M/s. Hiralal Rattanlal v. State of U.P.

INTERNAL AIDS TO INTERPRETATION (Literal Rule & Explanation)

INTRODUCTION

Words are the skin of language. Language gives its own meaning and interpretation of the law. It does so by employing appropriate phraseology to attain the object that the legislative policy seeks to achieve. Here, when the language of the statute is plain and unambiguous it would not be open to the courts to adopt a hypothetical construction on the ground that such a construction is more consistent with the alleged object and policy of the Act. But where such a plain reading leads to anomalies, injustices and absurdities, the court may look into the purpose for which the statute was enacted and try to interpret it so as to adhere to the purpose of the statute. It further mentions that if words are to be added by the court in order to repair an omission in the Act, it should be possible to state with certainty that these words would have been inserted by the draftsman and approved by the legislature had their attention been drawn to the omission before the Bill had passed into a law.

{7.1 introduction to Internal Aids, by N.S. Bindra}

FACTS

The Appellants were dealers in foodgrains, including cereals and pulses, especially split or processed foodgrains and dal. Under the Sales Tax Act, the purchases of split or processed foodgrains and dal were sought to be brought to tax under Section 3-D of the principal Act read with a notification. The validity of this levy was challenged by the Appellant on the ground that purchases of dal were not the "first purchases".

ISSUE

The issue in the current case pertained to whether the government was competent to levy sales tax on the purchases made by the Appellants of split or processed food grains and dal under the provisions of the United Provinces Sales Tax Act, 1948 as amended.

RULES

• Section 2(c) of the Uttar Pradesh Sales Tax (Amendment and Validation) Act, 1970 defines a “dealer”.

• Section 3 provides for the levy of multi-point tax.

• Section 3-D states that: “...there shall be levied and paid... a tax on the turnover... of first purchases made by a dealer... in respect of such goods or class of goods, and at such rates... not exceeding two paise per rupee in the case of foodgrains, including cereals and pulses...” (Emphasis added).

• Explanation II (Not fully reproduced in text, but discussed in Judgment): This explanation, attached to Section 3-D, clarified the meaning of "foodgrains" to include both processed/split and unprocessed/unsplit varieties.

DECISION OF THE HIGH COURT

The High Court of Allahabad had struck down the levy, holding that the dal purchased by the Petitioner could not be said to be a commodity essentially different from the arhar dal purchased by the dal mills, and accordingly, the purchases affected by the Petitioner could not be regarded as the first purchases (implying the first purchase was when the unprocessed pulse was bought).

JUDGEMENT AND ANALYSIS

• This Hon'ble court observed that the first and foremost rule of construction is the literal construction. If the provision is unambiguous and the legislative intent is clear, the literal construction rule is followed.

• The court examined that the Legislature had the power and authority (via Entry 54 of List II of the Constitution) to define the nature of the goods, the sale or purchase of which should be brought to tax. The Legislature was not incompetent to separate the processed or split pulses from the unsplit or unprocessed pulses and treat the two as separate and independent goods for the purpose of taxation.

• The court referred to Jagannath v. Union of India and observed there was no basis for the contention that the Legislature cannot, for the purpose of tax under the Act, separate the split or processed pulses from the unsplit or unprocessed.

• The court next addressed the role of Explanation II. It observed that even if an explanation appears to have widened the scope of the main Section, effect should be given to the legislative intent, notwithstanding the part's nomenclature. The court was required to find the true intent of the legislature.

• Section 3-D generally referred to "foodgrains", but because of Explanation II, it was imperative that the expression “foodgrains” was read as containing two different items: processed or split foodgrains and unprocessed or unsplit foodgrains.

• Consequently, while reading the expression “foodgrains'' in the notification also, such an approach must be adopted. The court effectively used the Internal Aid (Explanation II) to give distinct meaning to the two forms of pulse, making the purchase of the processed dal the "first purchase" of that commodity.

• The legislative classification was upheld, affirming the State's competence to levy sales tax on the purchases of split or processed food grains.