Skip to content


Mehta Brothers (Labella) Surat Vs. the State of Gujarat - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtGujarat High Court
Decided On
Case NumberSales Tax Reference No. 3 of 1978
Judge
Reported in[1979]43STC208(Guj)
ActsGujarat Sales Tax Act, 1969 - Sections 5, 49 and 49(2)
AppellantMehta Brothers (Labella) Surat
RespondentThe State of Gujarat
Appellant Advocate K.H. Kaji and; S.L. Modi, Advs.
Respondent Advocate G.T. Nanavati, Adv., i/b., Bhaishanker Kanga and Girdharlal
Cases ReferredBorough of Portsmouth v. Charles Bovill Smith
Excerpt:
.....mean manufactured in india - manufactured relates to raw materials from which rayons or artificial silk fabrics are manufactured and not place where they are manufactured - question referred answered in negative. - - the assessee carried the matter in appeal before the assistant commissioner of sales tax, but the appeal failed. the assessee thereupon carried the matter in further appeal before the gujarat sales tax tribunal (hereinafter called 'the tribunal') and, in that proceeding also, the assessee failed. it is not necessary for the purposes of this case to enter into the consideration of the interesting question as to whether this is a case of legislation by reference or citation, or of legislation by incorporation, properly so-called. if the word or phrase is precise and..........the assessee raised three contentions : (1) that the goods in question were 'artificial silk fabrics' within the meaning of entry 40 of schedule i and that, therefore, the sale of those goods was free from all taxes under section 5 of the gujarat sales tax act, 1969 (hereinafter referred to as 'the act'), (2) that the transactions of sale of the goods in question were exempted from the whole of tax under entry 67 of the schedule to the government notification dated 29th april, 1970, issued in exercise of the power conferred upon the state government by section 49(2) of the act and (3) that, in any case, the sales of the goods in question were liable to tax at 3 per cent. because they were declared goods and not at the rate specified in residuary entry 13 of schedule iii. the.....
Judgment:

Desai, J.

1. The assessee herein is a partnership firm. It is carrying on business of selling cloth, cosmetics, ready-made garments, hosiery, etc. In the assessment year S.Y. 2027, the assessee had purchased artificial silk cloth manufactured outside India from the customs department. The assessee sold the said cloth for a total value of Rs. 15,681. In the course of its assessment proceedings, the assessee raised three contentions : (1) that the goods in question were 'artificial silk fabrics' within the meaning of entry 40 of Schedule I and that, therefore, the sale of those goods was free from all taxes under section 5 of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as 'the Act'), (2) that the transactions of sale of the goods in question were exempted from the whole of tax under entry 67 of the Schedule to the Government notification dated 29th April, 1970, issued in exercise of the power conferred upon the State Government by section 49(2) of the Act and (3) that, in any case, the sales of the goods in question were liable to tax at 3 per cent. because they were declared goods and not at the rate specified in residuary entry 13 of Schedule III. The Sales Tax Officer rejected all the contentions advanced on behalf of the assessee and sales tax and general sales tax were levied at the rate specified in entry 13 of Schedule III. The assessee carried the matter in appeal before the Assistant Commissioner of Sales Tax, but the appeal failed. The assessee thereupon carried the matter in further appeal before the Gujarat Sales Tax Tribunal (hereinafter called 'the Tribunal') and, in that proceeding also, the assessee failed. At the instance of the assessee, however, the Tribunal has referred the following three questions for the opinion of this Court :

'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that entry 40 of Schedule I to the Gujarat Sales Tax Act, 1969, would apply to those fabrics which have been manufactured in India and not otherwise

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that entry 67 of the Government notification issued under section 49 of the Gujarat Sales Tax Act, 1969, would be applicable only to those fabrics which have been manufactured in India and not otherwise

(3) Whether, the Tribunal was right in holding that the sales of imported artificial fabrics would be covered by residuary entry 13 of Schedule III to the Gujarat Sales Tax Act, 1969, as there was no entry applicable for the sale of the said goods ?'

2. We propose to take up for consideration first question No. (1), for, that is the main question to be answered and, upon its answer, the answer to question No. (2) will automatically follow and question No. (3) will not require to be answered as the assessee has stated that it does not press the same.

3. Under section 5, subject to the conditions or exceptions, if any, set out against each of the goods specified in column 3 of Schedule I, no tax shall be payable on the sales or purchases of any goods specified in that schedule. The effect of this provision is that the sale or purchase of the goods specified in Schedule I is free from all taxes subject, however, to the conditions or exceptions, if any, set out against each of the goods. Entry 40 of the said schedule reads as under :

'Rayon or artificial silk fabrics as defined in item No. 22 of the First Schedule to the Central Excises and Sales Act, 1944.'

4. Having regard to the manner in which the goods covered by the said entry, namely, 'rayon or artificial silk fabrics' are defined, it would become necessary to refer to the definition of those goods in item 22 of the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Excise Act'). The said definition, in so far as it is material for the purposes of this case, reads as under :

''Rayon or artificial silk fabrics' means all varieties of fabrics manufactured either wholly or partly from rayon or artificial silk and includes 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.'

5. As would be apparent from what follows, we are not concerned with the remaining part of the definition and, therefore, we are not setting out the entire definition. It is manifest that this is an instance of legislation by adoption in that, the legislature for the purpose of defining rayon or artificial silk fabrics in entry 40 of Schedule I has adopted the definition of the said goods, as given in item 22 of the Excise Act. It is this legislative device adopted by the legislature which has given rise to the controversy which centres round question No. (1). To pinpoint the controversy and to resolve it against its proper background, it would be necessary at this stage to refer to the nature of the controversy and to the view of the taxing authorities on the point.

6. The contention of the assessee was that the goods sold by it were artificial silk fabrics as defined in item 22 of the First Schedule to the Excise Act and that, therefore, no tax was leviable on the sale of those goods. The Sales Tax Officer rejected this contention on the ground that, in order to get the benefit of exemption, it was necessary for the assessee to establish that artificial silk cloth, which was the subject-matter of the concerned sales, was manufactured in India, because artificial silk fabrics as defined in item 22 of the First Schedule to the Excise Act alone are eligible to exemption under entry 40 of Schedule I of the Act and the said item 22 covered only such fabrics as were manufactured in India, in view of the fact that excise is leviable only on such goods which are manufactured in India. The Appellate Assistant Commissioner also took substantially the same view. The Tribunal concurred in the decision of the taxing authorities and it expressed itself on the question in the following words :

'When the definition of 'rayon or artificial silk fabrics' has been incorporated in the Gujarat Act from the definition given in item No. 22 of the First Schedule to the Central Excises Act, 1944, we have to take the meaning as can be attributed to the word 'manufactured' used in item No. 22 in the context of the Central Excises and Salt Act, 1944 ............ That Schedule I has got reference in section 3 of the Central Excises Act, 1944, and section 3 specifically states that the goods mentioned in the First Schedule are the goods which are manufactured in India because excise duty can only be levied on the goods manufactured in India except in the case of salt. Thus considering the arguments of both the parties on the whole, we are of the view that the learned Assistant Commissioner was right in holding that only those fabrics which have been manufactured in India would fall in item No. 22 of the First Schedule to the Central Excises Act, 1944, and as the goods in dispute are imported goods, they would not fall under item No. 22 and, as such, they cannot be covered by entry 40 of Schedule I to the Gujarat Act.'

7. It might be stated at this stage that before the Tribunal, the decision of the taxing authorities was sought to be supported on behalf of the revenue on an alternative argument based on the legislative history, namely, that the exemption to sales or purchases of artificial silk fabrics is granted because those fabrics are to bear additional excise duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957, which came into force on 24th December, 1957, and that since the additional duty of excise can be levied only on the goods manufactured in India, it must be presumed that the legislature intended to give under entry 40 of Schedule I exemption to sales or purchases of only those fabrics which were manufactured in India. In the instant case, proceeded the argument, the goods in question were not manufactured in India but were imported goods and, therefore, sales of such goods would not be exempted under entry 40 of Schedule I. The Tribunal rightly rejected this argument relying upon the decision of the Supreme Court in Innamuri Gopalam and Maddala Nagendrudu v. State of Andhra Pradesh ([1963] 14 S.T.C. 742 (S.C.)), and the decisions of this Court in Pravin Brothers v. The State of Gujarat ([1964] 15 S.T.C. 478) and in Hind Engineering Co. v. Commissioner of Sales Tax ([1973] 31 S.T.C. 115). This contention was not pressed on behalf of the revenue at the hearing of the reference and, therefore, the only question which survives for consideration is whether the Tribunal correctly approached the question in issue and whether its ultimate view founded on the reasoning, the substance of which has been extracted above, is correct in law.

8. As earlier stated, entry 40 of Schedule I is, broadly speaking, an instance of legislation by adoption. It is not necessary for the purposes of this case to enter into the consideration of the interesting question as to whether this is a case of legislation by reference or citation, or of legislation by incorporation, properly so-called. Whatever may be the fine distinction between these concepts and whatever may be the category in which the legislative exercise in the instant case might properly fall, the important point to be noted is that all that the legislature has done while enacting entry 40 of Schedule I is merely to adopt the definition of 'rayon or artificial silk fabrics' as given in item 22 of the First Schedule to the Excise Act. The adoption herein is not of the law generally which governs the levy of excise duty or additional excise duty on rayon or artificial silk fabrics. The adoption is merely of that part of the Excise Act which defines the relevant words, namely, rayon or artificial silk fabrics. This distinction is material and it cannot be lost sight of. It is one thing to adopt the definition of a word or expression in one statute for the purpose of giving the meaning to the same word or expression in another statute and quite another to incorporate one statute as a whole into another by bodily lifting of the provisions of one enactment and making it part of another. The legal effect of the adoption of the definition of the material words as given in item 22 of the First Schedule to the Excise Act, therefore, merely is to implant that definition and that definition alone into entry 40 of Schedule I of the Act as if the said definition has been actually written in it with the pen or printed in it. In other words, we have to treat the definition of the material words as given in item 22 of the First Schedule to the Excise Act as having been set out ipsissima verba in entry 40 of Schedule I. In interpreting such definition or any word or phrase contained in such definition, the golden rule of construction, namely, the rule of literal construction, must be applied and if, on its plain language, there is nothing to modify, nothing to alter or nothing to qualify such definition, the word or phrase must be construed in its ordinary natural meaning. If the word or phrase is precise and unambiguous, no more is necessary than to expound it in its natural and ordinary sense, the word or phrase in such a case best declaring the intention of the legislature.

9. The Tribunal, in taking the view that it did, was influenced by the consideration that when the definition of 'rayon or artificial silk fabrics' was borrowed from the Excise Act, any word used in such definition must to read in the sense which it bore in the Excise Act and that consequently the word 'manufactured' in the definition of the material words must be given that meaning which would be ascribed to it under the Excise Act and that since under the Excise Act only those goods which are manufactured in India would be covered by an entry in Schedule I, having regard to the provisions of section 3 of the Excise Act, it would be legitimate to hold that even for the purposes of entry 40 of Schedule I, the word 'manufactured' should bear the same meaning and, accordingly, it should be read as covering goods manufactured in India. We are afraid, in adopting this approach, the Tribunal has lost sight of the basic fact that what is adopted in entry 40 of Schedule I is merely the definition of 'rayon or artificial silk fabrics' as given in item 22 of the First Schedule to the Excise Act and not the law generally which governs the levy of excise duty on those goods. All that can be looked at, therefore, is the definition on its plain terms and not the other provisions of the Excise Act, which have not been made part of entry 40 of Schedule I. Since the word 'manufactured' is not qualified by the use of the expression 'in India' in the definition clause itself or in the independent definition of the word 'manufacture' given in the Excise Act, it would not be permissible to read those qualifying words by reference to the charging provisions of the Excise Act and to modify the ordinary and natural meaning of the said word accordingly in the Act. It cannot be overlooked in this connection that whereas the Excise Act levies tax on manufacture of goods, sales tax law makes sale or purchase of such goods exigible to tax. Therefore, even having regard to the different subject, context, object and purpose of the two legislations, the requirement of manufacture of goods in India which might be relevant for the Excise Act is not material for the purposes of sales tax law. Even from that point of view, therefore, it would be inappropriate to read the qualifying words along with the word 'manufactured'.

10. True it is that it has been held that where a single section of an Act of Parliament is introduced into another Act, it must be read in the sense which it bore in the original Act from which it is taken, and that, consequently, it is perfectly legitimate to refer to all the rest of that Act in order to ascertain what the section meant, though those other sections are not incorporated in the new Act and that, therefore, all other sections, including the interpretation clause, if there be one, may be referred to for ascertaining the meaning of the section which has been incorporation (see Mayor, Aldermen and Burgesses of the Borough of Portsmouth v. Charles Bovill Smith ((1885) 10 App. Cas. 364)). That principle can possibly be invoked where a section of an earlier Act is introduced in a subsequent Act but not when what has been adopted in the subsequent Act is a definition of a word or expression in the earlier Act. Definition is the legislative dictionary of the word or expression defined. Its precise function is to give the meaning of a word or expression, subject to the context, used in the enacting part of the statute. It is, therefore, difficult to envisage a situation in which it would be legitimate to refer to the enacting part of the statute in order to ascertain what the interpretation clause means. It is obvious, therefore, that if what has been adopted in the subsequent Act is the definition of a word or expression given in an earlier Act, then all can be looked at is that definition and if any of the words or expressions occurring in such definition is independently defined in the earlier Act, then the definition of such words or expressions, no more than that, in our opinion, would be permissible in such circumstances.

11. It is significant to note in this connection that there appears to be conflict of authority even on the question as to whether other parts of the earlier statute, which are not incorporated in the later statute, can be referred to in construing the sections which are incorporated. In Hulsbury's Laws of England, Third Edition, Volume 36, paragraph 611, at pages 404-405, the following pertinent observations are to be found, which throw light on this subject :

'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.'

12. It would thus appear that even in cases where the incorporation into the subsequent statute is of a section and not of the definition clause of the earlier statute, for the purposes of construing such section, other parts of the earlier statute, which are not incorporated, can be referred to only where there is an ambiguity or obscurity in the incorporated sections which cannot otherwise be resolved. In other words, if there is no ambiguity or obscurity in the incorporated sections, or even if there is an ambiguity or obscurity but it can be resolved otherwise than by referring to the other parts of the earlier statute, which are not incorporated, it would not be permissible to refer to such other parts. If this be the principle applicable in relation to incorporation of sections and not definition clauses, we see no reason why with regard to interpretation clauses which are adopted in the subsequent statute any different principle should be applied. Therefore, if the adopted or incorporated definition clause of any word or expression contained therein does not give rise to any ambiguity or obscurity and is capable of being construed, according to its ordinary or natural meaning, it would not be permissible to modify or alter its meaning or to qualify it by reference to the other parts of the statute from which the interpretation clause is bodily lifted and introduced.

13. The word 'manufactured' is neither ambiguous nor obscure. In its ordinary, plain and natural meaning it is not qualified by any concept such as manufactured in India. It would not, therefore, be right to read the said word accordingly in entry 40 of Schedule I by reference to section 3 of the Excise Act. Be it noted in this connection that the word 'manufacture', though it is defined in clause (f) of section 2 of the Excise Act, does not bear the meaning 'manufactured in India' according to the said statutory definition. Even according to the legislative dictionary, therefore, in the Excise Act, the word 'manufacture' is not necessarily to be read as manufactured in India.

14. One more aspect which has some bearing on the resolution of the controversy may be referred to and that is that even the context in which the word 'manufactured' is used in the definition of 'rayon or artificial silk fabrics' in item 22 of the First Schedule to the Act does not require that the said word should be read as 'manufactured in India'. It is significant to note that the word 'manufactured' in the said definition is used in connection with the raw materials from which rayon or artificial silk fabrics are manufactured and not the place where they are manufactured. The relevant words are : '.... manufactured .... from rayon or artificial silk ...' This context and collocation also highlight the fact that the word 'manufactured' in its grammatical variation is used in the relevant definition in its plain and natural meaning without any qualification except the qualification relating to the basic material from which the manufactured article is produced.

15. On the basis of the foregoing discussion, we hold that the Tribunal was in error in holding that entry 40 of Schedule I covers only those fabrics which are manufactured in India and that, therefore, the goods in question, which had been imported in India, would not be covered by the said entry.

16. Question No. (2) turns upon the interpretation of entry 67 of the Schedule to the Government notification issued under section 49(2) of the Act. The said entry reads as under :

'Sales or purchases of cotton, rayon, artificial Whole of tax.' silk or woollen fabrics dyed, bleached or printed.

17. It would appear on a perusal of this entry that sales or purchases, inter alia, of artificial silk fabrics dyed, bleached or printed are exempt from the whole of tax. The contention of the assessee appears to have been two-fold : first, that the definition of 'artificial silk fabrics', which has been adopted for the purposes of entry 40 of Schedule I cannot be projected into entry 67 of the Schedule to the Government notification and, second, that, in any case, and even if the said definition is relevant for the purpose of interpreting the expression 'artificial silk fabrics' in entry 67, it would not be correct, on a true interpretation of the said definition, to hold that artificial silk fabrics intended to be covered by entry 67 should have been manufactured in India. The revenue's contention, on the other hand, appears to have been that the expression 'artificial silk fabrics' having been defined in entry 40 of Schedule I of the Act, the same meaning must be given to those words even when they occur in entry 67 and, accordingly, for the purposes of earning exemption under entry 67, the sale must be of artificial silk fabrics which have been manufactured in India. The Tribunal upheld the contention of the revenue.

18. We shall assume for the purposes of this case, without deciding, that the basic approach of the Tribunal is correct, namely, that since the words 'artificial silk fabrics' have been defined in entry 40 of Schedule I of the Act, the same meaning must be given to those words when they occur in entry 67 of the Schedule to the Government notification and that, therefore, if the definition requires that artificial silk fabrics must be manufactured in India, that requirement will also have to be read into entry 67. Even so, on the view which we have taken on the first question, it is apparent that it is not essential under the definition that artificial silk fabrics should have been manufactured in India in order to be covered by entry 40 of Schedule I. We, must, therefore, hold that even for the purposes of entry 67 of the Schedule to the Government notification it is not necessary that artificial silk fabrics therein mentioned should have been manufactured in India. It must, therefore, be held that the Tribunal was not right in the view that it took as to the artificial silk fabrics which are intended to be covered by entry 67.

19. Question No. (3) does not require to be answered, because, having regard to the phraseology of the said question, the assessee has not pressed for its answer.

20. In view of the foregoing discussion, we answer the questions referred herein as follows :

Question No. (1) : In the negative, that is to say, in favour of the assessee and against the revenue.

Question No. (2) : In the negative, that is to say, in favour of the assessee and against the revenue.

Question No. (3) : Not required to be answered.

21.The State of Gujarat shall pay the costs of this reference to the assessee.

22. Reference answered accordingly.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //