Karnataka High Court
P.R. Chindak And Another vs Deputy Commissioner Of Commercial ... on 19 December, 1995
Equivalent citations: ILR1996KAR2873
JUDGMENT M.F. Saldanha, J.
1. An interesting aspect of law relating to interpretation of newly added entry No. 16-B of the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1979 read with Government Notification Nos. 235 CET 83(i) and 83(ii) both dated 28th October, 1986 has come up for decision in this set of appeals.
2. The interesting aspect of the matter is that entry No. 16-B was grafted on to the parent Act by Act 41 of 1986 with effect from 28th October, 1986. By this entry, "all raw materials, component parts and inputs which are used in the manufacture of an intermediate or finished product......" was brought within the ambit of entry tax. On the same day the first of the aforesaid notifications was also published in the official gazette whereby three heads of items were totally exempted from the scope of the definition "raw materials, component parts and inputs". We are here concerned with sub-clause (3) of the third item which deals with man-made filament yarn, man-made fibre yarn, man-made fibre. The entire controversy has arisen because Notification II also issued on the same date prescribes a flat rate of 1 per cent as entry tax payable on all items that come within the definition of entry No. 16-B. What has really given rise to the present litigation is the fact that even though the amending Act and the notifications appear on the statute book effective from 28th October, 1986, entry No. 16-B was to come into effect from 1st April, 1983. Therefore, the question that has arisen is as to how the aforesaid provisions are to be construed in respect of the intermediate period, namely, 1st April, 1983 up to 28th October, 1986. Undoubtedly, for the following period there can be no controversy in so far as these items are exempt from income-tax.
3. The appellants are a firm at Belgaum and it is their contention that they are doing business in certain types of man-made fibres which they receive at Belgaum and thereafter either supply them to the handloom trade or re-export them to the various customers in different local areas. As far as the user is concerned, we do not propose to go into the facts at all because even though the appellants have contended that assuming without admitting that the entry tax was applicable to them, that they would still be exempt because of the aforesaid reasons. These aspects of the matter have not been examined by the authorities below and we do not propose to go into that aspect of the case either, because the appellants are entitled to straightaway succeed on the basis of the first head of challenge, namely, that construing the aforesaid provisions harmoniously and correctly this particular item is outside the scope of entry No. 16-B and will have to be held to be always outside the scope of that entry even with effect from 1st April, 1983.
4. The appellant's learned advocate has in the first instance drawn our attention to the amending Act 41 of 1986 and he has brought to the notice of the court one aspect of some significance. He points out that even though this Act received the assent of the President on 14th January, 1986 that the assent was a conditional one in so far as it was pointed out that the aforesaid three items which form the subject-matter of Notification I were required to he exempted from the ambit of entry tax. It is in this background that the State Government issued the first notification and what is of consequence is that the learned advocate brings it to our notice that this was simultaneously done and that it was issued on the same date on which the amending Act was published in the official gazette. According to him, the effect of this notification read with the provisions of the amending Act would mean that in the all-inclusive definition that appears in entry No. 16-B, the three items indicated in Notification I would stand deleted. The learned advocate brings to our notice the fact that on the same day the Government issued Notification II in which a flat rate of tax has been prescribed for all items that come within the ambit of entry No. 16-B which is 1 per cent. He contends that the reason why two separate notifications were issued was in order to make it abundantly clear that as far as the definition in entry No. 16-B was concerned that it would have to be first virtually amended to the extent of deleting the three items specified in Notification I and once this purpose was achieved, that the second notification prescribed the tax at the rate of 1 per cent in respect of remaining items that survive for taxation.
5. The appellant's learned advocate in the light of this background contends that the assessing authority was perfectly justified and correct in having exempted the appellant from the payment of entry tax on this ground and he assails the correctness of the notice issued to the appellant under section 15 of the Act, pursuant to which the appellant was heard and the original assessment order was set aside and the revisional authority directed the appellant to pay entry tax on the total value of their turnover which amounted to approximately Rs. 3.96 lakhs in the first case alone. The learned advocate contends that the reasoning of the appellate authority is erroneous. We need to record here that the appellate authority has construed the provisions of entry No. 16-B as they appear and he has sought to reconcile Notifications I and II by holding that as far as Notification I is concerned, that it has been gazetted on 28th October, 1986 though it does not prescribe in the body of the notification as to from what date the three items in question stand deleted from the ambit and scope of entry No. 16-B. Consequently the view that has been taken is that since the tax covered by entry No. 16-B made effective from 1st April, 1983; that the notification issued on 28th October, 1986 in the absence of prescribing that the exemption will hold good from the dale of inception would have to be normally construed as having exempted those items with effect from the date of the notification, namely, 28th October, 1986. In this view of the matter, the revisional authority has imposed the entry tax at the rate of 1 per cent on the entire turnover without going into the other aspects of the matter.
6. The learned Government Advocate submitted that it is perfectly permissible to construe the notifications in the manner in which the Commissioner has done. He points out to the court that even though the Notification I dated 28th October, 1986 exempts the three items in question the operation can only be prospective and not retrospective unless there is a specific provision to that effect. Under these circumstances, he argues that even though it was legally competent to give effect to entry No. 16-B from 1st April, 1983 which has in fact been done, on a clear construction of Notification I which is a separate notification and does not form part and parcel of Notification II, that it will rationally have to be construed, that the intention of the Legislature was at the highest to exempt the three items from entry tax only with effect from 28th October, 1986. It is in this background that he submits that the challenge in these appeals to the revisional order is misconceived because he contends that as the law stands the entry tax was payable up to 28th October, 1986. As regards the other two heads which are basically factual, the learned Government Advocate submits that since the contention is that the petitioners would be exempt from taxation for these reasons that at the highest the authority who has not considered the aspect of the matter can be directed to do so.
7. The rules and principles with regard to interpretation of statutes are well defined and it is also essential when there is a possibility of more than one interpretation or when an ambiguity of the present type has arisen that a court must not only construe the provisions harmoniously but that the cardinal principle of achieving the legislative intent must be borne in mind. In the present instance the sequence of events, normally indicates that the Legislature did intend by virtue of the promulgation of entry No. 16-B to include all other heads as indicated in that entry within the incidence of entry tax. It is on this basis the learned Government Advocate has submitted that when entry No. 16-B was made operative with effect from 1st April, 1983 that the tax authorities were justified in levying the entry tax for the period starting from 1st April, 1983 even if by notification dated 28th October, 1986 the three items were withdrawn. Under normal circumstances, this submission would have not only appeared plausible but would have straightaway been accepted except for the fact that it is necessary for us to construe the various provisions in the light of the fact that the two notifications and the amending Act were all gazetted on the same date. We also take note of the fact that the exempting notification was the first in the order of sequence and the one which prescribes the rate of tax is the second in order of sequence. Also, the fact that these notifications were issued on the same date on which the amending Act was published in the background of the fact that it was because of the special circumstance of conditional assent. It is very clear that the object of issuing Notification I was in order to give effect to the conditional assent and to thereby delete from the omnibus scope of entry No. 16-B the three items specified in Notification I. Also, since this Notification II which specifies the rate of taxation comes after the previous one which exempts the three items, the end result of the various provisions construed together would be that the over-all intention was to tax the remaining items that fall under entry No. 16-B at the rate of 1 per cent after excluding the three items that are contained in Notification I. It is very necessary to take cognizance of these special aspects particularly the time factor and the sequence, in order to avoid any possible confusion. It is not possible to accept the submission canvassed by the learned Government Advocate for the reason that if that submission were to be accepted, it would be doing violence to the concept of legislative intent in so far as one cannot lose sight of the fact that since the amending Act was basically gazetted only on 28th October, 1986 regardless of the fact that it was effective from 1st April, 1983, any assessments regarding entry tax in respect of the newly added item entry No. 16-B would necessarily had to be done only after 28th October, 1986. At that point of time, Notification I was already promulgated and therefore, it would not be permissible for the assessing authority to ignore that notification. We have very carefully construed the effect of the amending Act as also the legal effect of the two notifications and in our considered view the only correct and logical interpretation that emerges is that it will have to be held that entry No. 16-B virtually stood amended in the sense that the three items that form the subject-matter of Notification I stood deleted from the very inception.
8. In this view of the matter the appeals are entitled to succeed. The orders passed by the revisional authority dated 27th July, 1991 and 28th September, 1991 in respect of the three assessments is quashed and set aside and the order passed by the assessing authority dated 28th September, 1988 is restored.
9. The appeals to stand disposed of. No order as to costs.