Karnataka High Court
Mrf Limited vs Commissioner Of Commercial Taxes And ... on 2 April, 1996
Equivalent citations: [1997]105STC68(KAR)
JUDGMENT G.C. Bharuka, J.
1. The question involved in the present batch of writ petitions pertains to interpretation of section 6-D of the Karnataka Sales Tax Act, 1957 (in short, "the Act") which was inserted by Karnataka Act 6 of 1995 providing for levy of cess on certain transactions of sale and/or purchase with effect from April 1, 1995.
2. Sub-section (1) of section 6-D which is relevant for the present purpose reads as under :
"6-D. Levy of cess. - (1) In addition to the tax payable under section 5, 5B, 5C and 6, there shall be levied and collected by way of cess for the purpose of Bangalore Mass Rapid Transit System a tax, on sales or purchases effected by any dealer who is carrying on business within the limits of Bangalore City Planning Area, at the rate of five per cent of tax payable under the said sections :
Provided that where a dealer is selling to any person goods specified in serial number 12 of Part 'M' of the Second Schedule within the limits of Bangalore City Planning Area, such dealer shall pay the cess on the sale of, -
(i) petrol at the rate of twenty-five paise per litre; and
(ii) diesel at the rate of ten paise per litre."
3. It appears that subsequent to the insertion of the said provision, the Commissioner of Commercial Taxes, pursuant to certain queries, issued a Circular No. 3/949-95 dated 21st April, 1995 giving his own interpretation of the said provision, the relevant part whereof is to the following effect :
"The cess is payable by all the assessees having their places of business within the Bangalore City Planning Area and who are registered with the assessing authorities having jurisdiction over such area and paying taxes to such authorities in respect of all sales/purchases made by them in the State.
Where the principal place of business of a corporate body is within the limits of Bangalore City Planning Area and is having branches in other places in the State and where such corporate body has obtained separate registration under section 12E for the purpose of assessment, such branches shall also be liable to pay cess in addition to the tax payable by them in respect of sales or purchases as the case may be effected by them."
4. Pursuant to the said circular, the assessing authorities under the Act have issued notices to all the dealers like the petitioners herein, demanding cess at the rate of 5 per cent of tax payable by such dealers under sections 5, 5-B, 5-C and 6 of the Act in respect of all their sales or purchases effected by them even at their places of business/branches located outside the Bangalore City Planning Area ("Bangalore are", for short). These actions as emanated from the above referred Commissioner's circular has triggered off the present spate of litigations.
5. The controversy which needs to be resolved is as to whether the petitioners having more than one place of business in the Karnataka State including the ones within the limits of Bangalore area are liable to pay cess in terms of section 6-D of the Act only on the tax payable by them in respect of sales or purchases effected within the Bangalore are or even in respect of sales or purchases effected by them outside the said area.
6. Section 2(k) of the Act defines the term "dealer", inter alia, to mean "any person who carries on the business of buying, selling, supplying or distributing goods". Clause (q) of this section gives an inclusive definition of "place if business".
7. Section 10 of the Act provides for registration of dealers and section 10A lays down the procedure for the same. Section 10A(3) directs that where a dealer has more than one place of business, the registration certificate shall cover all such places of business. But rule 22A of the Karnataka Sales Tax Rules, 1957 ("the Rules", for short) give an option to bodies corporate having more than one place of business to make an application to the Commissioner to seek a special order based on the hardships likely to be faced by them, to permit each branch to be assessed separately by the assessing authority of the area in which such branch is situated as a separate business and grant of such permission has to be subject to the provisions of the Act and Rules relating to registration, filing of monthly statements, returns, assessments, payment and recovery of taxes, and other conditions embodied in the Rules.
8. By referring to the scheme of the Act, it has been submitted by Mr. Sarangan and Mr. Natarajan learned Senior Counsel appearing for the petitioners, that section 6-D of the Act is capable of more than one interpretation; and keeping the view the object with which the impugned section 6D was inserted, the sales or purchases effected by a dealer within the Bangalore area can only be subjected to levy of cess and not the transactions which have been effected by such dealers outside that area; and the circular issued by the Commissioner expressing a contrary view should be held to be unauthorised, illegal or unenforceable.
9. According to the petitioners, on a fair and rational construction arrived at by employing internal and external aids as judicially evolved for the purpose, the irresistible conclusion could not only be the one which has been placed on their behalf, since according to them, any contrary construction will not only be opposed to the object of the impugned legislative exercise but will also be violative of article 14 of the Construction of India as it may lead to uncertainties and ambiguities and above all irrational application of law under the executive fiat, which again is impermissible under the mandate of article 265 of the Commission.
10. To fortify the said submissions, it has been illustrated that if a person, like the petitioners herein, has three branches - one within the Bangalore area and the other two at Mangalore and Dharwad, the impugned section 6D of the Act, even on its plain reading, does not indicate that such a person will be demand to be a dealer carrying on business in Bangalore area even in respect of its outside transaction, thus making him liable for paying cess even in respect of its such sales of purchases; or if he is taken to be a dealer carrying on business at Mangalore or at Dharwad, then whether still he can be held liable for payment of cess. Similarly, it has further been submitted that in the same illustration even on a fair reading of the sanction, persons having more than one branches, out of which one being in Bangalore area can claim complete exemption from levy of cess under the Act on the ground that under the impugned provisions only such dealer has been made liable to pay cess who carries on business only within. Bangalore area meaning thereby at no other place in the State of Karnataka.
11. The acceptance of either of the rival contentions invites for judicial construction of the impugned provision. Therefore, employment of the rules of interpretation has become incumbent.
12. Accordingly, to seek the first aid, let me overview the enacting history of the impugned provisions. As has been made clear in the body of section 6D by the Legislature, the cess in question has been levied for the purpose of Bangalore mass rapid transmit system (for short, "the transmit system"). The necessary of having this new transmit system has been explained in paragraph 95 and 96 of the Budget Speech for the year 1995-1996 made by the Minister of Finance and Planning which read as follows :
"95. The number of vehicles registered in Bangalore have increased from 3.19 lakhs to 7.81 lakhs in the past one decade. It is hardly possible to wide the roads to make space for the ever increasing traffic. Further, the carrying capacity of conventional modes of transport is also limited. The only way out is a mass rapid transmit system. The Government has initiated steps to set up an elevated light rail transmit system by the private sector with necessary support from the Government. Global tenders inviting Requests for Proposal (REP), for this project already been floated. The Government expects to finalise the agency by June, 1996 which will ultimately execute the project on build, own and operate/build own and transfer basis.
96. It will be a huge project with an estimated cost of Rs. 4,000 crores at current prices. While most of the funds will be brought by the private sector, the Government will have to provide some financial support either as a one time support or as a recurring support. The honorable members will agree that the other commitments of the State Government will not leave resources for supporting this massive project. It will be in order if the potential users of the system are asked to contribute. The Government proposes to set up mass rapid transmit system fund. The receipts for this fund will be generated out of cess to be levied on various taxes collected in the city of Bangalore alone. During 1995-1996, it is proposed to raise Rs. 55 crores through this cess........"
13. Accordingly, in paragraphs 155 and 156 of the said speech, it was proposed to make provisions for levy of cess for the said purpose. The proposals were to the following effect -
"155. In order to meet the cost of Bangalore Mass Rapid Transmit System, I purpose to impose a cess which could be limited to the activities in Bangalore Planning Area Limits. The details of levy furnished in annexure XII.
"156. The above measures will necessitate amendments to the provisions of various tax enactments. These amendments, together with certain other changes by way of rationalisation will be brought to the House in due course for consideration and approval."
14. Since as noticed above, the incorporation of section 6D of the Act was capable of more than one interpretation, it led to spate of litigations in this Court, like filing of the present batch of writ petitions, the Government taking note of this fact felt in desirable to make necessary amendment in the impugned provision to remedy the misgivings as is apparent from paragraph 152 of the Budget Speech for the year 1995-96 made by the Minister of Finance and Planning. Planning 152 of the said Budget Speech reads thus :
"152. Honorable Members are aware that the BMRT cess was introduced from April 1, 1995 on sales or purchases taking place in Bangalore City Planning Area, in order to partly meet the cost of Bangalore Mass Rapid Transmit System. The language employed in section 6D, unfortunately has led to litigation in the High Court. We have also received representations from the trade. I, therefore, propose to suitably amend the relevant section, so that the levy of BMRT cess is made applicable only to sales or purchases effected within the Bangalore City Planning Area."
15. Accordingly, by section 6(4) of the Karnataka Taxation Laws (Second Amendment) Bill, 1996 (Act 5 of 1996), it has been provided that -
"in section 6-D, for the words 'by any dealer who is carrying on business within the limits of Bangalore City Planning Area', the words, 'within the limits of Bangalore City Planning Area by any dealer' shall be substituted;"
16. On incorporation of the said amendment, section 6D(1) of the Act now reads as under :
"6-D. Levy of cess. - (1) In addition to the tax payable under sections 5, 5B, 5C and 6, there shall be levied and collected by way of cess for the purpose of Bangalore Mass Rapid Transit System at tax, on sales or purchases effected within the limits of Bangalore City Planning Area by any dealer, at the rate of five per cent of tax payable under the said sections :
Provided that..........."
17. I may also be noticed here that in order to give effect to the budget proposals noticed above, provisions for levy of cess were made by incorporating the provisions similar to the impugned section 6D of the Act in other two State taxing statutes. Those are as follows :
(i) 3A(1) of the Karnataka Tax on Professions, Trades, Callings and Employment Act, 1976 (Karnataka Act 35 of 1976) :
"In addition to the profession tax payable under the Act, there shall be levied and collected by way of a cess for the purpose of Bangalore Mass Rapid Transit System a tax from every person engaged in profession, trade, calling or employment within the limits of Bangalore City Planning Area, at the rate of five per cent of the profession tax :
Provided that the profession tax together with the cess payable under this sub-section shall not exceed two thousand five hundred rupees."
(ii) Section 3A(1) of the Karnataka Tax on Luxuries (Hotels and Lodging Houses) Act, 1979 (Karnataka Act 22 of 1979) :
"3A. Levy of cess. - (1) In addition to the tax payable under section 3 there shall be levied and collected by way of cess for the purpose of Bangalore Mass Rapid Transit System a tax at the rate of five per cent of the tax payable under the said section on the luxury provided in a hotel within the limits of the Bangalore City Planning Area, where the charges for lodging per room per day are not less than seven hundred and fifty rupees."
18. Now to ascertain as to whether under the provisions of section 6D of the Act, the intention of the Legislature was to levy cess on the transactions of sales or purchase of a dealer effected in Bangalore area only or on its global transactions effected through all the branches in the State, it may be relevant to refer to the budget speech of the Finance Minister noticed above who was the mover of the Bill leading to incorporation of the said provision. But, H. G. Ramesh, learned Additional Government Advocate, takes objection to the use of the said speech as an external aid for discovery of the legislative intent. He refers to a decision of the Supreme Court in the case of B, K, Industries v. Union of India , wherein it has been held that -
"9. We find it difficult to agree. It is not brought to our notice that the budget proposals contained in the Finance Minister's speech were accepted by the Parliament. The cess having been imposed by a Parliamentary enactment could be rendered inoperative only by a Parliamentary enactment. Such repealing enactment came only in the year 1987 with effect from April 1, 1987. Now only that, the repealing Act expressly provided in section 13 that the cess due before the date of said repeal, but not collected, shall be collected according to law as if the Cess Act is not repealed. This provision amounts to a positive affirmation of the intention of the Parliament to keep the said imposition alive and effective till the date of the repeal of the Cess Act. In this face of the said statutory provisions, so rights can be founded, nor can the levy of the cess be said to have been dispensed with by virtue of the alleged decision referred to in the Finance Minister's speech is not law. The Parliament may or may not accept his proposal. Indeed, in this case, it did not accept the said proposal immediately but only a year later. It is only from the date of the repeal that the said levy becomes inoperative."
19. On the other hand, Mr. Sarangan relied upon the decision of the Supreme Court in the case of Sole Trustee, Loka Shikshana Trust v. Commissioner of Income-tax [1975] 101 ITR 234 in support of his contention that there is no bar on placing reliance on a budget speech made by the Minister. At page 252 of the Report, it has been held by their Lordships of the Supreme Court that :
"It is true that it is dangerous and may be misleading to gather the meaning of the words used in an enactment merely from what was said by any speaker in the course of a debate in Parliament on the subject. Such a speech cannot be used to defeat or detract from a meaning which clearly emerges from a consideration of the enacting words actually used. But, in the case before us, the real meaning and purpose of the words used cannot be understood at all satisfactorily without referring to the past history of legislation on the subject and the speech of the mover of the amendment who was, undoubtedly, in the best position to explain what defect in the law the amendment had sought to remove. It was not just the speech of any member in Parliament. It was the considered statement of the Finance Minister who was proposing the amendment for a particular reason which he clearly indicted. If the reason given by him only elucidates what is also deducible from the words used in the amended provision, we do not see why we should refuse to take it into consideration as an aid to a correct interpretation. It harmonises with and clarifies the real intent of the words used. Must we, in such circumstances, ignore it ?
We find that section 57, sub-section (4), of the Evidence Act, not only enables but enjoins courts to take judicial notice of the course of proceedings in Parliament assuming, of course, that it is relevant. It is true that the correctness of what is stated, on a question of fact, in the course of Parliamentary proceedings, can only be proved by somebody who had direct knowledge of the fact stated. There is, however, a distinction between the fact that a particular statement giving the purpose of an enactment was made in Parliament, of which judicial notice can be taken as part of the proceedings, and the truth of a disputable matter of fact stated in the course of proceedings, which has to be proved aliunde, that is to say, apart from the fact that a statement about it was made in the course of proceedings in Parliament (See Jerold Lord Strickland v. Carmelo Mifsud Bonnici AIR 1935 PC 34 and Englishman Ltd. v. Lajpat Rai (1910) ILR 37 Cal. 760).
In the case before us, a reference was made merely to the fact that a certain reason was given by the Finance Minister, who proposed an amendment, for making the amendment. What we can take judicial notice of is the fact that such a statement of the reason was given in the course of such a speech. The question whether the object stated was properly expressed by the language of section 2(15) of the Act is a matter which we have to decide for ourselves as a question of law. Interpretation of a statutory provision is always a question of law on which the reasons stated by the mover of the amendment can only be sued as an aid in interpretation if we think, as I do in the instant case, that it helps us considerably in understanding the manning of the amended law. We find no bar against such a use of the speech."
20. Therefore, keeping in view the law laid down by the Supreme Court, it can unhesitantly be held that if the proposals made by the mover of the Bill like those of the Finance Minister in the present case are accepted by the Legislature without any demur crystalising the proposals into a legislative exercise, then such speeches and proposals can be made use of as an aid in the interpretation of the statutory provisions so made. In the present case, the two Budget speeches referred to above, are clearly indicative of the fact that the intention of incorporating the impugned section 6D in the Act was to levy cess only on the sales and purchases effected by a dealer in the Bangalore area.
21. The said intention is amply fortified by the amendments subsequently made by the Karnataka Act 5 of 1996 which was apparently done to remedy the ambiguity and to make the provisions consistent with the intention with which it was incorporated. Learned Government Advocate submits that since the said amendment has not been made retrospective in nature, it cannot affect the liabilities already accrued if the impugned provision before its amendment could have read as imposing such liability. In this connection, it is suffice to state that the presumption against the retrospective operation is not applicable to declaratory statues, provided there is an intrinsic evidence to hold the statue to be declaratory in nature, and for determining its nature regard must be had to the substance rather than to the form. "A declaratory Act" as observed in Craies on Statute Law "is an Act to remove doubts existing as to the common law, or the meaning or effect of any statute".
22. In the case of Keshavlal Jethalal Shah v. Mohanlal Bhagwandas , the Supreme Court has held that an explanatory Act is generally passed to supply obvious omission and to clear out the doubts as to the meaning of the previous Act. In the present case, as noticed above, it was clearly stated by the Finance Minister on the floor of the Legislature that the language employed in section 6D of the Act had led to unfortunate litigations and therefore it was found essential to suitably amend it so that the levy of cess could be made applicable only to sales or purchases effected within the Bangalore City Planning Area. This unequivocal statement of the mover of the amending Bill itself is sufficient to hold the amendment as declaratory, and, therefore, retrospective in nature.
23. Further a reading of pari materia provisions incorporated under the Karnataka Tax on Professions, Trades, Callings and Employment Act, 1976 (in short, "the Profession Tax Act") and the Karnataka Tax on Luxuries (Hotel and Lodging Houses) Act, 1979 (for short, "the Luxury Tax Act") providing for levy of cess for the very Mass Rapid Transit System, as a consequence of the same budgetary proposals indicate that the Legislature had intended to levy cess only on the taxable events taking place in the Bangalore area. Under section 3A(1) of the Profession Tax Act, the liability of the cess has been levied on persons engaged in professions, etc., in Bangalore area only. Similarly in section 3(A)(1) of the Luxury Tax Act, cess has been sought to be levied on the luxuries provided in hotels within the limits of Bangalore area only. This gives another strong cue in support connection raised on behalf of the contention raised on behalf of the petitioners that the cess under section 6D of the Act has to be confined only on the taxable events, i.e., sales and purchases effected within the Bangalore area.
24. Then, much stress has been laid by both sides on the proviso to section 6D(1) of the Act to sustain their points of view on the interpretation of the main part of the said sub-section. The proviso very clearly tells that the cess on sale of petrol and diesel by a dealer will be levied only on the sales effected by him within the limits of Bangalore area. According to the petitioners, liability to pay cess on other goods as well should take its colour from the proviso since any other construction may lead to discrimination without any rational basis thus offending article 14 of the Constitution of India. On the other hand, behalf of the Revenue it has been contended that in respect of petrol and diesel the intention of the Legislature was to levy the cess only on the sales effected within the Bangalore area, whereas it has not been so specified in respect of sale of other goods; and, therefore, in respect of such other goods the global sales of the dealer has to bear the burden of cess.
25. In my opinion, there being over-weighting evidence about the intention of the Legislature to levy cess only in respect of sales and purchases effected by a dealer within the Bangalore area. The main part of section 6D(1) has to be read in the light of the provisions made under the proviso.
26. If the contentions raised on behalf of the respondents as are precisely contained in the impugned circular of the Commissioner of Commercial Taxes are accepted, then the expression "sale or purchase effected by any dealer who is carrying on business within the limits of Bangalore City Planning Area" as used in section 6Di of the Act should be construed and read as "the aggregate of the sales or purchases effected by any dealer carrying on business within the limits of Bangalore City Planning Area at all its places of business in the State".
27. For properly appreciating the fallacy involved in the said arguments, I may refer to the definition of the words "turnover" and "total turnover" as devised and defined under section 2(1)(v) and 2(1)(u-2) of the Act. For the present, I will refer to only that part of the said definitions which are material for the purpose. "Turnover" means the aggregate amount for which goods are brought or sold. "Total turnover" means the aggregate turnover in all goods of a dealer at all places of business in the State.
28. If the Legislature at all intended, as Sri Indra Kumar, learned counsel appearing for some of the petitioners rightly pointed out, it could have conveniently conveyed its said intention of roping in the global transactions of a dealer carrying on business in Bangalore area for levying cess by using the expression "on the total turnover effected by a dealer carrying on business within the limits of Bangalore City Planning Area", which could have automatically embraced all transactions of sales and purchases of a dealer effected within the State of Karnataka. As a matter of fact, when the Legislature so intended, it has used the word "total turnover" in different charging sections, for example, sections 5-B and 6-C of the act.
29. In the case of Polestar Electronic (Pvt.) Ltd. v. Additional Commissioner, Sales Tax [1978] 41 STC 409 at 422, it has been held by the Supreme Court that :
"The Legislature was enacting a piece of legislation intended to levy tax on dealers who are laymen and we have no doubt that if the legislative intent was that 'resale' should be within the territory of Delhi and not outside, the Legislature would have said so in plain unambiguous language which no layman could possibly misunderstand. It is a well-settled rule of interpretation that where there are two expressions which might have been used to convey a certain intention, but one of those expressions will convey that intention more clearly than the other, it is proper to conclude that, if the Legislature used that one of the two expressions which would convey the intention less clearly, it does not intend to convey that intention at all."
30. Applying the aforesaid cannons of interpretation in the present settings, it can well be said that the Legislature could have conveniently made its intention beyond the pale of any controversy by using the comprehensive expression "total turnover" in the impugned provision if it at all intended be levy cess on the aggregate transactions of the dealer concerned effected through all its branches in the State. But it has not done so. Therefore, it has to be inferred that the Legislature had no intention to levy cess on sales and purchases effected by a dealer through its branches lying outside the Bangalore area.
31. For the aforesaid reasons, it is declared that the dealers carrying on business within the limits of Bangalore City Planning Area are liable to pay cess on sales or purchases effected by them in the said area only. The circular of the Commissioner of Commercial Taxes dated April 21, 1995 in No. 3/949-95 is accordingly quashed as having misread the impugned provisions. Accordingly, it is held that the petitioners will be entitled to all such reliefs which logically flows from the said declaration.
32. Consequently, the writ petitions are allowed but without awarding any costs.
33. Writ petitions allowed.