The Empress Mills, Nagpur v. The Municipal Committee, Wardha

STRICT INTERPRETATION (OF TAXING STATUTES)

INTRODUCTION

The construction of a statute according to its letter is a construction which takes the language used in its literal sense. When a strict construction is appropriate, the particular case to come within the purview of the statute must be within both its letter and its spirit and reason. The literal meaning of a statute is that which the words express, taking them in their natural and ordinary sense. Strict construction of a statute confines its operation to cases which are clearly within the letter of the law as well as within its spirit and reason.

Further, according to Sutherland, a strict interpretation would depend on multiple factors such as:

• With reference to former law

• With reference to the rights and persons affected

• With reference to the letter or language of the statute

• With reference to the purpose and object of the statute.

{6.4 Strict and Liberal Construction, by N.S. Bindra}

FACTS

The Appellant's (Empress Mills) bales of cotton were transported from Yeotmal to Nagpur by road. The vehicles carrying the goods simply passed through the limits of Wardha Municipality (on a PWD road). The goods were neither unloaded nor reloaded at Wardha; they were merely carried across the municipal area. The Municipal Committee, acting under Section 66(l)(o) Rule 1 of the C.P. & Berar Municipalities Act, collected a terminal tax on these goods, arguing they were exported by the Appellant from the limits of the Municipality of Wardha. The Appellant claimed a refund.

ISSUE

The issue highlighted in the above case is focused on the construction of the phrase "terminal tax on goods or animals imported into or exported from the limits of a municipality" in Section 66(l)(o) Rule 1 of the C.P. & Berar Municipalities Act.

RULES

Section 66(1) of the C.P. & Berar Municipalities Act lists the taxes a committee may impose:

• (d) a toll on vehicles and animals... entering the limits of the municipality...

• (e) an octroi on animals or goods brought within the limits of the municipality for sale, consumption or use within those limits.

• (o) a terminal tax on goods or animals imported into or exported from the limits of a municipality.

DECISION OF THE HIGH COURT

The High Court held that the words ‘export’ and ‘import’ have no special meaning and uphold the ordinary dictionary meaning, meaning only ‘taking out of and bringing into’.

JUDGEMENT AND ANALYSIS

• This Hon'ble court observed that while "import" (from importare) means "to bring in" and "export" (from exportare) means "to carry out," lexicologically, they don't necessarily reference goods in 'transit' (from transire, meaning to go across). These words were required to be interpreted in ways not solely confined to their literal derivations.

• The court examined that if the words "import" or "export" were given their wide literal meaning (as insisted by the Respondent), it would make rail-borne goods passing through a railway station within the municipal limits liable to the tax on arrival or departure. Such an interpretation would lead to inconvenience, confusion, inordinate delays, and an unbearable burden on trade, both inter-State and intra-State. The court held that such an interpretation would lead to absurdity which was deemed to be avoided.

• Citing precedents (Brown v. State of Maryland, Harvey v. Mayor and Corporation of Lyme Regis), the court observed that import is not merely bringing into but comprises something more, generally bringing in for the purpose of sale, consumption, or being kept. Similarly, export meant taking out of goods which had become a part and parcel of the mass of the local area’s property and wouldn’t apply to goods which were in transit.

• The term "Terminal" generally means end or boundary. As this was a taxing statute, the construction placed on the term should be the one that favours the tax-payer, according to the principle of strict construction.

• The court concluded that the words "imported into or exported from," when used in conjunction with "terminal tax," must connote the idea that the end of something is connected with motion, and not with that of an intermediate stage of a journey.

• The court therefore held that the terminal tax under Section 66(1)(o) of the act is not leviable on goods which are in transit and are only carried across the limits of the Municipality.