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Inder Singh v. Sales-Tax Officer, Jodhpur
Structured Summary of the Opinion
Factual and Procedural Background
This is a reference under Section 15(1) of the Rajasthan Sales Tax Act, 1954 made by the Commissioner, Excise and Taxation, Rajasthan, Udaipur at the instance of the firm Messrs Motilal & Co., Jodhpur (the assessee).
For the assessment year 1957-58 the assessee claimed exemption from sales tax on Durries. The Sales Tax Officer disallowed the claim holding that Durries were not included in "handloom cloth." The assessee sought revision before the Commissioner, Excise and Taxation, who also rejected the claim on the ground that the term "cloth" is not a word of art and Durries are not included in Notification No. F. 21(7)/SR/55 dated 14 April 1955. The Commissioner referred the following question for determination:
Whether under the facts and circumstances of the case the turnover of Durries has been rightly included in the taxable turnover?
The Court heard counsel for the assessee (Shri Hastimal) and the Government Advocate (Shri Kan Singh).
Legal Issues Presented
- Whether, under the facts and circumstances of the case, the turnover of Durries has been rightly included in the taxable turnover (i.e., whether Durries fall within the exemption for "handloom cloth" in Notification No. F. 21(7)/SR/55 dated 14 April 1955)?
Arguments of the Parties
Assessee's Arguments (Shri Hastimal)
- Durries are woven on handloom in exactly the same manner as other handloom cloth; the technique is identical.
- Because "cloth" (as defined in ordinary dictionaries) includes articles used as "covering," Durries — being coverings for floors, stairs, etc. — fall within the exemption for "handloom cloth."
- The Commissioner used a dictionary meaning of "cloth" but did not give full effect to the word "covering" in the dictionary definitions.
- Where a fiscal statute is capable of more than one meaning, an interpretation favorable to the subject should be adopted; reliance was placed on State of Bombay v. R. S. Phadtare (A.I.R. 1956 Bom. 496) and Empress Mills v. Municipal Committee, Wardha (A.I.R. 1958 S.C. 341) to support the beneficial construction doctrine.
Government's Arguments (Shri Kan Singh)
- The matter concerns construction of an exemption clause, not simply the charging provision; exemption claims must be strictly construed and the benefit should not be extended beyond the express language of the notification.
- The principle that a taxing statute be construed in favor of the subject is not directly applicable to claims of exemption.
- The word "cloth" is not a word of art and has acquired a secondary meaning; that meaning should be preferred in this context.
- Reliance was placed on Kosuri Subba Raju v. State of Andhra ([1956] 7 S.T.C. 479) where an item manufactured in the same manner as handloom cloth (nawar tape) was held not to be exempt.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| State of Bombay v. R. S. Phadtare, A.I.R. 1956 Bom. 496 | Doctrine that, if two constructions are possible on a taxing statute, the construction which gives relief to the subject should be adopted. | Cited by the assessee to support a favourable construction. The Court noted the principle but declined to apply it to expand an exemption clause here. |
| Empress Mills v. Municipal Committee, Wardha, A.I.R. 1958 S.C. 341 | Where two interpretations are possible in construing a taxing statute, the one favoring the citizen should be adopted. | Cited by the assessee; the Court acknowledged the principle but held it inapplicable to broaden the scope of an exemption in this case. |
| Kosuri Subba Raju v. State of Andhra, [1956] 7 S.T.C. 479 | Authority where an article manufactured similarly to handloom cloth (nawar tape) was not held exempt. | Relied upon by the Government Advocate to show that similar manufactured items were not necessarily exempt; the Court recorded this argument as supportive of strict construction. |
| R. v. Peters, (1886) 16 Q.B.D. 636 | Principle that words in a statute are to be given their ordinary meaning and dictionaries are useful aids. | Invoked by the Court as the "golden rule" that statutory words prima facie have their ordinary meaning; the Court used dictionary definitions to examine "cloth." |
| Inland Revenue Commissioners v. Forrest, (1890) 15 App. Cas. 334 | Observations that exemptions from taxation increase burden on others and should be deprecated. | Invoked by the Court to support the proposition that exemptions must be strictly construed. |
| Kapildeoram Baijnath Prosad v. J. K. Das, [1954] 5 S.T.C. 365 | Statement that all exemptions from taxation must be strictly construed and not extended beyond the language used. | Cited by the Court as a domestic authority consistent with strict construction of exemptions; the Court relied on this reasoning in rejecting a broad reading of "handloom cloth." |
| Dilworth v. Commissioner of Stamps, [1899] A.C. 99 | Observation that the word "include" is generally used to enlarge rather than restrict the meaning of preceding words. | The Court used this principle to infer that the draftsman used "cloth" in a narrower sense and then employed "including" to enlarge it to clearly specified items, supporting a narrow overall meaning of "cloth." |
Court's Reasoning and Analysis
The Court began by identifying the statutory framework: Section 3 (charging section), Section 4(1) (exemptions subject to Schedule conditions), and Section 4(2) (power of the State Government to exempt by notification). The State Government's Notification of 14 April 1955 exempted "Handloom cloth, including pagri made of handloom cloth (with or without challa) safa, woven on handloom and handloom cloth interwoven with gold thread, of whatever description."
The pivotal textual element for construction was the entry "handloom cloth including pagri etc." The Court observed that "handloom" qualifies "cloth" to indicate the manufacturing process; there was no dispute that Durries were made of the same material and by the same handloom process as other handloom cloth. Thus, the factual dispute boiled down to the third dimension of the word "cloth" (as shown by dictionary definitions): the uses to which the woven material is put.
The Court then adopted the established rule that statutory words are prima facie to be given their ordinary meaning and consulted dictionaries to determine that "cloth" has threefold reference: (1) material, (2) manner of manufacture, and (3) uses (including coverings). Given that material and manner matched, the contest was whether the use "covering" as ordinarily understood would include Durries.
The Court rejected the assessee's submission that a beneficial (favourable) construction should be applied on the ground that the claim concerned an exemption. It relied on authorities to state that exemptions increase burdens on others and ought to be strictly construed. The Court reasoned that because the notification used the word "including" after "handloom cloth," the draftsman intended "cloth" in a narrower sense and then expressly enlarged that narrower denotation by listing examples (such as pagri, with or without challa). The Court found the use of "including" to be an indication that the base term "cloth" was meant narrowly and not to encompass Durries by implication.
Addressing the assessee's point that "including pagri" must have been to capture embroidered pagris, the Court rejected that suggestion because pagri was included both "with or without challa," implying the draftsman's intent was to enlarge a narrower term rather than to correct some omission.
On this textual and purposive basis — giving ordinary meanings, recognising the need for strict construction of exemptions, and considering the drafting technique ("including") — the Court concluded that the notification's exemption of "handloom cloth" did not intend to include Durries.
Holding and Implications
Holding: The Court answered the referred question in the affirmative — the turnover of Durries has been rightly included in the taxable turnover; Durries are not covered by the exemption for "handloom cloth" in the Notification dated 14 April 1955.
Implications:
- The direct legal effect is that the assessee's claim for exemption of Durries fails and such turnover is subject to tax under the Act.
- The Court applied and reiterated the principle that exemptions must be strictly construed; it declined to extend the scope of the exemption to include Durries on the facts before it.
- The opinion records that, because there was a legitimate dispute as to interpretation, each party was to bear its own costs.
- The opinion does not purport to establish a novel broad precedent beyond applying established rules of statutory construction for exemption clauses; it rests its decision on the specific text of the notification and settled principles concerning exemptions and the use of "including."
Note: All statements in this summary are confined to and derived from the provided opinion text. No facts or conclusions beyond the opinion's contents have been introduced.
1. This is a reference under Section 15(1) of the Rajasthan Sales Tax Act, 1954 (Act No. XXIX of 1954 hereinafter called the Act) by the Commissioner, Excise and Taxation, Rajasthan, Udaipur, made at the instance of the firm of Messrs Motilal & Co., Jodhpur, through its partner Inder Singh, the assessee.
2. For the assessment year 1957-58 the assessee, who carries on business in Jodhpur City, claimed exemption of sales tax on Durries. The Sales Tax Officer disallowed this claim holding that Durries were not included in handloom cloth. The assessee preferred a revision application before the Commissioner, Excise and Taxation, Rajasthan. That officer also rejected the assessee's claim on the ground that the term "cloth" is not a word of art and Durries are not included in the Notification No. F. 21(7)/SR/55 dated 14th April, 1955. On an application by the assessee that the Durries woven on handloom stood covered by the exemption certificate granted under the Notification relating to hand-loom cloth, the Commissioner has submitted the following question for answer:-
Whether under the facts and circumstances of the case the turnover of Durries has been rightly included in the taxable turnover?
3. We have heard Shri Hastimal, learned counsel for the assessee, and Shri Kan Singh, Government Advocate, for the State.
4. Before we proceed to examine the contention of the learned counsel for the parties we think it useful to refer to the relevant provisions of law around which the present controversy revolves. Under Section 3, subject to the provisions of the Act, every dealer whose turnover in the previous year in respect of sales or supplies of goods exceeds Rs. 12,000 shall be liable to pay tax. Under Section 4(1) no tax shall be payable under the Act on the sale of any of the exempted goods if the conditions specified in column 3 of the Schedule are satisfied. Under Section 4(2) where the State Govenment is of opinion that it is necessary or expedient in the public interest so to do, the State Government may, by notification in the Official Gazette, exempt from tax the sale of any goods or class of goods on such conditions and on payment of such fee as may be specified in the notification.
5. Pursuant to the provisions of Section 4(2), the State Government issued a Notification No. F. 21(7)/SR/55 dated 14th April, 1955, the relevant entry whereof reads as under:-
Handloom cloth, including pagri made of handloom cloth (with or without challa) safa, woven on handloom and handloom cloth interwoven with gold thread, of whatever description.
6. The learned counsel for the assessee argued that it is not disputed that the Durries regarding which the assessee claims exemption are woven exactly in the same manner as any other handloom cloth. The technique employed in making Durry or other handloom cloth being identical, Durry is a handloom cloth intended for covering the floor, stairs etc., and, therefore, stands exempted. The learned counsel urged that the Commissioner adopted the dictionary meaning of the word "cloth" but stopped short by not giving full effect to the word "covering". The learned counsel further argued that even assuming that the expression handloom cloth was capable of more than one meaning in a fiscal statute that interpretation should be given which is favourable to the subject. He relied on State of Bombay v. R. S. Phadtare A.I.R. 1956 Bora. 496, wherein it was held that sugarcane is a fresh vegetable which is exempted from the provisions of the Act. The learned Judges applied the doctrine that if two constructions are possible on a taxing statute, the Court must consider the one which gives relief to the subject. The learned counsel also cited Empress Mills v. Municipal Committee, Wardha A.I.R. 1958 S.C. 341, wherein it was held that if in construing a taxing statute, there are two interpretations possible, then effect is to be given to the one that favours the citizen and not the one that imposes a burden on him.
7. The learned Government Advocate, on the other hand, urged that it was not the construction of a taxing statute but of an exemption clause. While construing an exemption clause the case of the assessee must strictly fall within the compass of the exemption granted. The principle that a taxing statute should be construed in favour of the subject was inapplicable as such in the case of a claim relating to an exemption. He further submitted that the word "cloth" is not a word of art. It has acquired a secondary meaning and it is that meaning which should be preferred. He relied on Kosuri Subba Raju v. State of Andhra [1956] 7 S.T.C. 479, wherein nawar tape although manufactured in the same manner as handloom cloth was not held to be exempted.
8. The entry which we have to construe for answering the reference is "handloom cloth including pagri etc." The word "cloth" has been qualified by the word "handloom" to indicate the process by which the cloth was manufactured. There is no disagreement between the parties that Durries for which exemption is claimed are also manufactured by the same process as any other handloom cloth. Therefore, the word that requires closer examination is "cloth" and the significance of the clauses which follow it.
9. The golden rule is that the words of a statute must prima facie be given their ordinary meaning. In R. v. Peters (1886) 16 Q.B.D. 636 (641), said Lord Coleridge :
I am quite aware that dictionaries are not to be taken as authoritative exponents of the meanings of the words used in Acts of Parliament, but it is a well known rule of courts of law that words should be taken to be used in their ordinary sense, and we are therefore, sent for instruction to these books.
10. Now the word "cloth" has been understood by the following Lexicographers as under :-
1. The Oxford English Dictionary :
"A piece of pliable woven or felted stuff, suitable for wrapping or winding round, spreading or folding over, drying, wiping, or other purpose; a swaddling or winding cloth, wrap, covering, veil, curtain, handkerchief, towel, etc."
2. Webster's New Twentieth Century Dictionary :
"a woven, knitted, or pressed fabric of fibrous material, as wool, hair, cotton, flax, hemp, synthetic fibres etc., used for garments or other covering, and for various other purposes, as household furnishings...".
3. Twentieth Century' Chambers's Dictionary: "woven material from which garments or coverings are made : a piece of this material : clothing: the usual dress of a trade or profession, esp. the clerical : a table-cloth : sails: a theatre curtain....
11. The meaning assigned to the word "cloth" in three~ standard dictionaries aforesaid is substantially the same. The word has threefold points of reference : one, the material of which it is made; two, the manner in which it is made ; and three, the uses to which it is put.
12. With respect to the first two aspects there is evidently no dispute in the instant case as the material of which Durry and cloth are made may be taken to be identical and so also the manner in which the two are made. It is with reference to the use to which the fibrous woven material on handloom is put that the conflict accentuates. The assessee maintains that the word "covering" is wide enough to include a "Durry" as it covers a floor or a stair-case while the department resists such a wide application.
13. It is, therefore, clear that if we give cloth and covering their generic import, "Durry" would appear to be included in the term. On the contrary, if a narrower interpretation is put, "Durry" would appear to be excluded. The learned counsel for the assessee invoked the aid of the doctrine that it is a fiscal matter and the beneficial construction should be put. We are unable to agree. As we have already noticed the item which we are called upon to interpret is an exemption pursuant to the provisions of Section 4(2) of the Act. Section 3 is the charging section and it is in those cases alone where public interest demands that the State Government may exempt certain sales from being included in taxable turnover. Lord Halsbury, L.C., in Inland Revenue Commissioners v. 'Forrest (1890) 15 App. Gas. 334, observed that all exemptions 'from taxation increase the burden on other members of the community and should, therefore, be deprecated. Similar has been the view of the High Courts in India. In Kapildeoram Baijnath Prosad v. J. K. Das [1954] 5 S.T.C. 365 to which one of us was a party, it has been observed :
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, therefore, be construed in such a way as to accomplish those objects.
14. It is from this view of the law that the relevant entry has to be examined.
15. Some assistance can indeed be had in ascertaining the intention of the draftsman by reference to the words which follow "handloom cloth". They are "including pagri made of handloom cloth (with or without challa) safa...." Evidently these items are intended to be included in the word "handloom cloth". The word "including" or "includes" has been usually understood to enlarge rather than restrict the meaning of the word after which it has been used. Lord Watson observed in Dilworth v. Commissioner of Stamps [1899] A.C. 99 (105), that the word "include" is very generally used in interpretation clauses to enlarge the meaning of the words or phrases. The need for this enlargement in the instant case gives us a clue to the author's intention, namely, that he used the word "cloth" in its narrower sense, and with a view to enlarge its denotation he was impelled to have recourse to the usual method of "including". The learned counsel for the assessee suggested that he did so because embroidery work in a handloom pagri would have been otherwise outside the pale of handloom cloth. We are unable to accept the suggestion for the simple reason that pagri has been included both with and without challa.
16. In our opinion, therefore, item 3 of the Notification of 14th April, 1955, when it exempted handloom cloth, it did so in its narrower meaning and "Durry" was not intended to be included in this exemption. We answer the question referred to us in the affirmative.
17. As there was a legitimate dispute relating to interpretation, we leave the parties to bear their own costs.
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