Case: Innamuri Gopalam and Maddala Nagendrudu and Others Vs. State of Andhra Pradesh and Another

How the matter came before the High Court was briefly this. There was no dispute that the appellants were and are doing business in the purchase and sale of textile goods. They claimed exemption from the payment of sales tax in respect of goods in stock with them on December 14, 1957, relying on the notification set our earlier. The Sales Tax Authorities, however, rejected this claim and as a result a writ petition was filed in the High Court under Article 226 by the appellants praying for a direction for quashing the notice issued by the Sales Tax Department of the Government of Andhra Pradesh calling upon them to pay the sales tax on these goods. It is now necessary to mention that the validity of the action of the Sales Tax Officialsthe Commercial Tax Officer, the second respondentmaking the demand was impugned by the appellants not merely on the ground that no tax was payable by them by reason of the above notification but also on various other grounds including the constitutional invalidity of the Sales Tax Act itself and in particular the provisions imposing sales tax on textile goods. The learned Judges dismissed their petition rejecting everyone of the contentions urged, and the appellants have come up in appeal after obtaining special leave. It must, however, be mentioned that the argument regarding the constitutional invalidity of the Act and the rules were not repeated before us and the only point arising for consideration is as regards the construction of the notification.Before proceeding further it would be convenient to set out the grounds on which the learned Judges held that the appellants were not within the benefit of the exemption conferred by the notification. The argument urged on behalf of the State Government as regards the construction of the notification and which was accepted by the learned Judges of the High Court, was briefly this. The exemption from payment of sales tax was granted in order to avoid double taxation, i.e., both the excise duty leviable by the Central Government under clause 3 of the Bill and sales tax to the State Government, and it was claimed that this was made out by the terms of the proviso to the notification. In other words, the reasoning was that if the exemption provision contained in the first paragraph of the notification was to operate, the goods must have been such that it was liable to the tax under clause 3(1) of the Bill and that where this condition was not satisfied the exemption provision had no application. It was admitted before the High Court that the textile goods in the possession of the appellants were not subject to excise duty or the additional excise duty under clause 3(1) of the Bill. As no excise duty was leviable on these goods there was, of course, no question of the dealer being able to prove to the satisfaction of the assessing authorities under condition (1) of the proviso that additional duties had been levied and collected from him. Another and distinct line of argument was based on the use of the expression "any class of such goods" as distinguished from "any goods" occurring in the proviso and in regard to this the learned Judges observed :"Textiles fall within the class of such goods in regard to which additional duties could be levied in certain contingencies. It does not mean that only such goods as are actually liable to be taxed by reason of section 3 of theCentral Act, that were intended to be covered by the proviso. If that were so, the expression any class of such goods would be unmeaning. In our opinion, that clause only conveys the thought goods belonging to the class in respect of which additional duties could be levied. That expression does not exclude goods set out in the appendix merely because they would not fall within the scope of section 3 of the Central Act."5. On these two lines of reasoning the learned Judges held that the appellants were not entitled to the benefit of the exemption and in consequence directed the dismissal of the writ petition. It is the correctness of this interpretation that is challenged before us.

Reasoning: This submission has to be accepted and be heard no serious argument againstargument was that "textile goods" were "a class of goods" in respect of which an additional duty was leviable, though by reason of their location, viz., not being within the precincts of a factory, warehouse etc., no duty could be levied and that consequently unless condition (1) to the proviso was satisfied the exemption could not be claimed. The learned Judges accepted this argument, but with great respect to them, it appears to us that they were in error in doing so. In the first place, "the class of goods" referred to in the proviso to the notification are such that in respect of them duties of excise are leviable. If, therefore, in respect of a class of goods such duties are not leviable because of the situs in which they are lying or are stocked, they would not be the class of goods in respect of which duties of excise are leviable, for the essential condition for the proviso to be brought into operation is the liability of the goods to the levy of the additional duty. It therefore appears to us that the expression "class of such goods" has to be understood as being a reference not merely to the goods specified in the opening words of clause 3(1) of the Bill but to such goods as fall within the entirely of that taxing provision and in respect of which therefore the additional duty would be leviable, for in respect of cotton fabrics produced in India per se or simpliciter no excise duty would be leviable unless they are at the premises which are specified in the latter portion of clause 3(1) of the Bill. Both these conditions are necessary to exist before the duty of excise is "leviable" and when the proviso therefore uses the words "any class of such goods" it could only refer to the class of goods named in the 1st para of clause 3(1)lying, stored or stocked in the places referred to in the concluding portion of the clause.There is another aspect from which this question of construction could be viewed. It cannot be disputed that the proviso and the conditions appended thereto form an integral part thereof. It is obvious that where the proviso operates it would be open to the dealer affected by it to pay the additional duty and establish that he has paid such duty and thereby entitle himself to the exemption. In other words, it cannot be that the proviso excludes the exemption but in circumstances in which the conditions cannot be fulfilled. The conditions themselves would thus throw light upon the words of the proviso, and when the proviso is read with the conditions of which they are an integral part, the conclusion is inescapable that the word "leviable" used in the proviso means that in respect of the goods specified as regards which he claims exemption from the payment of sales tax there was a liability upon him to pay the additional excise duty under clause 3 of the Bill for it was only in that event he would be able to prove to the assessing authorities that additional duty has been levied and collected from him.We do not feel persuaded to accept this argument. No doubt, statutes have to be construed as a whole so as to avoid any inconsistency or repugnancy among its several provisions, but if there is nothing to modify, nothing to alter, or nothing to qualify the language of a statute, the words and sentences have to be construed in their ordinary and natural meaning (vide 36 Hals. (3rd Edn.) s. 585). What we are now concerned with is a fiscal provision and it has often been said that there is no equity in a taxing statute and either the subject is within it or not, on the words of the enactment or the rules validly made thereunder. In a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the words of the provision. If the taxpayer is within the plain terms of the exemption he cannot be denied its benefit by calling in aid any supposed intention of the exemption authority. It such intention can be gathered from the construction of the words of the statute or rule or by necessary implication therefrom, the matter is different, but that is not the position here. In this connection we might refer to the observations of Lord Watson in Salomon v. Salomon and Co. ([1897) A.C. 22 at p.d counsel for the State is possibly right in the submission that the object behind the framers of the notification was to avoid double taxable 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 the case before us the operative words of the notification are to be found in the 1st paragraph granting the exemption and it was not disputed that the appellants were within that provision.the proviso on its proper construction, as we have endeavoured to point out earlier, cannot apply to cases where an additional duty of excise is not leviable under clause 3 of the Bill it would follow that the operation of the exemption is unaffected by the proviso. The appellants were therefore entitled to the relief from sales tax granted by the notification dated December 13, 1957.9. In the writ petition which they filed to the High Court they prayed for a declaration that certain provisions of the Andhra Pradesh Act VI of 1957 were ultra vires of the Constitution of India. As stated earlier, this point about the constitutional invalidity of the Act was abandoned in this Court and the argument before us was confined wholly to their claim to exemption under the notification.