Commercial Plastics vs State of Andhra Pradesh

S.B. Sinha, C.J.—These two Tax Revision Cases by M/s Commercial Plastics, Industrial Estate, Visakhapatnam are directed against the common order of the Sales Tax Appellate Tribunal, Hyderabad in TA Nos. 122 and 122 of 1991 respectively confirming the orders of the Deputy Commissioner of Commercial Taxes, Visakhapatnam dated 23-2-1991 revising the order of the Commercial Tax Officer, Dwarakanagar, Visakhapatnam dated 20-8-1989.

The question involved in these revision cases is as to whether polythene bags manufactured by the petitioner fails under entry 19 or 187 or entry 188 of the First Schedule appended to Andhra Pradesh General Sales Tax Act (for short "the Act").

Upon noticing the conflicting decisions of the co-ordinate Benches of this Court - one Division Bench in TRC No.5 of 1986 decided on 3-2-1993 taking the view that the polythene bags fall under Entry-19 and two other Division benches in State of Andhra Pradesh v. High Palymer Enterprises, 27 APSTJ 207, as also in an unreported Judgment in TRC.No.230 of 1999 dated 8-12-1999 taking the contrary view, a Division Bench of this Court by order dated 20-8-2001 has referred these matters for decision by a Full Bench.

The factual aspects involved in the matter may briefly be noted thus:

The petitioner is engaged in manufacturing and selling of polythene bags, which are made out of plastic material. The plastic raw material required for the purpose of manufacturing the bags falls under entry 186 of the First schedule appended to the Act. By reason of G.O.Ms.No. 574 Revenue, dated 9-6-1987, entries 186, 187 and 188 were inserted in the First schedule appended to the Act. The Notification-II issued under G.O.Ms.No.574 dated 9-6-1987 provides that where tax has been levied and collected under the said Act in respect of the sale or purchase inside the State of plastics referred to in item 186, the tax leviable under the said Act on the sale of articles of plastics referred to in item 187 manufactured from out of such plastics that suffered tax be reduced by the amount of tax levied and collected on such plastics with effect from 15-6-1987. The assessing authority granted set off of tax for the period from 15-6-1987 to 31-3-1988 for the assessment year 1987-88 to a tune of Rs. 36,804/- and Rs. 15,460/-for the entire assessment year 1988-89. The Deputy Commissioner (DCTO), however, revised the assessment orders and withdrew the set off taking the view that the plastic bags sold by the petitioner have to be considered as falling under entry 19 of the first schedule as it stood during the relevant period and not entry 187 and G.O.Ms.No. 574 has no application. By the orders under revision, the Tribunal declined to interfere with the orders of the Deputy Commissioner of Commercial Taxes. The petitioner contends that the plastic bags sold by it have to be considered only as goods failing under entry 187 and not under entry 19 as it stood during the relevant period.

Before we go into the merit of the matter, we may refer to the relevant provisions.

Entry No. 19 as substituted by Act No. 5 of 1974 with effect from 1-3-1974 reads as under;

Containers other than gunnies and bottles.

By the very same Act No. 5 of 1974, item No. 113 was inserted with effect from 1-3-1974 in the following terms:

Plastic sheets and articles.

By reason of G.O.Ms.No. 130 dated 14.2.1989 with effect from 15-2-1989 entry 19 was substituted as:

Containers other than gunnies, bottles and plastic containers.

Therefore, upto 14-2-1989, the unamended entry No. 19 was in force. By reason of G.O.Ms.No. 375 dated 12-5-1997, entry 19 was further amended, but since the period in question relates to the assessment years 1987-88 and 1988-89, it is not necessary to refer to the same.

However, by reason of G.O. Ms. No. 574 dated 9-6-1987, entry 113 was deleted with effect from 15.6.1987 and entries 186 to 188 were introduced with effect from 15-6-1987. Entries 187 and 188 read as follows:

Articles of plastics (excluding HDPE woven sacks) and including-

Monofilament rods, sticks and profile shapes of plastics.

Tubes, pipes and hoses, fittings therefore (for example, joints, elbows, flanges) of plastics.

Floor coverings of plastics, whether or not self-adhesive, in rolls or in the form of tiles; wall or ceiling coverings of plastics.

Plates, blocks, sheets, film foil, tape, strip and other flat shapes.

High Density polthelene polypropylene (HDPE/PP) Wovensacks.

Entry 188 was, however, deleted by reason of G.O.Ms.No. 375 dated 12-5-1997 as the said item was made part of item 19.

The DCTO held that the polythene bags manufactured and sold by the petitioner have to be considered as containers falling under entry 19 and not goods failing under entry 187. According to the petitioner, the polythene bags, which are made out of plastic, fall under Clause (iv) of entry 187, which refers to ''flat shapes'' of articles of plastic inasmuch as polythene bags are in flat shape. The Tribunal rejected the said contention on the ground that polythene bags are manufactured only to serve as containers and not for any other purpose. It was also held that under the unamended entry 19 only gunnies and bottles were taken out of the entry and that plastics bags which are plastic containers have to be considered as falling under entry 19 only till it was amended with effect from 15-2-1989.

In the factual context as noticed hereinabove, we will have to consider the applicability of one or the other entries.

Admittedly, entries 186 to 188 were introduced with effect from 15-6-1987 and at the same time the unamended entry 19 was also in operation. Entries 186 clearly refers to "plastics", the nature and particulars of which are enumerated in Clause 1 to 14 of the said entry. Entry 187 also refers to plastics only. There is no dispute that the raw material being used by the petitioner-company for manufacture of the polythene bags falls under entry 186. Entry No. 19 says ''Containers other than gunnies and plastics''. A plastic bag or polythene bag may be a container but the same had not been specifically included therein. Entry 19 was amended on 15-2-1989 wherein again by way of clarification and abundant caution ''plastic containers'' were kept outside the purview of ''containers''. Entry 113, which provides for ''plastic sheets and articles'' was deleted by reason of G.O.Ms-No. 574 dated 9-6-1987 and from the said date entries 186 and 187 were introduced.

Only in the event the plastic bags fall within the purview of entry 187, he can claim set off in terms of G.O.Ms.No. 574 dated 9-6-1987 during the relevant period. The said entry clearly speaks of plastics, which includes goods, which are classified in items 1 to 4 therein.

The learned Tribunal proceeded on the basis that by reason of the word ''container'' used in entry 19, only gunnies and bottles were taken out of the entry but plastic containers must come within the purview of the said entry.

It is now well known that for the purpose of construing a taxing statute a commonsense meaning is to be applied. One of the tests laid down is as to how dealers deal in the matters and how the consumers would understand the meaning thereof. A bag literally may be a container. But while purchasing a bag, no customer would ask the shop-keeper for a container. But, it is also a plastic article. The word ''article'' has wide connotation, which would include plastic bags.

It must also be borne in mind that although the words ''means and includes'' have not been employed in entry 187, the manner in which expression ''article'' has been used in relation to the said entry clearly establishes that the same is of wide amplitude. For the purpose of bringing within the purview of the said entry any article of plastic, which should answer the description of ''articles of plastics'', will come within the purview thereof. By reason of such inclusive clause, the meaning of ''articles of plastics'' cannot be narrowed down.

In Dadi Iagannadham v. Jammulu Ramulu 2001 AIR SCW 3051, the Apex Court held:

The settled principles of interpretation are that the Court must proceed on the assumption that the legislature did not make a mistake and that it did what it intended to do. The Court must, as far as possible, adopt a construction, which will carry out the obvious intention of the legislature. Undoubtedly if there is a defect or an omission in the words used by the legislature, the Court could not go to its aid to correct or make up the deficiency. The Court could not add words to a statute or read words into it which are not here, especially when the literal reading produces an intelligible result. The Court cannot aid the legislature''s defective phrasing of an Act, or add and mend, and, by construction, make up deficiencies which are there.

In Gurudevdatta VKSSS Maryadit and Others Vs. State of Maharashtra and Others, , the Apex Court held that the words used in a provision should be considered in the following terms:

It is a cardinal principle of interpretation of statute that the words of a statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning, unless such construction leads to some absurdity or unless there is something in the context or in the object of the statute to suggest to the contrary. The golden rule is that the words of a statute must prima facie be given their ordinary meaning. It is yet another rule of construction that when the words of the statute are clear, plan and unambiguous, then the courts are bound to give effect to that meaning irrespective of the consequences, It is said that the words themselves best declare the intention of the lawgiver.

Expression used in an entry, as is well known, should be assigned the same meaning as that of main provision.

In State of A.P. v. High Palymer Industry (supra), Maruti, J., speaking for the Division Bench held that polythene bags would come within the purview of entry 188. Entry 188 refers to High Density polythene polypropylene (HDPE/PP) woven sacks.

20th Chambers Dictionary defines the word ''woven'' as under:

weave - wove paper. Paper that shows in its fabric the marks of a fine wire gauz, sieve or mould.

The concise Oxford dictionary for the 1990''s defines the word woven to mean:

(of paper) made of a wire guaz mesh and so having a uniform unlined surface.

The word ''sack'' as per the Concise Oxford dictionary would mean:

A large strong bag usually made of hessain, paper or plastic, for storing or conveying goods.

A polythene bag cannot come within the purview of woven unless it has a definite connotation. We are, therefore, of the opinion that the said decision does not lay down the correct law.

Yet again in an unreported decision in TRC. No. 5 of 1996 a Division Bench of this Court referred to entry 19 of the First Schedule and considered the words ''containers other than gunnies and plastic containers'' holding:

For the Revenue, it is contended that polythene bags are articles of plastic and are covered by entry-113, even though they are containers. There cannot be any doubt that polythene bags are made of plastic material and are plastic article. But, the question is whether they fall under entry 19 or 113. When there is a specific entry entry-19 relating to containers, we cannot apply entry 113 relating to plastic articles, which is general in nature. Therefore, we cannot agree with the learned Government Pleader. We agree with the findings of the Appellate Tribunal.

We do not agree with the aforementioned view also.

Having regard to the facts and circumstances of the case, we are of the opinion that polythene bags would come only within the purview of entry 187 and not within the purview of entry 19 or entry 188 (as it existed during the relevant period) of the First schedule appended to the Act.

The order of the Tribunal is therefore set side and the TRCs are allowed accordingly.