Kapildeoram Baijnath Prosad vs J.K. Das and Others

Sarjoo Prosad, C.J.—This is an application for a Writ of certiorari or mandamus or any other writ of the like nature for the purpose of quashing certain orders under the Assam Sales Tax Act (17 of 1947). The orders in question are dated 29-3-52 and 20-8-52. There is also a prayer for a direction on the Respondents not to enforce those orders.

The application is on behalf of Messrs. Kapildeoram Baijnath Prasad, a registered dealer carrying on business in the District of Nowgong. The business carried on by the Petitioner is mainly of the sale of ''chira'' and ''muri''.

The Petitioner was assessed to sales tax in respect of various quarters from September 1950 to September 1951 by the Superintendent of Taxes, Nowgong. The officer was of opinion that the said articles of food were not exempted from taxation. The Petitioner appealed against the orders, but all his appeals were dismissed under order, dated 20-8-52, communicated to him on 4-9-52.

The Petitioner then moved the Commissioner of Taxes for a reference to this Court u/s 32(2), Assam Sales Tax Act, 1947 (hereinafter called the Act). This was by a petition, dated 24-10-52. The Commissioner of Taxes made a reference in which he expressed the opinion that the above commodities were "to be considered more as ''forms'' of rice than as products thereof and exempt from taxation." The point of law which he thus referred for the consideration of this Court was:--"Whether the turnover from ''chira'' and ''muri'' was exempt from taxation under item (1) of Schedule 3 of the Assam Sales Tax Act?", and he submitted that in his opinion the answer to the question should be in the affirmative.

The reference was heard on 29-5-53 by a Bench of this Court and it was dismissed on the ground that such a reference was incompetent in law and was not covered by the provision of Section 32(2) of the Act.

The Petitioner complains that instead of disposing of the application u/s 31 of the Act,--as the Commissioner had power to do--he erroneously made a reference to this Court, with the result that the Petitioner has now no other remedy left except to present this application under Article 226 of the Constitution.

He submits that the order taxing the sale of ''chira'' and ''muri'' is entirely without jurisdiction and should not be given effect to, these commodities being excluded from taxation under the schedule to the enactment.

Section 3 of the Act provides for the liability to sales tax and, amongst others, it says:

every dealer whose total turnover during the year immediately preceding the commencement of this Act'' amounted to or exceeded the sum of Rs. 10,000/- (hereinafter referred to as "the taxable quantum"), shall be liable to pay tax under this Act on all sales effected after the date so notified.

Section 7 of the Act relates to exemption. This is the provision which has been largely canvassed at the Bar. It says:

Subject to the conditions and exceptions, if any, set out in Schedule 3 attached to this Act, the sale of goods specified therein shall be exempt from taxation under this Act.

It also provides that the Provincial Government can, by notification, add to, amend or otherwise modify the said Schedule.

In view of Section 7, the specification of goods in Schedule 3 which are exempted from taxation is material.

The first item in Schedule 3 is that "all cereals and pulses including all forms of rice" shall be exempt from taxation except when sold in sealed containers. The main question, therefore, is whether ''chira'' and ''muri'' are cereals or forms of rice so as to be exempted from the levy of tales tax.

The Superintendent of Taxes thought that the deduction claimed on account of the sale of ''chira'' and ''muri'' could not be allowed because those articles were not ''rice'' but "transformed prepared food". The Assistant Commissioner of Taxes, Assam, upheld this view. He held that ''chira'' and ''muri'' were ''products of rice'' and did not fall within the exempted item in the Schedule, which refers to ''all forms of rice'' only.

He observed thus:

Because of an exemption of an article from levy of sales tax, it cannot be concluded that all its products are also exempt. To get the products, the article is subjected to several mechanical and chemical processes and at times a product of an article loses the original properties of the article itself altogether. As such, I do not see how I can hold the product of an article to be the same as the article itself and what is exempted being all forms of rice'', I do not see how I can hold ''all products of rice'' also to be exempt.

I have quoted this because it puts the case strongly for the Department.

The Commissioner of Taxes, as already observed, did not agree with this view of the taxing authorities because, in his opinion, these commodities were to be considered "more as ''forms'' of rice than as ''products'' thereof and exempt from taxation", and he even suggested that the answer to the question formulated in the reference to the High Court should be given in the affirmative.

Mr. Ghose on behalf of the Petitioner has endeavoured to reinforce the opinion expressed by the Commissioner of Taxes. He has referred to the Assam Food Stuffs (Foodgrains) Control Order 1951 wherein ''rice and paddy products'' have been defined to include ''chira'' and ''muri'' etc. He also referred to the Railway Traffic Rules wherein they have been placed on the same footing as ''rice'' for purposes of Railway freights. The Assam Food Grains Control Order of 1951, though a local Order, is a later publication and cannot be of much assistance in construing the language of the statute with which we are concerned here, which came into being much earlier in 1947. Nor do I find much relevancy in the Railway Traffic Rules where commodities, even of different species and varieties, for purposes of freight, may be treated or classified on the same footing.

I am, however, inclined to think that there is much substance in the view taken by the learned Commissioner of Taxes. It has been contended on behalf of the Petitioner that ''chira'' and ''muri'' do not require any real mechanical or chemical process for their preparation; because ''chira'' is rice beaten and ''muri'' is rice parched; and, as such, they are simply different forms of rice.

It is also urged that these commodities are essential to the life of the community and, on principle, ought not to be taxed, because evidently the burden of taxation, in that case will fall upon the poor consumers.

We are in this case concerned not with the effect of the legislation, but we have to construe the language of the Act itself and, in particular, of the exemption Clause in Schedule 3 of the Act which says that (to quote the relevant part) "all cereals and pulses, including all forms of rice" are exempt from taxation.

It is well settled that all exemptions from taxation must be strictly construed and must not be extended beyond the express requirements of the language used. These taxation laws are not in the nature of penal laws; they are substantially remedial in their character and are intended to prevent fraud, suppress public wrong and promote the public good. They should be, therefore, construed in such a way as to accomplish those objects.

The dictum of Lord'' Halsbury in--''Inland Revenue Commrs. v. Forrest'' (1890) 15 AC 334 (A) supperts the view that since all exemptions from taxation increase the burden on other members of the community, they should be deprecated, except to the extent permissible by the express language of the statute itself.

Here we, find that all cereals and pulses, including all forms of rice, have been excluded. The question is whether ''chira'' and ''muri'' have ceased to be cereals merely because rice or paddy has undergone the process of being flattened or fried in assuming the form of ''chira'' and ''muri''.

The answer, to my mind, seems to be clearly in the negative. The intention of the statute evidently was to exclude all cereals from taxation including all forms of rice. The words ''all cereals'' obviously included ''all forms of rice''; but the very fact that in spite of having mentioned the genus the legislature was still anxious to mention the species and the repetition of the word ''all'' in relation to both shows that the intention was to make the language of the exemption as wide and comprehensive as possible. The term ''including'' is significant and in the collocation of the words used in the exemption Clause, it seems to me that ''forms of rice'' do not refer merely to the various varieties of rice, because that would be cearly implied by the mere use of the expression ''rice'', but also to the forms which rice may take, so long as it does not altogether lose its original shape or character of a cereal.

The contention of the learned Advocate General that the word ''forms'' should be confined to mere varieties of rice, does not, therefore, commend it self to me, as that would be putting a construction upon the language of the Clause which unwarrantably narrows its meaning. The idea was to exclude all cereals from taxation. The dictionary meaning of the term ''cereal'' is ''grain used as food''.

''Chira'' and ''muri'', to all intents and purposes, are cereals, and have not lost their character of cereals by any process of transformation so as to make us call them by any other name. I am conscious of the fact that in the case of--''Kayani & Co. v. Commr. of Sales Tax'' AIR 1953 Hyd 252 (B), ''cooked rice'' was not exempted from taxation. In that case, the word ''form'' was held to connote a visible aspect such as shape or mode in which a thing exists or manifests itself species, kind or variety. Rice, in all forms, according to the learned Judges, meant all kinds or varieties of rice or species of rice, such as broken rice, kichidi rice, pichodi rice, or rice flour etc., but yet the learned Judges did not regard cooked rice as rice.

One of the rules of construction which they there laid down was that when the legislature uses a term relating to any article of food, the Court must construe it in the sense in which it is understood in the country, and not elsewhere. Applying that rule, it seems to me that the word ''chawal'', which is the vernacular synonym for ''rice'', is also commonly used in ordinary parlance to denote ''cooked rice'' in various parte of India.

If cereal or rice has been so mixed up with other ingredients or so transformed as not to be reasonably called by that name, the position would be undoubtedly different. There can be no exception to the meaning which the learned Judges attributed to the word ''form'', but I hesitate to go to that length of saying that ''cooked rice'' is not a form of ''rice'', even assuming that the language of the exemption Clause which arose for consideration in that case, was identically the same as the one with which we have to deal in this case.

In my opinion, as long as a thing continues to be a cereal and retains its form as such, although it may have undergone some simple processes of boiling or parching it is difficult to hold that it would not be covered by the exemption provided in serial No. 1 of Schedule 3 to the Assam Sales Tax Act. It seems to me, therefore, that the opinion of the Commissioner of Taxes, Assam, was right that these commodities could be regarded ''more as forms of rice than as products thereof'' and in any case they fall within the definition of cereals and are exempt from taxation.

The learned Advocate General then argues that the Petitioner is not entitled to any relief under Article 226 of the" Constitution because there was a specific remedy provided for appeal u/s 30 and also for revision u/s 31 of the Assam Sales Tax Act, 1947.

Section 31 lays down that the Commissioner may, either of his own motion or on petition filed within ninety days of the order objected to, call or and examine the records of any proceedings which have been token under this Act, and revise such order. He contends that this remedy under S.31 was available to the Petitioner, but instead of taking advantage of it, he has sought to move this Court for a prerogative writ which should not be, therefore, allowed to him.

The fact that there is a specific remedy available is not in all cases an absolute bar to the entertainment of an application under Article 226 of the Constitution. We find in the present case that the order passed by the Assistant Commissioner dismissing the appeal of the Assessee was passed on 20-8-52 and communicated to the Petitioner on 4-9-52. On 24-10-52, well within 90 days from the date of that order, the Petitioner moved the Com missioner against the Appellate order of the Assistant Commissioner. The application undoubtedly was for a, reference u/s 32 of the Act and, as such, was apparently misconceived. But Section 31 enables the Commissioner himself, even on his own motion, to examine the records of the proceedings and to make such orders as he deemed necessary, subject to the provisions of that Section. Therefore, there was nothing to prevent the Commissioner from acting u/s 31 of the Act and dealing with the application presented by the Petitioner on that footing. Rule 27 of the rules framed under the Sales Tax Act provides for an appeal against an order, whether original or Appellate, passed by the Assistant Commissioner, to the Commissioner, and Rule 34 mentions the particulars which are to be put in an application for revision u/s 31 of the Act. The application for reference to this Court undoubtedly contains all those particulars. The failure of the assessee'' to point out the law under which the Commissioner had authority to act, should not be held to deprive him of his remedy, specially when this remedy should have been available to him even if the Commissioner had acted on his own motion. There can be no doubt that in this case the Commissioner called for the records of the proceedings'' and examined them. It is also obvious that after a judicial application of his mind to the matter, he came to think that the items in regard to which exemption was claimed, fell within the exemption Clause and should have been, as such, exempted from taxation; yet he failed to give relief because both the Petitioner as well as the Commissioner were under a misapprehension of the real position in law. In a case like this, and under the circumstances aforesaid, we would have been justified in issuing a writ of mandamus directing the Commissioner to exercise his power u/s 31 of the Act.

It is well settled that where the law creates an obligation and couples it with a duty in relation to rights of others, then the performance of the duty is imperative where the justice of the case demands it. On his own showing, the Commissioner found that in the present case, exemption should have been granted, and that being so, although the word ''may occurs in Section 31, yet it was his clear duty, in the circumstances of this case, to interfere and give relief to the assessee.

On the above grounds, I think that the application should succeed and the orders complained of should be quashed as being illegal and void. As the Petitioner was also responsible for not specifically moving the Commissioner, u/s 31 of the Act, he should not get any costs of this application.

Ram Labhaya, J.

The issue is whether ''chira'' and ''muri'' are exempt from taxation under the Sales Tax Act. The answer depends on the interpretation to be placed on the first item in Schedule 3 attached to the Sales Tax Act. This item is as follows:

All cereals and pulses including all forms of rice, when not sold in sealed containers.

The contention is that it would cover both ''chira'' and ''muri''. They are mere forms or varieties of rice and not its products. The processes that rice or paddy undergoes to reach the stage of ''chira'' and ''muri'' are negligible. They produce no appreciable or material change in paddy or rice whatever it may be. It is not correct to regard them as productsof rice.

It is a settled rule of construction that the intention of the legislature is to be gathered from the language used in the enactment which comes up to be interpreted. If the words leave no doubt as to their meaning and import, it is the obvious duty of the Court to give effect to them. Where the language is plain and admits of one meaning only, it has to be given effect to, even if it leads to apparent hardship.

The crucial word in item No. 1 is ''cereals''. Rice is admittedly a cereal when it exists in the form in which it comes into existence or manifests itself. All varieties of rice at this stage would also be admittedly cereals. There is no controversy so far. The question is whether paddy or rice when subjected to some process for conditioning it so that it should become edible or capable of use as food, still remains rice for the purpose of exemption. To answer the question, we have again to go back to the expression ''cereals'' and to discover its real import and significance.

The question has two facets wich make it a serious issue with the two sides appearing at the first blush to be fairly well-balanced.

The case of the taxing authorities as presented by the learned Advocate-General is as follows:

That the expression ''cereal'' means grain in the form in which it comes into existence or manifests itself. It was in this State that rice in all its forms was included in the first item of Schedule 3 along with other ''cereals''. He points out that paddy has to undergo certain processes before it reaches the stage of ''chira'' or ''muri'' ''Chira'', according to him, involves boiling paddy, its dehydration, frying and then flattening.

The formation of ''muri'' also involves similar four processes. These are soaking, boiling, dehydrating and the removal of husks. As a result of these processes, the cereal becomes edible. In its transformed state, the cereal can be taken as food without any more cooking. It is a conveniently portable food which does not get stale. The processes in both the cases, he argues, though simple, cannot all be excluded from the very wide range of chemical processes, though crude apparatus is employed for the necessary transformation.

He proceeds to emphasise that the expressions ''chira'' and ''muri'' are significant by them selves. They are not treated as rice and paddy in common parlance. They are dealt with and described by names which distinguish them from rice in its original form. Dealers in chira and muri form a class by themselves. The legislature, in his view, could not be unaware of this state of affairs.

He derives support from the Assam Food Grains Control Order, 1951, relied upon by Mr. Ghose, for his contention. In this Order, ''rice'' and ''paddy'' products were defined as including ''chira'' and ''muri'' The Order does treat ''chira'' and ''muri'' as distinct from rice paddy. They are also treated as ''products'' as distinguished from ''forms'' of rice. This treatment may not be helpful in interpreting the Sales Tax Act--an earlier measure but he utilises it for showing the Legislative description of ''chira'' and ''muri'' as products of rice in another Act.

He has also relied upon--''AIR 1953 Hyd 252 (B)'', in support of his contention. In this case also, the words ''rice in all forms'' were construed. It was held that the word ''form'' would connote a visible aspect such as shape or mode in which a thing exists or manifests itself, species, kind or variety. Rice in all forms would mean all kinds or varieties of rice, such as broken rice, kichidi rice, pichodi rice and even rice flour but not cooked rice. He strenuously disputes the correctness of the view "of the Commissioner that ''chira'' and ''muri'' are forms of rice, and not its products.

Mr. Ghose, the learned Counsel for the Petitioner has argued that both ''chira'' and ''muri'' are mere forms of paddy. Mere boiling and frying with a view to flattening and soaking and boiling for removal of husks do not introduce any real change in the substance. It retains its characteristics. It is not mixed with any other commodity. The essential quality of the cereal is not lost.

He urges that in common parlance the distinct names do not signify different substances just as the names of different forms of rice do not take out these forms from the description of rice. He points out that ''chira'' and ''muri'' figure with rice and paddy for purposes of the Assam Food-grains Control Order of 1951, and also for the purposes of Railway freight. He regards this treatment as a pointer to their affinity with rice and paddy.

He thinks that the conclusion arrived at by the learned Judges in the Hyderabad case is not correct and contends that the inclusion of ''chira'' and ''muri'' specifically in item No. 1 was not necessary as the expression ''cereal'' and the words ''forms of rice'' amply covered them.

This, however, is not all that may be said for the viewpoint of the assessee. The expression ''cereal'' has not been defined by the legislature. There is a dispute as to its import and significance. It admittedly includes ''foodgrains'' in the state in which they manifest themselves, but does it exclude ''cereals'' if they are made edible by such processes as paddy undergoes to be converted into ''chira'' and ''muri''? In--''the Hyderabad case AIR 1953 Hyd 252 (B)'', the word ''form'' was held to connote a visible aspect such as shape or mode in which a thing exists or manifests itself. I am prepared to subscribe to the interpretation placed on the word ''form'' but with great respect to the learned Judges, I feel that what has to be interpreted is the word ''cereal''.

If that expression would cover ''chira'' and ''muri'', if in spite of the transformation they undergo, they can still be appropriately described as cereals, it would not be necessary to determine the meaning of the word ''form'' in item No. 1 of the Schedule. In view of the dispute as to the connotation of the expression ''cereals'' and in the absence of any definition of the word in the Act itself, it becomes necessary to invoke the aid of the dictionaries. They are not authoritative exponents of the meanings of the terms used by the legislature but they form useful guides in case in which popular or current meanings of expressions have to be ascertained.

According to Webster, ''cereal'' is any grass yielding farinaceous seeds suitable for food as wheat, maize, rice, etc; also seeds or grains so produced either in their original state or ''commercially prepared''. A prepared foodstuff of grain as oatmeal or flaked corn, used'' specially with milk or cream as a breakfast food, is also ''cereal'' (Italics (here into '' '') are mine). If oatmeal and flaked com are cereals, there would be ample justification for describing ''chira'' and ''muri'' as cereals. The processes to which foodgrain is to be subjected to make it ready for use at the breakfast table are not less elaborate than those that paddy undergoes to be converted into ''chira'' and ''muri''.

If the expression ''cereal'' is used in this broad and comprehensive sense in which it would include readily edible food, which has been prepared by merely conditioning a cereal in its original state, both ''chira'' and ''muri'' would be covered by item No. 1 of the third Schedule as they retain the quality of the cereal whose original state has ceased to exist. Even boiled rice may thus be described as a cereal though cooked rice of every description may not be described as cereal. Pulao is one instance of cooked rice which it would be difficult to describe as a cereal. It has other ingredients. The wider sense in which the expression ''cereal'' may be used was not considered in the Hyderabad case.

It still remains to be seen in which sense the expression ''cereal'' was used by the legislature. It could be used in a narrow sense in which it would convey cereals in the form in which they manifest themselves. It could also be used in a broader sense referred to above.

The context in which the expression in question occurs is not very helpful in determining conclusively what the real intention of the legislature was. It is true that notwithstanding that milk has been exempted from tax in item No. 26, the legislature thought it necessary to exempt milk products like ghee, dahi, butter," cream, specifically under item No. 12. The order of these exemptions may not be quite what it might have been, but this apart, milk not being a ''cereal'' the analogy would be misleading. The other instance which, according to Mr. Lahiri, gives an insight into the working of the legislative mind is also not very helpful. It is argued that cereals include wheat.

This would be admittedly exempt under item No. 1, yet its products like bread (vide item No. 4) and flour, including atta, maida, shuji and brawn were included specifically (vide item No. 12) even though wheat as a cereal if used in its wider sense, might cover all these just exactly as rice would include rice-flour of all kinds as held in the Hyderabad case. ''Chira'' and ''muri'' not having been specifically included in the schedule, he argues that the intention was to keep them subject to the imposition of Sales Tax.

Argument by analogy is generally very weak. Besides it would be more correct to hold that atta, maida, shuji, etc. were included in item No. 12 by way of abundant caution. Flour should include atta and maida just as ''cereals'' include rice in all its forms, yet in item No. 1, it was considered desirable to mention rice in all its forms. In both these instances, the exercise of caution is apparent.

Schedule 2 deals with luxury goods and goods which are liable to tax Schedule 3 deals with exemptions. A perusal of Schedule 3 as a whole leaves the impression that the legislature attempted to cover the entire field of necessaries of life in a somewhat generous way. Necessities, it appears, were not meant to be taxed. If aricles like bread, coal, gas, electrical energy, ghee, butter, cream, fresh fruits, hooka tobacco, etc., are exempted, it is difficult to conceive that ''Chira'' and ''Muri'' were intended to be taxed.

Item No. 1 when seen in the light of the exceptions, also lends some support to the case of the assessee. Cereals including rice, are exempt except when sold in sealed containers. This exception applies to other articles like salt, water, sugar, ghee etc. The indication that these exceptions give is that where cereals are sold along with other commercial articles, they lose the privilege of exemption. Barring this, if they remain cereals unmixed and unadulterated with other commercial commodities, and are capable of being described as cereals, they remain exempt.

In view of the foregoing discussion, the weight of reason seems to be in favour of the Petitioner but what really clinches the matter is the fact that even if the expression ''cereal'' in item No. 1 of Schedule 3 is taken as a word of doubtful import in the context in which it occurs, by reason of the fact that it is capable of use in a limited and also in a comprehensive sense, the benefit of doubt has to go to the Assessee according to recognised canons of interpretation. If there is any ambiguity or doubt in the expression of the legislative intent in a fiscal enactment the Courts have to give the benefit thereof to the subject and relieve him from the burden of taxation (vide-- Kikabhoy Chandabhoy and Others Vs. Commissioner of Income Tax, In--''C.P. & Berar Provincial Co-operative Bank Ltd. v. Commr of I.T.C.P. & U.P. Lucknow'' AIR 1946 Nag 216 (D) it was held that the rule would apply even though it resulted in the Assessee obtaining a ''double advantage''.

The application of Article 226 is clearly attracted. The Petitioner applied for a reference to the High Court bona fide believing that he had the right to demand it. The Commissioner did not dispute the right & referred the question of law which arose in the case to this Court. Under the law he was bound to express his opinion in the statement of the case to be submitted to this Court. This he did. His opinion was in favour of the assessee.

He might have at that time exercised his powers of revision and thus avoided the reference. He did not adopt this course. A Special Bench of this Court declined to entertain the reference on the ground that it was not permissible under the Sales Tax Act though references under the Act had been made and entertained before. There was change in view of the law that had prevailed in this Court when it declined to entertain the reference made in this case at the instance of the Petitioner. When the Court declined to entertain the reference the remedy by revision had become time-barred.

The loss of this remedy cannot possibly be attributed to any negligence, laches or carelessness on the part of the assessee. His conduct of the case was diligent and bona fide. The expeditious remedy which the Sales Tax Act allowed him is now beyond his reach. There is no equally efficacious and adequate remedy available to him. The orders of assessment are illegal and they lead to a miscarage of justice. The legislature has not expressed its mind with sufficient clarity. The language employed is equivocal and ambiguous and there is no reasonable basis for reading the word ''cereals'' in a limited or in a narrow sense. I therefore agree in the conclusion arrived at and the order proposed by my lord the Chief Justice.