Case: Assessing Authority-Cum-Excise and Taxation Officer, Gurgaon Vs. Messrs East India Cotton Manufacturing Company Limited Faridabad

The assessee is a limited company registered under the Companies Act, 1956 and having its registered office at Calcutta. The assessee owns a factory in Faridabad where it carries on business of manufacturing and processing textiles. The assessee is registered under the Punjab General Sales Tax Act, 1948 as in force in the State of Haryana and at material times it also held a Certificate of Registration under section 7 of the Central Sales Tax Act, 1956 (hereinafter referred to as the Central Act). The business mentioned in the Certificate of Registration was Textile manufacturing, sale, purchase, wholesale distribution; sales and purchase of yarn and waste and textile machinery and the Certificate of Registration also specified inter alia the following classes of goods for the purpose of sub-section (l) of section 8, namely, "dyeing colours, and other chemicals for use in manufacture." The assessee purchased these goods in the course of inter-state trade and commerce on the basis of its Certificate of Registration and furnished to the selling dealers declarations in Form C stating that these goods were purchased for use by the assessee in the manufacturing of goods for sale. On the strength of these declarations the selling dealers were taxed in respect of the sales effected by them to the assessee at the rate of 3 per cent under section 8 (1) (b) of the Central Act. The goods purchased by the assessee were used partly for sizing, bleaching and dyeing of textiles belonging to the assessee and partly for sizing, bleaching and dyeing of textiles belonging to third parties on job basis.On 17th September 1966, the Excise and Taxation Officer, Gurgaon issued a notice calling upon th e assessee to show cause why action should not be taken against it under section 10 of the Central Act on the ground that the assessee had been misusing the certificate of registration by doing sizing, bleaching and dyeing for third parties on j ob basis. This was followed by another notice dated 13th July 1967 in the same terms by the Excise and Taxation Officer in regard to the assessment years 1962-63 to 1966- 67. The assessee replied to the notices by its letter dated 21st July 19 67 asking for details and circumstances in which, according to the Excise and Taxation Officer, the assessee had misused the certificate of registration so that the assessee could satisfy the Excise and Taxation Officer that no such misuse had , in fact, taken place. In response to this query made by the assessee, the Excise and Taxation Officer formulated the case against the assessee in the followingcompany purchased goods from outside the State of Punjab (now Haryana) on submission of C Forms for the purpose of use in manufacture of goods for sale. But instead of doing so, the company used those purchases partly in manufacturing its own goods for sale and partly for doing job work for other parties. The Company could not use the material concessionally purchased, for the job work as that does not constituteassessee contended in reply that neither the terms and conditions of the certificate of registration nor the provisions of section 8 (3) (b) of the Central Act required that the goods purchased by the assessee must be used by it in manufacture or processing o f its own goods intended for sale by itself and that it would be sufficient compliance with the requirement of section 8 (3) (b) read with the Certificate of Registration even if the goods purchased were used by assessee in manufacture or processing of goods for a third party under a job contract, so long as the manufactured or processed goods were intended for sale by such third party. This contention was however not accepted by the Excise and Taxation Officer and he consequently issued notices to the assessee for the assessment year 1962-63 to 1966-67 proposing to impose penalty under section 10A of the Central Act on the ground that the assessee had "contravened the provisions of section 10 of the Act ibid by purchasing goods for the purpose specified in clause (b) of subsection (3) of section 8" but had failed "without reasonable excuse to make use of the goods for any such purpose." The assessee thereupon filed a writ petition in the High Court of Punjab and Haryana for quashing and setting aside the various notices issued by the Excise and Taxation Officer seeking to proceed against the assessee under sections 10 and 10A of the Central Act.The writ petition came up for hearing before a single Judge of the High Court who rejected it on the ground that on a true interpretation of section 8 (3) (b), the goods purchased by the assessee against its certificate of registration could be used by it only in manufacture of textiles intended for sale by itself and if the goods purchased were used in manufacture of textiles for a third party on the basis of a job contract, it would amount to user of the goods purchased for a purpose different from that specified in section 8 (3) (b) and the assessee would be liable to be proceeded against under section 10 and 10A and in the circumstances the notices issued against the assessee must be held to be valid. The assessee preferred an appeal before a Division Bench of the High Court and before the Division Bench, two contentions were advanced on behalf of the Revenue in support of the decision of the learned single Judge. The first contention was that the sizing, bleaching and dyeing of textiles did not amount to manufacture of textiles and the goods purchased by the assessee could not therefore be said to have been used by it in manufacture of textiles as specified in the Certificate of Registration and hence the assessee had failed to make use of the goods purchased for the purpose specified in sec. 8 (3) (b) read with the Certificate of Registration. This contention was negatived by the Division Bench which held that though sizing bleaching and dyeing of grey cloth did amount to processing, it had the effect of converting grey cloth into a commercially different marketable commodity and it therefore amounted also to manufacture of a commercially new product and the user of the goods purchased in sizing, bleaching and dyeing grey cloth was consequently within the terms of section 8 (3) (b) read with the Certificate of Registration. This view taken by the Division Bench was not challenged on behalf of the Revenue in the appeal before us and hence we need not say anything more about it. The second contention urged before the Division Bench was-and that was the only contention pressed upon us on behalf of the Revenue-that the interpretation placed on section 8 (3) (b) by the learned single Judge was correct and in order to come within the terms of that section, the assessee was required to use the goods purchased in manufacture of its own goods intended for sale by itself and if the assessee used the goods purchased in manufacture of goods for a third party, the user would be for a purpose different from that specified in section 8 (3) (b), even though the manufactured goods were intended for sale by such third party. The Division Bench did not accept this contention of the Revenue and over-turning the view taken by the learned single Judge, the Division Bench held that all that section 8 (3) (b) provided was that the goods purchased must be used by the assessee in manufacture of goods for sale and d id not require that the sale must be by the assessee himself. The prescription of section 8 (3) (b) was that the goods manufactured must be for sale, without any qualifying expression that the sale must be by the assessee manufacturing the goods and therefore even if the goods were manufactured for a third party, so long as they were intended for sale by such third party, the case would be covered by the terms of the section. The Division Bench accordingly allowed the writ petition and quashed and set aside the notices issued against the assessee. The Revenue thereupon preferred the present appeal after obtaining certificate of fitness from the High Court.

Court's reasoning:
We will presently set out that section but before we do so, it is necessary to refer to some other provisions of the Central Act as well, for it is a well-settled rule of interpretation that no one section should be construed in isolation but that the statute should be read as a whole with each part throwing light on the meaning of the other. Section 6 is the charging section and it levies Sales Tax on every dealer "on all sales effected by him in the course of inter state trade or commerce during anyCourt must construe the language of section 8 (3) (b) according to its plain words and it cannot write in the section words which are not there. To read the words "by him" after the words "for sale" in section 8 (3) (b) would not be construction but judicial paraphrase which is impermissible to the Court. It is also important to note that the word use is followed by the words "by him" clearly indicating that the use of the goods purchased in the manufacture of goods for sale must be by the registered dealer himself but these words are significantly absent after the words "for sale", On a plain grammatical construction, these words govern and qualify only "use" and cannot be projected in to the words "for sale". The goods purchased by the registered dealer must be used by him in the manufacture of goods which are intended for sale but such sale need not be by the registered dealer himself: it may be by any one.Now ordinarily when the language of a statutory provision is plain and unambiguous, there is no need to resort to the object and purpose of the enactment because in such a case, the language best dealers the intention of the law-giver. But, even if we look at the object and intendment of section 8 (1) (b), read with section 8(3) (b), we reach the same conclusion. The object of providing a lower rate of tax under 8 (1) (b) for sales of goods described in section 8 (3) (b) clearly is that when goods are purchased by a registered dealer for being used by him in the manufacture or processing of goods which are intended for sale, the goods which are ultimately sold should not become unduly expensive to the consumer by addition of a high rate of sales tax on the purchase of goods which are used in the manufacture or processing of the goods ultimately sold. Now if this be the object of section 8 (1) (b) read with section 8 (3) (b) it should be immaterial whether the sale of the manufactured or processed goods is by the registered dealer manufacturing or processing goods or by another person for whom the goods are manufactured or processed by the registered dealer. The intendment of the statutory provision being that the cost of the manufactured or processed goods to the consumer should not be unduly enhanced by reason of higher rate of tax on the goods used in the manufactured or processing of the goods sold, it is obvious that if this intendment is to be ful ly effectuated, the benefit of the statutory provision should be available irrespective of whether the manufactured or processed goods are sold to the consumer by the registered dealer or by some one else who has got the same manufactured by the registered dealer. It was for this reason that the legislature deliberately omitted to add the words "by him" after the words "for sale" so as to make it clear that this sub clause of section 8 (3) (b) would apply even if the goods manufactured or processed by the registered dealer were intended for sale by some one else. The words "for sale" following upon the word goods clearly indicate that the goods manufactured or processed by the registered dealer must be goods for sa le or in other words, they must be goods intended for sale and it is immaterial whether they are intended for sale by the registered dealer himself or by anyone else. This sub clause of section 8 (3) (b) would therefore clearly cover a case where a registered dealer manufactures or processes goods for a third party on a job contract and uses in the manufacture or processing of such goods, materials purchased by him against his Certificate of Registration and the declarations in Form C, so long as the manufactured or processed goods are intended for sale by such third party. It is of course, true that if proceedings are taken against the registered dealer under section 10 clause (d) or section 10A, the question would arise whether the goods manufactured or processed by the registered dealer for a third party were intended for sale by such third party and that would have to be decided by the Court or the competent Authority according to the appropriate and relevant rules of evidence, but merely because some difficulty may arise in the determination of this question by reason of the third party coming into the picture that would be no ground for refusing to place on the language of section 8 (3) (b) the only construction which it can reasonably bear.We are therefore of the view that the Division Bench of the High Court was right in holding that even if the assessee carried out the work of sizing, bleaching and dyeing of textiles for a third party on job contract basis, its case would be covered by the terms of the second sub- clause of section 8 (3) (b), provided that the textiles so sized, bleached and dyed by the assessee were intended for sale by such third party. If it is proved in any proceedings initiated under section 10 (d) or section 10A that the textiles sized, bleached or dyed by the assessee for a third party on job contract basis were not intended for sale by such third party, as would be evident if s uch textiles were in fact not sold by the third party but were used for its own purposes, the assessee would incur the penalty prescribed in thoseit is a well settled rule of interpretation that a statute must be construed according to its plain language and neither should anything be added nor substracted unless there are adequate grounds to justify the inference that the legislature clearly so intended. It was said more than seven decades ago by Lord Mersey inThompson v. Goold and Company [1910] A.C.is a strong thing to read into an Act of Parliament words which are not there and in the absence of clear necessity, it is a wrong thing to do.Now here we find that the expression used by the legislature as also the rule making authority is simpliciter "forof goods for sale" without any addition of words indicating that the sale must be by any particular individual. The legislature has designedly abstained from using any words of limitation indicating that the sale should be b y the registered dealer manufacturing goods. It is significant to note that where the legislature wanted to restrict the sale to one by the registered dealer himself, the legislature used the qualifying words "by him" after the words "for resale" in the firstof section 8 (3) (b) indicating clearly that the resale contemplated by that provision is resale by the registered dealer purchasing the goods and by no one else, but while enacting the second subclause of section 8 (3) (b) the legislature did not qualify the words "for sale" by adding the words "by him". This deliberate omission of the words "by him" after the words "for sale" clearly indicates that the legislature did not intend that the sale of the manufactured goods should be restricted to the registered dealer manufacturing the goods. If the legislature intended that the sale of the manufactured goods should be by the registered dealer manufacturing the goods and by no one else, there is no reason why the words "by him should have been omitted after the words "for sale" when the legislature considered it necessary to introduce those words after the words "for resale" in the firstof section 8 (3) ( b). The omission of the words "by him" is clearly deliberate and intentional and it cannot be explained away on any reasonable hypothesis except that the legislature did not intend that the sale should be limited to that by the registered dealer manufacturing the goods. TheCourt must construe the language of section 8 (3) (b) according to its plain words and it cannot write in the section words which are not there. To read the words "by him" after the words "for sale" in section 8 (3) (b) would not be construction but judicial paraphrase which is impermissible to the Court. It is also important to note that the word use is followed by the words "by him" clearly indicating that the use of the goods purchased in the manufacture of goods for sale must be by the registered dealer himself but these words are significantly absent after the words "for sale", On a plain grammatical construction, these words govern and qualify only "use" and cannot be projected in to the words "for sale". The goods purchased by the registered dealer must be used by him in the manufacture of goods which are intended for sale but such sale need not be by the registered dealer himself: it may be by any one.Now ordinarily when the language of a statutory provision is plain and unambiguous, there is no need to resort to the object and purpose of the enactment because in such a case, the language best dealers the intention of theBut, even if we look at the object and intendment of section 8 (1) (b), read with section 8(3) (b), we reach the same conclusion. The object of providing a lower rate of tax under 8 (1) (b) for sales of goods described in section 8 (3) (b) clearly is that when goods are purchased by a registered dealer for being used by him in the manufacture or processing of goods which are intended for sale, the goods which are ultimately sold should not become unduly expensive to the consumer by addition of a high rate of sales tax on the purchase of goods which are used in the manufacture or processing of the goods ultimately sold. Now if this be the object of section 8 (1) (b) read with section 8 (3) (b) it should be immaterial whether the sale of the manufactured or processed goods is by the registered dealer manufacturing or processing goods or by another person for whom the goods are manufactured or processed by the registered dealer. The intendment of the statutory provision being that the cost of the manufactured or processed goods to the consumer should not be unduly enhanced by reason of higher rate of tax on the goods used in the manufactured or processing of the goods sold, it is obvious that if this intendment is to be ful ly effectuated, the benefit of the statutory provision should be available irrespective of whether the manufactured or processed goods are sold to the consumer by the registered dealer or by some one else who has got the same manufactured by the registered dealer. It was for this reason that the legislature deliberately omitted to add the words "by him" after the words "for sale" so as to make it clear that this sub clause of section 8 (3) (b) would apply even if the goods manufactured or processed by the registered dealer were intended for sale by some one else. The words "for sale" following upon the word goods clearly indicate that the goods manufactured or processed by the registered dealer must be goods for sa le or in other words, they must be goods intended for sale and it is immaterial whether they are intended for sale by the registered dealer himself or by anyone else. This sub clause of section 8 (3) (b) would therefore clearly cover a case where a registered dealer manufactures or processes goods for a third party on a job contract and uses in the manufacture or processing of such goods, materials purchased by him against his Certificate of Registration and the declarations in Form C, so long as the manufactured or processed goods are intended for sale by such third party. It is of course, true that if proceedings are taken against the registered dealer under section 10 clause (d) or section 10A, the question would arise whether the goods manufactured or processed by the registered dealer for a third party were intended for sale by such third party and that would have to be decided by the Court or the competent Authority according to the appropriate and relevant rules of evidence, but merely because some difficulty may arise in the determination of this question by reason of the third party coming into the picture that would be no ground for refusing to place on the language of section 8 (3) (b) the only construction which it can reasonably bear.We are therefore of the view that the Division Bench of the High Court was right in holding that even if the assessee carried out the work of sizing, bleaching and dyeing of textiles for a third party on job contract basis, its case would be covered by the terms of the second subsections.6. We find that there are three decisions of three different High Court which have taken a view different from the one taken by us. One is the decision of the Madhya Pradesh High Court in Commissioner of Sales Tax v. S. R. Sharma 31 Sales Tax Cases, 480 , the other is the decision of the Gujarat High Court in Navsari Cotton Mills Limited v. State of Gujarat 37 Sales Tax Cases 104 and the third is the decision of the Kerala High Court in O. Parmasivan v. State of Kerala 1971 Taxation Law Reports 1241. These three decisions proceed on an erroneous interpretation of section 8 (3) (b) and must be deemed to be over ruled by the present decision.