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Judgment
Lalit Moltan Sharma, J.—The petitioners have, by (his writ application challenged the demand of sales tax by the respondents on ''unmanufactured'' tobacco'' with effect from 1.3.1979. The Commissioner of Commercial Taxes, Bihar (respondent no. 2), has issued a circular letter, as contained in Annexure-5, directing the Sales Tax authorities to take steps in this regard for the period commencing on the date on which ''unmanufactured tobacco'' was exempted from payment of additional excise duty. Accordingly, notices, Ann-exures-6 series, have been issued to the petitioners 2 to 4 which are partnership firms dealing ''ununmanufactured tobacco'' and Biri leaves. The petitioner no. 1 is a Society, registered under the Society Registration Act, 1860, of which the petitioner nos. 2 to 4 and other similar dealers are members. They have prayed for quashing of Annexures 5 and 6 series. The State Government in exercise of its powers under the Bihar Sales-tax Ordinance, 1977, on 26.12,1977, by a notification as Contained in Annexure-2 to the writ application, exempted payment of sales tax on the sale of certain goods Including ''tobacco'' as mentioned against serial no. 21 of the schedule quoted below :-"21. Cotton fabrics, rayon or artificial silk fabrics woollen fabrics, sugar and tobacco as defined in the Additional Duties of excise (Goods of Special Importance) Act. 1957 and handloom cloth including pure silk fabrics manufactured in mills and power-looms." The item was substituted on 29.11.1978 as indicated in Annexure-3 to the writ application, the relevant entry being :- "21, Cotton fabrics, rayon or artificial silk fabrics, woollen fabrics, sugar and tobacco subject to levy of Additional Duty of Excise u/s 3 of the Additional Duty of Excise (Goods of Special Importance) Act, 1957 read with the Schedule appended thereto, handloom cloth and pure silk fabrics which have borne the incidents of duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. "The result of this case depends on the interpretation of this item on which the parties have serious difference.
On 1.3.1979, the Central Government in exercise of its power under Rule 8(1) of the Central Excise Rules, 1944 exempted, by a notification as mentioned in Annexure-4 ''unmanufactured tobacco'' from the duty payable under the Central Excise & Sale Act, 1944 and the Additional Duties of Excise (Goods of Special Importance) Act, l?57. Pie respondent no. 2 has issued a direction as in Annexure-5, stating that,, since ''unmanufactured tobacco'' ceased to be subject to payment of Additional Excise Duty, the article automatically become subject to payment of sales tax.
Mr. Sorabjee, appearing in support of the application, contended that the exemption from sales tax is dependent on the livability of additional duty of excise u/s 3 of the Additional Duty of Excise (Goods of Special Importance) Act, 1957 and not on incidence of duty, and since ''unmanufactured tobacco'' continues to be subject to levy of the aforesaid duty, it is not permissible to assume that it has ceased to be exempted from sales-tax. The learned Counsel appears to be right. As a result of the exemption under Rule 8 of the Central Excise Rules, the article in question does not cease to be subject to levy of tax. The exemption order affects the incidence of taxation but does not make the article non-excisable goods. Levy of excise is a legislative function of the legislature while exemption is granted by the executive as its delegate. Since the tariff schedule to the Central Act has not been amended so as to omit ''unmanufactured tobacco'', the same continues to be excisable goods and it, therefore, entitled to the benefit under Annexure-3, eves after 1.3.1979. This view is supported by several decisions of different High Courts, including that in Vishal An-dhra Industries vs. Union of India : 1983 E.L.T. 2265 (Delhi), and, by my judgment in M/s. Shri Madhav Mills Private Ltd. Vs. Collector of Central Excise and Others,
Mr. Ram Balak Mahto, learned Advocate General, appearing on behalf of the respondents, has been fair not to dispute this position. He has, however, attempted to support the impugned annexure by interpreting item no. 21 in Annexure-3 as requiring all the articles mentioned therein to bear the Incidence of duty under the Central Act so as to benefit from the exemption order. The learned Counsel contended that an exemption clause in a statute should be construed strictly, and in case of any ambiguity it should be resolved in favour of the State. It was urged that the ob-ject of the Additional Duty Excise (Goods of Special Importance) Act, 1957 was to impose additional duty of excise in place of sales-tax levied by the State on certain articles, including tobacoo and Annexure-3 should be read in that background. If the central tax is now not recoverable on the sale of any particular article, the tame must be held to be subject to payment of sales tax, for, it was never the intention to allow it to escape both the taxes. It was strenuously urged that comparing the language of item no. 21 in Annexure-2 with that in Annexure-3 and giving full weight to the change, it must be held that the expression "which have borne the incidence of duty" un der the Additional Duty Excise (Goods of Special importance) Act, is a condition applicable to all the articles mentioned therein. Mr. Mahto emphasised on the addition of the aforementioned condition and dropping of the conjunction "and" before the words "hand-loom cloth''''.
In the 1977 Notification (Annexure-2), it appears, there were only two categories of articles : (i) cotton fabrics, rayon or artificial silk fabrics, woollen fabrics, sugar and tobacco, and (ii) handloom cloth, including pure sillk fabrics manufactured in mills and powerlooms. These two categories were joined by "and" After the amendment of 1978, the words "which have borne the incidence of duty" under the Central Act were added at the end of the entry. It was suggested on behalf of the petitioners as mentioned in para 16 of the writ petition that the expression applied to band-loom cloth and puie silk fabrics, but not to the first category of articles, including tobacco. Mr. Mahto argued that the added condition being at the end of the entry must be held to apply to all the articles. With that object the word "and" occurring before "handloom" was dropped and substituted by a comma, as in Annexure-2. The learned Counsel conceded that, in that view, it was not necessary to have described the first category of articles as subject of levy to the Central Act but asserted that on this account the entry may be held to be suffering from ambiguity which has to be resolved against the petitioners.
As observed in the preceding paragraph, the 1977 Notification (Annexure-2) mentioned two categories of articles and they were all unconditionally exempted from sales-tax. In 1978, the entry was re-structured by introducing two expressions namely, (a) "subject to levy of additional duty of excise under.", and (b) "which have borne the incidence of duty...". According to our reading, the first condition was applied to the first category of articles, and the second to pure silk fabrice only. "Handloom" was not subjected to any of these two conditions. It, therefore, became necessary to separate silk fabrics from the exclusive definition of handloom and join the two by "and". In this way, the new entry contained three categories instead of two. "Handloom" continued to enjoy the exemption unconditionally. If the intention had been, as suggested by the learned Advocate General, to apply the second condition to all the articles in the item, the first category would not have been subjected to the, first condition relating to the leviability clause. The interpretation attempted on behalf of the State will lead to the conclusion that this was by way of surplusage, which cannot ba presumed. During the hearing of the case, we put our tentative interpretation to the learned Counsel for the parties and invited their comment. Mr. Sprabjee accepted this interpretation as the correct one. giving up the stand taken in the writ application but Mr. Mahto did-not, although he could not suggest any acceptable reason for his stand.
Mr. Sorabjee relied on the language of the relavant entry, as it stands now, after the amendment on 29.6.1985.
It reads as follows :
Cotton fabrics, rayon or artificial silk fabrics woollen fabrics, sugar and tobacco subject to levy of addiiional duties of excise u/s 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 read with the schedule appended, thereto and which have borne the incidence of duty under the said Act, and handloom cloth excluding pure silk cloth, silk Dnoties and silk Sarees of handloom origin.
He argued that having correctly appreciated the import of Aonexure-3, it has now been amended so as to require tobacco, etc., to benefit from the exemption only if they bear the incidence of duty. It is true, as urged by Mr. Advocate General, that the subsequent amendment cannot control tin. l.ue meaning- of the earlier entry, but it does give a corroborative support to the interpretation urged on behalf of the petitioners. Further, it will be seen that "handloom cloth", which was exempted unconditionally through out continues to enjoy the privilege, presumably, as it is the State''s policy to support handloom industry. Pure silk cloths, which have not been treated on the same level as handloom, have now been completed excluded from the exemption. On the examination of the language of the entry no. 21 as appearing in different ann-exures from time to time. I am of the view that the interpretation mentioned in para 7 above; which was accepted by the petitioners as their case, is the correct one, not involving any ambiguity, and, therefore, there is no question of applying the rule of interpretation as suggested by Mr. Advocate General. In reply to the argument of Mr. Advocate General based on the statement of objects and reasons of the Central Act, Mr. Sorabjee relied on the observations in the case of Innamuri Gopalan and others vs. State of Andlira Pradesh & another 1964 (2 S.C.R. 888 at page 898) to the following effect:-
Learned Counsel for the State is possibly right in the submission that the object behind the framers of the notification was to avoid double taxation but the operation of an enactment or of a notification has to be judged not by the object which the legislature or the notifying authority, as the case may be, may have had in mind but by the words which it has employed, to effectuate the legislative intent
In view of the conclusion I have reached about the meaning of Annexure-3, the petitioners cannot be deprived of the exemption on the ground suggested by Mr. Advocate General. The writ application is, therefore, allowed and the impugned annexures are quashed. There will be no order as to costs.
S. K. Choudhuri, J.
I agree.