LPA No.412 of 2003 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CASE NO.: LPA No.412 of 2003 DATE OF DECISION: March 3, 2009 STATE OF HARYANA ETC. ...APPELLANT VERSUS M/S HARYANA ORGANICS ...RESPONDENT CORAM: HON'BLE MR. JUSTICE ASHUTOSH MOHUNTA. HON'BLE MS. JUSTICE NIRMALJIT KAUR. PRESENT: MS. RITU BAHRI, DAG, HARYANA, FOR THE APPELLANT. MR. J.K. SIBAL, SR. ADVOCATE WITH MR. SAPAN DHIR, ADVOCATE FOR THE RESPONDENT. ASHUTOSH MOHUNTA, J. This order shall dispose of L.P.A. No. 412 of 2003, arising out of CWP No. 18240 of 1997 and L.P.A. No 413 of 2003, arising out of CWP No. 3455 of 1998. Both these Letters Patent Appeals have been filed by State of Haryana challenging a common judgment, dated 22.10.2002, passed by a learned single Judge of this Court, allowing the afore mentioned writ petitions filed by the respondents, involving similar questions of law and fact. In view of same judgment, dated 22.10.2002, being under challenge in both the appeals, we dispose of both the appeals by a common judgement. However, for the facility of reference, the facts are taken from L.P.A. No. 412 of 2003. The brief facts are that both the present respondents manufacture Ethyl Alcohol from Molasses. They applied for Eligibility Certificate for exemption of Sales Tax under rule 28-A of the Haryana General Sales Tax Rules 1975 (for short the ‘Rules’). However their claims for exemption were rejected by the authorities, at various levels on different dates, on the ground that their Units fell within the scope of Entry 10 of LPA No.412 of 2003 -2- negative list contained in Haryana Government Notification dated 11.02.1994 (Annexure P- 4-B). Feeling aggrieved, the respondents herein filed writ petitions, which have been allowed by a Learned Single Judge of this Court, leading to filing of the present appeals by the State of Haryana. Thus the sole question, which arose for the consideration of learned single Judge and now we are required to examine in these appeals is:- “Whether the respondents herein who are manufacturer of Ethyl Alcohol from Molasses falls within Entry 10 of the Notification dated 11.02.1994, so as to disentitle them from claiming exemption from sales tax under Rule 28- A of the Rules ?” The Entries 10 of the Notification dated 09.03.1992 and Notification dated 11.02.1994, which require interpretation, are para materia and reads as under :- “10. Ethanol (ethyl alcohol) based industries except non molasses alcohol industries” After examining the controversy, the learned single Judge has answered the aforementioned question in negative and has held that the appellants herein are not justified in denying the exemption to the respondents on the ground that they were manufacturing Ethanol/ Ethyl Alcohol from molasses. Learned single Judge has further held that manufacturers of Ethanol/ Ethyl Alcohol do not fall in Entry 10 of the negative lists of 1992 and 1994. Accordingly the learned single Judge after LPA No.412 of 2003 -3- quashing the orders of the High Level Screening Committee and Appellant Authority, has directed that the matter be sent back to High Level Screening Committee for fresh determination of the claim of the respondents herein. Before adverting to the respective arguments of both the sides, it would be appropriate to cull out the detailed reasons given by the learned single Judge in support of his aforementioned conclusion. Learned single Judge has first of all rejected contention raised on behalf of the present appellant - State of Haryana that entry in question consists of two parts i.e. (i) “Ethanol (Ethyl Alcohol) based industries” and (ii) “except non molasses Alcohol industries”. It has been held that on a plain reading of the entry, it is one single sentence in which part (i) is the main clause and part (ii) is an exception provided thereto and if entry is interpreted otherwise, then, it would mean that every industry other than “non-molasses Alcohol industries” would fall in the negative list and would render the need for listing any other industry in this list as redundant besides leading to absurd results. On the question as to whether “Ethanol (Ethyl Alcohol) based industries” includes industries manufacturing Ethanol or Ethyl Alcohol, like the respondents herein, learned single Judge, answering the question in the negative, held that it refers to only industries which are ‘based’ on Ethanol or Ethyl Alcohol, which is a stage subsequent to the manufacture of Ethanol or Ethyl Alcohol. Entry was held to refer to only such industries which consume Ethyl Alcohol as an input and not industries which manufacture Ethyl Alcohol. It was further held that if the interpretation sought to be placed by present appellant - State of Haryana, to the contrary, is accepted it would render the word ‘based’ in the entry as totally redundant, which LPA No.412 of 2003 -4- would be contrary to the well settled principles of interpretation. The learned single Judge relied upon the judgment of the Hon'ble Supreme Court in Aswini Kumar Ghose vs. Arabinda Bose [reported as 1953 SCR 1], where in it was held that it is not a sound principle of construction to brush aside words in a statute as being inapposite surplusage, if they can have appropriate application in circumstances conceivably within the contemplation of the statute. Regarding the question, as to what does the exception contained in part (ii) i.e. “except non-molasses Alcohol industries” exclude from the main clause in part (i), learned single Judge held that it excludes only such non molasses industries, which in the first place are covered by the main clause. The exception was held to take out industries, based on alcohol manufactured from non molasses, from the ambit and scope of the main clause and the Entry was held to include industries based on Ethanol or Ethyl Alcohol manufactured from molasses. The learned single judge relied upon the decision of the Hon'ble Supreme Court in Abboy Pada Saha vs. Sudhir Kumar [reported as AIR 1967 SC 115], where in interpreting the expression ‘Sunri excluding Saha’, the Apex court held that the word ‘Saha’ in this expression refers to only the caste group within the ‘Sunri’ caste and did not refer to ‘Sahas’ in general belonging to other castes. The learned single Judge held that the intention of the State Government for incorporating the said entry in the negative lists was irrelevant in view of the plain language of the main clause, while at the same time holding that the interpretation given by him would also discourage the consumption of molasses, which as per the State was avowed object behind the provision. Learned single Judge further held that when the LPA No.412 of 2003 -5- language of the provision is clear, there is no scope for giving it a different meaning on the basis of intendment. The citizens are guided by what is stated in the notifications or trade notices and he is neither required to go behind them to find out the intendment of the government nor does he have any access to the government records. The learned single judge relied upon the decision of the Apex Court in M/s Swadeshi Polytex Ltd. v. Collector of Central Excise [reported as AIR 1990 SC 301] Learned single Judge further held that the State has no machinery to verify as to whether alcohol consumed by a particular industry has been made out of molasses or non molasses, was no ground to give the entry a different meaning from what its plain language showed and it was not the duty of the Court to stretch the words used in a particular enactment or notifications to fill in the gaps or omissions by implying what is not expressed in a provision. We have heard the learned counsel for the parties at great length. Apart from addressing oral arguments at the bar, the learned counsel for the parties have also placed on record detailed written arguments, which have been perused by us. Ms Ritu Bahri, learned D.A.G., appearing on behalf of appellant- State of Haryana, has vehemently argued that the relevant entry was modified and made clear by subsequent Notification dated 17.12.1997, wherein the entry 8 read, “Manufacturer of ethyl alcohol and industries based on ethyl alcohol” from which it is apparent that the intention of the Department was to always include manufacture of ethyl alcohol in the negative list. Relying on the judgment of the Hon'ble Supreme Court in the case of Thiru Manickam and Co vs. State of Tamil Nadu, [reported as LPA No.412 of 2003 -6- 1977 (1) SCC 199], Learned Counsel argued that the subsequent notification can be looked into to interpret and construe the earlier provision. We are not impressed by the argument of the learned D.A.G. In Thiru Manickam and Co.’s case supra what the Hon'ble Supreme Court held is that subsequent legislation can be looked into, if the amendment is by way of clarification of an earlier ambiguous provision and clarified what was implicit in the earlier provisions, even if the amendment is not given retrospective effect. The relevant portion of the judgment is reproduced here under for the facility of reference: “……….As already mentioned above, the legislature as a result of the amendment, clarified what was implicit in the provisions as they existed earlier. An amendment which is by way of clarification of an earlier ambiguous provision can be useful aid in construing the earlier provision, even though such amendment is not given retrospective effect. We may refer in this context to observations on page 147 of Craies on Statute Law (Sixth Ed.) which read as under: " . . . . . in Cape Brandy Syndicate v. Inland Revenue Commrs., (1921-2- KB 403 at p. 414) Lord Sterndale M. R. said: 'I think it is clearly established in Att. Gen. v. Clarkson, (1900-1 QB 156) (supra) that subsequent legislation may be looked at in order to see the proper construction to be put upon an earlier Act where that earlier Act is ambiguous. I quite agree that subsequent legislation if it proceeded on an erroneous construction of previous legislation cannot alter LPA No.412 of 2003 -7- that previous legislation; but if there be any ambiguity in the earlier legislation, then the subsequent legislation may fix the proper interpretation which is to be put upon the earlier." (emphasis supplied) However, in the present case, neither the entry/ provision which has been introduced by the subsequent notification dated 17.12.1997 is implicit in the earlier notifications under consideration, nor the subsequent notification is by way of clarification of the earlier notification. It is altogether a new notification, laying down new entries. Still further an entry which is clear and unambiguous cannot be interpreted in light of a subsequent notification, providing for an altogether new entry so as to give it a meaning which is not borne out by a plain reading of the entry. The learned D.A.G., contended that the learned Single Judge has erred in not properly considering the judgment of the Hon'ble Supreme Court in Tata Oil Mills Co. Ltd vs. Collector of Central Excise [reported as 1991 (82) STC 225 = AIR 1990 SC 27], where in it has been held that to understand the language in a notification, one has to keep in mind the object and purpose of exemption. On 27.01.1992, a new industrial policy of the State was introduced for achieving new dimensions of industrial growth and thereby making it necessary to review the negative list, leading to notification dated 09.03.1992. The reason for aforesaid entry 10, was short supply of certain raw material i.e. molasses and therefore, its consumption was sought to be discouraged and this intendment was required to be kept in view by the learned single Judge while interpreting the aforesaid entry. It has been further argued on behalf of State of Haryana that the respondents- LPA No.412 of 2003 -8- assessees claiming the relief under the exemption provision have to show that they come within the language of the exemption. In order to deal with contention of the learned counsel we deem it proper to refer to the following observations of the Hon’ble Supreme Court in the said case: “6. We are of opinion that the view taken by the Excise Authorities as well as by the Tribunal proceeds upon too narrow an intetation of the notification. It is true, as Mr. Ganguli contended, that an assessee claiming relief under an exemption provision in a taxing statute has to show that he comes within the language of the exemption. But, in trying to understand the language used by an exemption notification, one should keep in mind two important aspects: (a) the object and purpose of the exemption and (b) the nature of the actual process involved in the manufacture of the commodity in relation to which exemption is granted. So far as (b) is concerned, it is common ground before us that rice bran oil as such is not directly used in the manufacture of soap. Rice bran oil contains glycerol and other impurities which have to be removed by a process of hydrolysis or hydrogenation and it is only the resultant purified rice bran oil that is actually used in the manufacture of soap. In fact, the Tribunal has given a clear finding that a pre-treatment to rice bran oil is required to be done as a matter of necessity for its use in the manufacture of soap in its factory first converts the oil into hydrogenated oil or fatty acid and then manufactures soap out of the latter. So LPA No.412 of 2003 -9- far as (a) is concerned, the object of the notification-as even the Tribunal finds – is to grant a concession to a manufacturer of soap who manufactures soap from rice bran oil to a substantial extent and thus discourage the use of edible oils in the manufacture. If these two aspects are considered together, it is clear that the emphasis in the notification is not that rice bran oil should be used as raw material in the very factory which produces the soap. The requirement is that the soap manufacture should, to a prescribed extent, be from rice bran oil as contrasted with other types of oil. The contrast is not between the use of rice bran oil as opposed to rice bran fatty acid or hydrogenated rice bran oil; the contrast is between the use of rice bran oil as opposed to, other oils. That is the ordinary meaning of the words used. These words may be construed literally but should be given their fullest amplitude and interpreted in the context of the process of soap manufacture. There are no words in the notification to restrict it to only to cases where rice bran oil is directly used in the factory claiming exemption and to exclude cases where soap is made by using rice bran fatty acid derived from rice bran oil. The whole purpose and object of the notification is to encourage the utilization of rice bran oil in the process of manufacture of soap in preference to various other kinds of oil (mainly edible oils) used in such manufacture and this should not be defeated by an unduly narrow interpretation of the language of the notification even when it is clear that rice bran LPA No.412 of 2003 -10- oil can be used for manufacture of soap only after its conversion into fatty acid or hydrogenated oil. 7………. We are, therefore, of opinion that, construing the notifications literally but reasonably in the light of the process of manufacture as explained by the Tribunal, the soap manufactured by the assessee is “soap made from indigenous rice bran oil” and is entitled to the exemption under the notifications to the extent permissible thereunder.” (emphasis supplied) We are of the considered opinion that what the Hon'ble Supreme Court held in the aforementioned case is that while ordinary meaning of the words used should be taken into account and words should be construed literally but they should be given their fullest amplitude and interpreted in the context in which they are used. Further in trying to understand the language used by an exemption notification, one should keep in mind inter alia the object and purpose of the exemption. From the aforementioned observations of the Hon'ble Supreme Court it cannot be deduced, that the intention of the State be read into the enactment by doing violence to the plain and clear meaning of the words used, so as to import what actually is not part of the entry, solely on the basis of the intention of the State. In the present case the words used in the notifications are clear and unambiguous. The learned single Judge has rightly interpreted the words on the basis of their literal meaning without adding or subtracting any thing from them. The learned counsel for State of Haryana also relied upon the observations of the Hon'ble Supreme Court made in Para 42 of S. LPA No.412 of 2003 -11- Sundaram Pillai v. V. R. Pattabiraman [reported as AIR 1985 SC 582], in support of her argument that a molasses based alcohol industry is to be part of the negative list and has argued that the exception provided in Entry 10 insists on certain mandatory condition to be fulfilled in order to make the enactment workable and falls in clause (2) of the four purposes mentioned by Hon'ble Supreme Court in the said case, which are reproduced hereunder:- “To sum up, a proviso may serve four different purposes: (1) qualifying or excepting certain provisions from the main enactment; (2) it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable; (3) it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself; and (4) it may be used merely to act as an optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision.” We are of the considered opinion, that in the present case the proviso, or the second part of the entry is covered by the clause (1) of the aforementioned four purposes enumerated by the Hon'ble Supreme Court i.e. its purpose is qualifying or excepting certain provision from the main enactment. The second part of the entry i.e. “except non- molasses alcohol industries” carved out an exception out of the first part i.e. “Ethanol (ethyl LPA No.412 of 2003 -12- alcohol) based industries”. Hence in our view, the learned single Judge rightly held that the exception takes out industries, based on alcohol manufactured from non molasses, from the ambit and scope of the main clause and the Entry includes industries based on Ethanol or Ethyl Alcohol manufactured from molasses. The Hon'ble Supreme Court in the judgment in S. Sundaram Pillai’s Case supra relied upon by the learned Counsel, itself has made following observations in the para 26 thereof, which in our view are applicable to the present case: “26…….Normally, a proviso is meant to be an exception to something within the main enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. In other words, a proviso cannot be torn apart from the main enactment nor can it be used to nullify or set at naught the real object of the main enactment…..” The learned counsel for the State further argued that as per the law laid down by the Hon'ble Supreme Court in the case of Pardeep Aggarbatti, Ludhiana v. State of Punjab [reported as AIR 1998 SC 171 = 1997 (107) STC 561], when some articles are grouped together in the list under the Schedule of Sales Tax, each word of the entry draws colour from the other words therein. On the basis of the said judgment it is averred that first part of Entry 10 viz, “Ethanol (ethyl alcohol) based industries” would draw colour from the second part i.e. “except non- molasses alcohol industries”. The paras 9 and 10 of the aforementioned judgment relied upon by the appellants reads as under:- LPA No.412 of 2003 -13- “9. Entries in the Schedules of Sales Tax and Excise statutes list some articles separately and some articles are grouped together. When they are grouped together, each word in the Entry draws colour from the other words therein. This is the principle of noscitur a sociis. 10. We are in no doubt whatever that the word "perfumery" in the said Entry No. 16 draws colour from the words 'cosmetics' and 'toilet goods' therein and that, so read, the word 'perfumery' in the said Entry No. 16 can only refer to such articles of perfumery as are used, as cosmetics and toilet goods are, upon the person. The word "perfumery" in the context in which it is used has, therefore, no application to 'dhoop' and 'aggarbatti'. The distinction between the present case and the case of Indian Herbs Research and Supply Company is evident for the word 'perfumes' in the entry under consideration in the latter case was not limited by the words before and after, as in the entry before us; both the words 'scent' and 'perfumes' related to articles that produced fragrances.” Again we find the interpretation sought to be placed by the learned State counsel to be misconceived. The Hon'ble Supreme Court was dealing with different articles which were mentioned in one entry and hence had been grouped together, it was in this context that the court held that each article in the entry would draw colour from the other words therein. However in the case before us, the position is entirely different and in our considered opinion, the aforementioned decision of the Hon'ble Supreme LPA No.412 of 2003 -14- Court does not advance the case of the appellants any further. The learned single Judge has rightly held that the entry in question lists only one category of industries and hence the judgment of the Supreme Court in Pardeep Aggarbatti’s case supra has not application. The learned State counsel further argued that the word “based” is of a wider connotation as compared to the word “manufacture”. The word based would include all industries which are manufacturing ethyl alcohol by using molasses as an input. The learned counsel relied on the judgment of Hon'ble Supreme Court in Collector of Central Excise, Jaipur v. Rajasthan State Chemical Works, Deedwana, Rajasthan [reported as AIR 1991 SC 2222], wherein it was held that ‘in determining what constitutes 'manufacture' no hard and fast rule can be applied and each case must be decided on its own facts having regard to the context in which the term is used in the provision under consideration’. Leaned Counsel emphasized that it must be inferred that any industry which is based on i.e. the fundamental ingredient used in the industries is molasses, cannot be exempted from the liability of paying Sales Tax. We cannot accept this contention of the learned counsel for the appellant State of Haryana. The words ‘based’ is derived from word ‘base’ which as per Oxford Dictionary means “main or important ingredient”. Thus literally construed the entry means an industry of which the main or important ingredient is Ethanol or Ethyl Alcohol. We agree with the Learned Single Judge that it refers to a stage subsequent to the manufacture of Ethanol or Ethyl Alcohol. Entry thus refers to only such industries which consume Ethyl Alcohol as an input and not industries which manufacture Ethyl Alcohol. Any other interpretation would render the word ‘based’ in LPA No.412 of 2003 -15- the entry as totally redundant, which cannot be accepted as correct interpretation. The learned State counsel relying on the judgments of the Hon'ble Supreme Court in State Level Committee and another vs. Morgardshammar India Ltd., [reported as 101 STC 1]; Commissioner, Trade Tax U.P. vs. Dhampur Sugar Mills Ltd [reported