1125, in view of the levy of additional excise duties by the Central Government. The Ordinance was replaced by Section 5A of the Kerala General Sales Tax Act. The said section exempted the dealer of mill-made textiles, tobacco and sugar from taxation under Section 3(1) of the General Sales Tax Act. When the General Sales Tax Act of 1125 M.E. was repealed and replaced by the Kerala General Sales Tax Act, 1963, Section 9 of the Act conferred 'the exemption in respect of goods specified in the Third Schedule. Item 7 of the said schedule is as follows :

Cotton fabrics, woollen fabrics and rayon or artificial silk fabrics as defined in items Nos. 19, 21 and 22 respectively of the First Schedule to the Central Excises and Salt Act, 1944.

Under the Kerala General Sales Tax Act, 1963, unlike in the Act of 1125, the definition of 'cotton fabrics', etc., is geared directly to the First Schedule to the Central Excises and Salt Act, 1944.

3. Counsel for the petitioner contended that the words 'as defined in the Central Excises and Salt Act, 1944' in item 7 of the Third Schedule to the Sales Tax Act are words of 'reference' or 'citation' and not words of 'incorporation'. He placed the strongest reliance on the decision of the Privy Council in Secretary of State v. Hindustan Co-operative Insurance Society Ltd. A.I.R. 1931 P.C. 149 at 151-152. One of the questions there considered was whether a further appeal lay to the Judicial Committee from an award of the Tribunal constituted under the Calcutta Improvement Act, 1911, referred to, in the opinion of the Board, as the 'local Act', in contradistinction to the Land Acquisition Act of 1894, referred to as the 'General Act'. Under the General Act, it is well-known that the value of the land acquired is determined, in the first instance, by the Collector by his 'award' against which, there is provision for objection or reference before a court, terminating again, in an award, from which an appeal lies to the High Court under Section 54. On these provisions, it was ruled in Rangoon Botatoung Co. v. Collector of Rangoon (1912) I.L.R. 40 Cal. 21 (P.C.), that no appeal lay to the Judicial Committe'e as the proceedings throughout were in the nature of arbitration proceedings. By the local Act the Board of Trustees was given power to carry out improvement schemes within the Municipal limits of Calcutta to facilitate expeditious acquisition of lands for the purpose. For the said purpose, the General Act stood modified and the modifications were enumerated, partly in the Act and partly in the schedule. The local Act constituted a Tribunal to take the place of a court under the General Act. By Section 71, the Tribunal was to be deemed to be a court under the General Act, except for the purpose of Section 54 of that Act (Section 54 confers a right of appeal to the High Court against an award). Section 71 of the local Act also provided that the award of the Tribunal shall be final. Almost contemporaneously with the passing of the local Act, there was an amendment to that Act, which provided for an appeal to the Bengal High Court in certain limited cases. In the light of these statutory provisions, the question which fell for consideration was whether an appeal to His Majesty in Council was maintainable. The right was founded on amendments effected to the General Act by Act 19 of 1921, by which every award was to be deemed to be a 'decree' and the reasons therefor, a 'judgment' within the meaning of the C.P.C, the newly added Sub-section (2) of Section 26, giving effect to this; and on Section 54, which stood amended to carry a right of appeal to the Privy Council against the High Court's decree passed on appeal from an award. The Judicial Committee observed:

Having regard to the provisions of Section 71 of the local Act, above referred to, under which the Tribunal is not deemed to be the 'court' for the purposes of Section 54, Land Acquisition Act, it is, their Lordships think, clear that the amendment of Section 54 cannot assist the contention presented to them on behalf of the Secretary of State. For even if the borrowing by the local Act in 1911 from the Land Acquisition Act could be held to include the new Section 54, an award of the Tribunal would not, by the express words of the local Act, come within its provisions.

The Judicial Committee observed that there were more cogent objections to the maintainability of the appeal. Their Lordships were not prepared to accept the amendment made to Section 26(2) of the Land Acquisition Act as conferring a right of appeal. It was observed :

It was not part of the Land Acquisition Act when the local Act was passed, nor in adopting the provisions of the Land Acquisition Act, is there anything to suggest that the Bengal Legislature intended to bind themselves to any future additions which might be made to that Act. It is at least conceivable that new provisions might have been added to the Land Acquisition Act which would be wholly unsuitable to the local code.

Discussing the matter further, it was observed :

In this country it is accepted that where a statute is incorporated by reference into a second statute, the repeal of the first statute does not affect the second: see the cases collected in 'Craies on Statute Law', Edn. 3, pp. 349-50. This doctrine finds expression in a common-form section which regularly appears in the Amending and Repealing Acts which are passed from time to time in India. The section runs:

The repeal by this Act of any enactment shall not affect any Act...in which such enactment has been applied, incorporated or referred to.

The independent existence of the two Acts is therefore recognised; despite the death of the parent Act, its offspring survives in the incorporating Act. Though no such saving clause appears in the General Clauses Act, their Lordships think that the principle involved is as applicable in India as it is in this country.

It seems to be no less logical to hold that where certain provisions from an existing Act have been incorporated into a subsequent Act, no addition to the former Act, which is not expressly made applicable to the subsequent Act, can be deemed to be incorporated in it, at all events if it is possible for the subsequent Act to function effectually without the addition.

In the light of the above principles, it was pointed out that the provision in Section 71 of the local Act giving finality to the award of the Tribunal and the deliberate exclusion of Section 54 of the General Act, from the provisions of the local Act (which was allowed to stand even after the amendments to the General Act), were strong indications of the legislature's intention that there should be no right of appeal from the High Court to the Privy Council. The decision was largely rested on the effect of the provisions of the local Act even after the amendment of the General Act. There was sufficient manifestation that the amendments of the General Act were not to operate in the local sphere.

4. The decision of the Judicial Committee was noticed and considered by the Supreme Court in Nathella Sampathu Chetty's case A.I.R. 1962 S.C, 316. Briefly stated, the position disclosed was this : one of the questions that arose for consideration was whether Section 178A introduced in the Sea Customs Act by a subsequent amendment, can be relied on for the purposes of the Foreign Exchange Regulation Act which had incorporated the Customs Act at a time before the introduction of Section 178A by amendment. The Foreign Exchange Regulation Act, brought into force on 25th March, 1947, provided by Section 23A, introduced by an amendment in 1952, that the restrictions imposed by certain specified provisions of the Act.

shall be deemed to have been imposed under Section 19 of the Sea Customs Act, 1878 and all the provisions of that Act shall have effect accordingly...

Section 19 of the Sea Customs Act enacted :

19. The Central Government may from time to time, by notification in the official Gazette, prohibit or restrict the bringing or taking by sea or by land goods of any specified description into or out of India across any customs frontier as defined by the Central Government.

Section 178A was introduced in the Sea Customs Act, 1878, by the amending Act 21 of 1955. It provided that where any goods are seized in the reasonable belief that they are smuggled goods, the burden of proving that they are not smuggled goods shall be on the person from whose possession the goods were seized. One of the questions examined by the Supreme Court was whether Section 178A introduced in 1955 is attracted to the provision enacted by Section 23A of the Foreign Exchange Regulation Act. The argument was that Section 23A of the latter Act enacted in 1952 incorporated into the Foreign Exchange Regulation Act all the relevant provisions in the Sea Customs Act, as it stood in 1952, with the result, that subsequent amendments to the Sea Customs Act did not and could not affect, modify, or enlarge the scope of the incorporated Sea Customs Act, which had become part of the Foreign Exchange Regulation Act. In support of the contention, reliance was placed on Secretary of State v. H.C.I. Society A.I.R. 1931 P.C. 149. It was held by the Supreme Court that the Privy Council case bore no resemblance to the case on hand. The court emphasised the distinction between a mere reference to, or a citation of, one statute in another and an incorporation, which, in effect, means the bodily lifting of the provisions of one enactment and making it part of another ; so much so, that the repeal of the former leaves the latter wholly untouched. In the case of a 'reference' or a 'citation', however, of one enactment by another without incorporation, the effect of a repeal of the one 'referred to' or 'cited' is what is set out in Section 8, Clause (1), of the General Clauses Act, namely :

8. (1) Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals and re-enacts, with or without modification, any provision of a former enactment, then references in any other enactment or in any instrument to the provision so repealed shall, unless a different intention appears, be construed as references to the provisions so re-enacted.

The effect of an incorporation, on the other hand, was stated by Brett, L.J., in Clarke v. Bradlaugh (1881) 8 Q.B.D. 63, as follows :

Where a statute is incorporated, by reference, into a second statute the repeal of the first statute by a third does not affect the second.

The principle thus stated, it was pointed out by the Supreme Court, was analogous to, although not identical with, what is embodied in Section 6A of the General Clauses Act, which enacts :

6A. Where any Central Act or Regulation made after the commencement of this Act repeals any enactment by which the text of any Central Act or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal.

In the light of the principles thus stated, the Supreme Court took the view in Nathella Sampathu Chetty's case A.I.R. 1962 S.C. 316, that on the language of Section 19 of the Sea Customs Act and Section 23A of the Foreign Exchange Regulation Act there was no scope for the argument that there was any incorporation of the provisions of the earlier Act into the later one. It was pointed out that the effect of Section 23A is to treat the notification by the Central Government under Section 8(1) as if it had been issued under Section 19 of the Sea Customs Act, by the creation of a legal fiction. The reference in Section 23A to Section 19 of the Sea Customs Act cannot have the effect of incorporating the relevant provisions of the earlier Act into the Act of 1947.

5. Based on the above two decisions, the counsel for the petitioner maintained that there was only a 'reference' or a 'citation' of the provision of the Central Excises and Salt Act into the General Sales Tax Act and not an 'incorporation' of it or of its provisions. He, perhaps too candidly, stated that if incorporation and not a mere reference or citation were to be found, he had little case. To this aspect, we shall revert a little later.

6. The petitioner's counsel cited the decision of the Madras High Court in State of Tamil Nadu v. East India Rubber Works, Madras-1 [1974] 33 S.T.C. 399. Exemption was claimed in that case from the provisions of the Madras General Sales Tax Act, 1959, in respect of waterproof cloth like rexine, etc., under item 4 of the Third Schedule to the Act. The question was whether 'waterproof cloth' would be covered by the expression 'textile' occurring in the said item. For the assessee the argument was that use of the article as wearing apparel is not decisive of its being 'textile' and despite the different use or purpose to which it was put, the article would still remain 'textile' so long as the cotton base was present. It was pointed out that 'cotton fabrics' in item 19 of the Central Excises and Salt Act, 1944, have been understood as fabrics impregnated or coated with cellulose or other plastic materials. For the revenue, it was answered that the processing done on the cloth alters its base and characteristics and converts the cloth into a new produce which is not a 'textile'. It was stressed that 'textile' normally signified cloth used as wearing apparel. The Madras High Court ruled that there was no warrant to import the definition of 'cotton fabrics' in item 19 of the Central Excises and Salt Act as amended by the Finance Act, 1969, into item 4 of Schedule III of the Madras General Sales Tax Act. Schedule III had therefore to be construed independently of any definition given under any other statute. So construing, it was ruled that 'textile' in its ordinary dictionary sense meant woven, suitable for weaving, textile fabrics. Interpreting the word 'textiles' in its ordinary and popular sense and not in its primary or technical sense, the learned Judges ruled that the processed articles have different properties and chracteristics are intended for different use and, in commercial circles, they are treated as entirely different from cloth or 'textile'. Hence they would not fall within item 4 of Schedule III to the Act. Counsel for the petitioner invited our attention to the Madras Act 37 of 1974, which amended the Madras Statute in consequence of this decision. He further stressed that the principles stated by the Madras High Court that loss of identity, or different use of the article, or change in the properties and characteristics, has not been accepted as the correct test for deciding the question by the Kerala High Court in Kesavan and Co. v. Assistant Commissioner of Sales Tax [1976] 37 S.T.C. 221. It was noticed in that case that 'caristrap rayon cord strapping' is made, using practically exclusively, rayon cord by a process by which the cords are pasted together by strong glue, which is resilient and elastic to some extent. Item 22 of the First Schedule to the Central Excises and Salt Act, which is attracted by item 7 in the Third Schedule of the Kerala General Sales Tax Act, 1963, was held to cover different articles made out of rayon. It was pointed out that it will be idle to apply the identity test to find out whether the thing sold is the thing mentioned as item 22 in the schedule.

7. The Gujarat High Court in Hind Engineering Co., Rajkot v. Commissioner of Sales Tax, Gujarat [1973] 31 S.T.C. 115, proceeded more or less on the same lines as the Madras High Court. It was there ruled that rubber beltings manufactured by superimposing rubber or rubber compound on both sides of canvas and used in machineries employed for transmission of power are not 'cotton fabrics' within entry 15 of Schedule A to the Bombay Sales Tax Act, 1959. It was further ruled that even if canvas is comprehended within the meaning of 'cotton fabrics', the process of superimposition of rubber brings about such a basic change in its character, nature and form, that it loses its identity and is converted into an altogether different commercial commodity, which cannot be said to fall within 'cotton fabrics'. The decision was relied on by the Government Pleader. But in view of the Division Bench ruling of the Kerala High Court, by which we are bound, we cannot accept the principle of the Madras [1974] 33 S.T.C. 399 and the Gujarat [1973] 31 S.T.C. 115 decisions.

8. The learned Government Pleader cited the decision of the Supreme Court in Ram Sarup's case A.I.R. 1963 S.C. 553. The question there considered was whether the definition of 'agricultural land' given in the Punjab Pre-emption Act, 1913, which adopted the definition in the Punjab Alienation of Land Act, 1900, would be affected by the repeal of the latter Act. Section 3(1) of the 1913 Act denned 'agricultural land' to mean 'land as denned in the Punjab Alienation of Land Act, 1900'. This latter Act was repealed in 1951 and the argument was that with the said repeal, the right of pre-emption granted by the Punjab Act, 1913, ceased to be available. The Supreme Court referred again, to the principle stated by Brett, L.J., in Clarke v. Bradlaugh (1881) 8 Q.B.D. 63 and held that the repeal of the Punjab Alienation of Land Act, 1900, had no effect on the continued operation of pre-emption, in the Pre-emption Act of 1913 and that the expression 'agricultural land' in the latter Act had to be read as if the definition in the Alienation of the Land Act had been bodily transposed into it.

9. The matter received further discussion at the hands of the Supreme Court in Ram Kirpal v. State of Bihar A.I.R. 1970 S.C. 951 and State of M.P. v. M.V. Narasimhan A.I.R. 1975 S.C. 1835. In Ram Kirpal v. State of Bihar A.I.R. 1970 S.C. 951, Section 3(2) of the Imports and Exports (Control) Act, 1947, provided that all goods to which any prohibition under Sub-section (1) apply 'shall be deemed to be goods of which the import or export had been prohibited under Section 19 of the Sea Customs Act, 1878'. It was pointed out that the effect of bringing into an Act the provisions of an earlier Act is to introduce the incorporated section of the earlier Act into the subsequent Act as if these provisions have been enacted in it for the first time. In State of M.P. v. M.V. Narasimhan A.I.R. 1975 S.C. 1835, the provision considered was Section 2 of the Prevention of Corruption Act, 1947. The said section enacted that for the purposes of the 1947 Act 'public servant' means 'public servant as defined in Section 21 of the Indian Penal Code'.. Section 21 of the Indian Penal Code, before its amendment by the Criminal Law (Amendment) Act, 1958, consisted of only eleven clauses. These clauses did not take in an employee under a Corporation or a Government company. The same was added by Clause 12 introduced by the Amendment Act of 1958 and was substituted by an Amendment Act of 1964. As a result of these two amendments, employees of Government companies and of Corporations were brought within the purview of the definition of 'public servant'. The question that arose for consideration was whether these subsequent amendments to the Indian Penal Code would be carried over to the provisions of the Prevention of Corruption Act, 1947. The difference between incorporation of a statute and incorporation of a reference in various provisions was pointed out. We may extract paragraph 6 of the judgment of the Supreme Court :

6. The doctrine of incorporation by reference to earlier legislation has been very aptly described by Lord Esher, M.R., in In re Wood's Estate, Ex parte, Her Majesty's Commissioners of Works and Buildings (1886) 31 Ch. D. 607 at 615-616, where he observed as follows:...

If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the new Act just as if they had been actually written in it with the pen, or printed in it and, the moment you have those clauses in the later Act, you have no occasion to refer to the former Act at all. For all practical purposes, therefore, those sections of the Act of 1840 are to be dealt with as if they were actually in the Act of 1855.

The Supreme Court noticed again the decision in Secretary of State v. Hindustan Co-operative Insurance Society Ltd. A.I.R. 1931 P.C. 149. It was ruled that the 1947 Act was undoubtedly a statute supplemental to the Penal Code and being so, any amendment in the definition of Section 21 of the Indian Penal Code would have to be read into Section 2 of the 1947 Act. Stress was laid on the principle noticed by the Privy Council that while incorporation of the provisions of one Act into another will not generally attract subsequent amendments or modifications carried out to the incorporated statute, there was an exception that this principle will not apply where the subsequent Act is rendered unworthy or is not able to function effectively. Having regard to the preamble to the 1947 Act that it was passed for the more effective prevention of bribery and corruption, it was ruled that the amendment to the Penal Code has to be read into the incorporated provision also. The legal position was summarised as follows:

On a consideration of these authorities, therefore, it seems that the following proposition emerges:

Where a subsequent Act incorporates provisions of a previous Act then the borrowed provisions become an integral and independent part of the subsequent Act and are totally unaffected by any repeal or amendment in the previous Act. This principle, however, will not apply in the following cases:

(a) where the subsequent Act and the previous Act are supplemental to each other;

(b) where the two Acts are in pan materia;

(c) where the amendment in the previous Act, if not imported into the subsequent Act also, would render the subsequent Act wholly unworkable and ineffectual; and

(d) where the amendment of the previous Act, either expressly or by necessary intendment, applies the said provisions to the subsequent Act.

10. The counsel for the petitioner stated that the words 'as defined by the Central Excises and Salt Act, 1944' would not amount to 'incorporation', but only to a 'reference' or a 'citation' as understood in this branch of the law and as expounded by judicial decisions. We notice that almost the same expression was judicially construed in Ram Sarup's case A.I.R. 1963 S.C. 553. The same words were also used in Section 2 of the Prevention of Corruption Act which was considered in State of M.P. v. M.V. Narasimhan A.I.R. 1975 S.C. 1835. In both these cases, it was ruled that the subsequent amendments and modifications had to be taken note of in construing a provision which had been incorporated. In Craies on Statute Law, Seventh Edition, at page 223, the position is thus stated:

Incorporation of earlier enactment.-The effect of bringing into a later Act, by reference, sections of an earlier Act is to introduce the incorporated sections of the earlier Act into the later Act as if they had been enacted in it for the first time. Consequently, when an Act of 1855 incorporated sections of an earlier Act of 1840, those sections were read so as to take effect as if they had been passed in 1855 and Lord Easher, M.R., said : 'If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the new Act just as if they had been actually written in it with the pen, or printed in it and the moment you have those clauses in the later Act, you have no occasion to refer to the former Act at all. For all practical purposes, therefore, those sections of the Act of 1840 are to be dealt with as if they were actually in the Act of 1855....

In Halsbury's Laws of England, Third Edition, Volume 36, page 404, paragraph 611, the position is thus stated:

Express incorporation of earlier provisions.-Where a statute in corporates by reference the whole or any part of an earlier statute, the provisions so incorporated are in general to be construed as they would be if set out in full in the later statute. Where a general Act is incorporated with a special Act subsequently passed relating to a particular subject-matter, a provision in the special Act prevails over an inconsistent provision in the general Act. Where particular sections of an earlier statute are expressly incorporated into a later statute, there is a conflict of authority as to whether other parts of the earlier statute which are not incorporated may or may not be referred to in construing the sections which are incorporated ; it seems probable that, on the principles already referred to in connection with earlier statutes in pari materia, they may be referred to, but only where there is an ambiguity or obscurity in the incorporated sections which cannot otherwise be resolved.

In the light of the principles which have become crystallized by the judicial decisions and been expounded by the leading authorities, let us examine the position. In Ram Sarup's case A.I.R. 1963 S.C. 553 and in State of M.P. v. M.V. Narasimhan A.I.R. 1975 S.C. 1835, the mode chosen by the legislature to express itself was practically the same as we have here, viz., 'as defined in the Central Excises and Salt Act'. In the earlier case, the question was regarding the survival of what we may call the 'built-in' or 'embanked' provision after the repeal of the parent statute from which it was 'built-in' or 'embanked'. It was ruled this would make no difference. That is understandable, whether the words be words of incorporation or of reference. In State of M.P. v. M.V. Narasimhan A.I.R. 1975 S.C. 1835, the definition of 'public servant' in the Prevention of Corruption Act, 1947, was held to be an incorporated definition, nevertheless, it was ruled that the amendments effected by the subsequent clauses of the Indian Penal Code to the definition of the term would get added to the provisions of the Prevention of Corruption Act as well. While the general principle is that an incorporated or impregnated foetus of the provision, neither grows, nor shrinks, nor dies, with the changes or even the death of the parent, this principle would not apply, inter alia, where the two Acts are supplemental to each other ; and where, to confine the impregnated provision to a static state would render the containing Act ineffectual and unworkable. This principle was succinctly stated by the Privy Council in the passages noticed supra in para 3.

11. In the light of the principles thus formulated, it seems unnecessary for us to labour the point whether we are confronted in these cases with a 'reference' or 'citation' on the one hand, or an 'incorporation' on the other, of the definition of 'cotton fabrics' in item 19 of the First Schedule of the Central Excises and Salt Act, into the provisions of Section 9 read with item No. 7 of the Third Schedule of the General Sales Tax Act, 1963. If the definition was merely by way of 'reference' or 'citation', the referred or cited provision grows and shrinks with the changes in the parent statute. Even in the case of an incorporated definition, while the general principle is that the incorporated definition remains static and is unaffected by the developments or fluctuations of the parental source from which it was incorporated, two of the well-recognised exceptions formulated by the Supreme Court in State of M.P. v. M.V. Narasimhan A.I.R. 1975 S.C. 1835 seems to apply here, are, exceptions (a) and (c) (see para 9 supra). The concept of 'cotton fabrics' in the Central Excises and Salt Act seems to be integrally linked with the provisions of the General Sales Tax Act and we do not think that we would be justified in regarding the latter Act as unaffected by the growing concept of the term 'cotton fabrics' in the Central Excises and Salt Act. We feel too, that unless the extended definition of the Central Excises and Salt Act is imported into the Sales Tax Act, the latter Act would become unworkable and ineffectual. We therefore allow these tax revision cases, set aside the orders of the Appellate Tribunal and send these cases back to the Tribunal to determine the amount due by way of refund to the petitioner, in accordance with law and in the light of the observations contained in this judgment. There will be no order as to costs. Issue carbon copies to counsel.


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