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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.336 OF 2003

                                                      COMMERCIAL TAX OFFICER,  RAJASTHAN ..Appellant(s)                   

  Versus

M/S. BINANI CEMENTS LTD. & ANR. ..Respondent(s)                                   

J U D G M E N T

H.L. DATTU, J.

1.The  Revenue  is  in  appeal  before  us  against  the  impugned  judgment  and  order  passed  by  the  High  Court of Rajasthan at Jodhpur in S.B. Sales Tax  Revision Petition No.582 of 1999, dated 02.07.2001  whereby and whereunder the High Court has dismissed  the  revision  petition  filed  by  the  Revenue  and  upheld the case of the respondent-assessee.

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2.The respondent-assessee is a new industrial unit  manufacturing  cement  situated  within  Panchayat  Samiti, Pindwara, Rajasthan. It is an admitted fact  that  it  started  its  commercial  production  on  27.05.1997.  It  is  also  not  disputed  that  the  respondent-assessee  has  fixed  capital  investment  (for short, “the FCI”) exceeding Rs.500/- Crores  and employs more than 250 employees.  

3.The  core  issue  arises  out  of  the  respondent- assessee’s  application  for  grant  of  eligibility  certificate for exemption from payment of Central  Sales  Tax  and  Rajasthan  Sales  Tax  to  the  State  Level Screening Committee, Jaipur under the “Sales  Tax New Incentive Scheme for Industries, 1989” (for  short “the Scheme”).   

4.For  convenience  of  discussion,  we  would  first  notice the relevant scheme and certain provisions  and  thereafter  proceed  towards  analysis  of  the  facts  in  the  instant  case.  The  Scheme  for

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exemption from payment of sales tax was notified  by  the  State  of  Rajasthan  in  exercise  of  its  powers under sub-section(2) of Section 4 of the  Rajasthan  Sales  Tax  Act,  1954  (for  short,  “the  Act”). The scheme exempts certain industrial units  from  payment  of  tax  on  the  sale  of  goods  manufactured  by  them  within  the  State.  It  specifies and categorizes the districts, types of  units,  the  extent  of  exemption  from  tax  (in  percentage),  the  maximum  exemption  available  in  terms  of  percentage  of  fixed  capital  investment  (FCI) and the maximum time limit for availing such  exemption  from  tax.  By  introducing  a  deeming  clause,  the  scheme  is  deemed  to  have  come  into  operation  with  effect  from  05.03.1987  and  to  remain in force upto 31.03.1992. An amendment to  the  aforesaid  notification  was  brought  in  by  issuing  notification  –  S.  No.763:  F.4(35)  FD/  Gr.IV/87-38,  dated  06.07.1989  and  was  made  operative/effective  with  effect  from  05.03.1987  and  to  remain  in  force  upto  31.03.1995.  Yet

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another  amendment  was  introduced  by  the  State  Government  by  issuing  notification  No.763:  F.4(35)FD/Gr.IV/87-38 dated 06.07.1989. Once again  by introducing a deeming clause, the notification  was made operative with effect from 05.03.1987 and  to  remain  in  force  upto  31.03.1997.  The  State  Government  has  issued  another  subsequent  notification amending the earlier notification in  exercise of its power under Section 4(2) of the  Act  in  763:  F.4(35)FD/Gr.IV/87-38,  dated  06.07.1989  which  is  deemed  to  have  come  into  operation  with  effect  from  05.03.1987  and  to  remain in force upto 31.03.1998. Clause 1 of the  scheme  notification  provides  for  its  operation.  Clause 2 is the dictionary clause which provides  for  meaning  of  the  expressions  like  “New  Industrial  Unit”,  “Sick  Industrial  Unit”,  “Eligible Fixed Capital Investment” etc.  For the  purpose  of  this  case,  we  require  to  notice  the  definitions of New Industrial Unit, Eligible Fixed  Capital  Investment,  Prestigious  Unit  and  Very

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Prestigious Unit.

5.Clause 2(a) defines the meaning of the expression  ‘New Industrial Unit’ to mean an industrial unit  which commences commercial production during the  operative  period  of  the  scheme.  The  definition  provides an exclusion of certain industries from  the  purview  of  New  Industrial  Unit.   They  are  industrial  units  established  by  transferring  or  shifting or dismantling an existing industry and  an industrial unit established on the site of an  existing  unit  manufacturing  similar  goods.  Explanation I and II appended to the notification  need not be noticed by us, since the same is not  necessary  for  the  purpose  of  disposal  of  this  appeal.

6.It is neither in dispute nor could be disputed by  the  revenue  that  the  respondent  is  not  a  ‘New  Industrial Unit’.

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7.Clause  2(e)  defines  eligible  fixed  capital  investment (FCI) to mean investment made in land,  new  buildings,  new  plant  and  machinery  and  imported  second  hand  machinery  from  outside  the  country  and  installation  expenditure  capitalized  for  plant  and  machinery  and  installation  capitalized for plant  and machinery’s capitalized  interest during construction not exceeding 5% of  the total fixed capital investment; and technical  know-how fees or drawing fees paid in lump-sum to  foreign  collaborators  or  foreign  suppliers  as  approved  by  Government  of  India  or  paid  to  laboratories recognized by the State Government or  Central  Government  and  Rail  Sidings,  rolling  stock,  racks  and  railway  engines,  owned  by  the  unit.

8.Clause 2(i) defines ‘Prestigious Unit’.  The same  is as under:-

“Prestigious Unit” means a “new  industrial unit” first established in

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any  Panchayat  Samiti  of  the  State  during the period of this Scheme in  which  investment  in  fixed  capital  exceeds Rs.10/- cores with a minimum  permanent employment of 250 persons  or a “new industrial unit” having a  fixed  capital  investment  exceeding  Rs.25.00  crores  and  with  a  minimum  permanent employment of 250 persons  or a new electronic industrial unit  having  fixed  capital  investment  exceeding Rs.25/- crores’.

9.The definition is in three parts.  The first part  speaks  of  a  ‘New  Industrial  Unit’  first  established in any Panchayat Samiti of the State.  The establishment is of the unit during the period  of the Scheme.  The investment in fixed capital  must  exceed  Rs.10/-  crores  and  lastly  the  industrial unit has minimum permanent employment  of 250 persons. In the second limb, the necessity  of  establishing  the  ‘New  Industrial  Unit’  in  Panchayat  Samiti  is  done  away  with.   The  unit  should have capital investment exceeding Rs.25/-

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crores  and  should  have  minimum  permanent  employment of 250 persons. The third limb of this  definition applies only to Electronic Industrial  Unit  having  fixed  capital  investment  exceeding  Rs.25/- crores.   

10. Clause  2(ii)  defines  the  expression  “Very  Prestigious Unit” as under:

“Very  Prestigious  Unit”  means  a  new  industrial  unit  established  in  any  Panchayat Samiti of the State during the  period  of  this  Scheme  in  which  investment in fixed capital is Rs.100/-  crores  or  more.   However,  the  progressive investment of the amount of  project  cost  as  appraised  by  the  financial  institutions  shall  be  considered as investment made by a new  unit,  and  as  soon  as  such  investment  reaches or crosses the point of Rs.100/-  crores during the operative period of  the Scheme, the unit shall acquire the  status of a Very Prestigious Unit for  the  purpose  of  claiming  enhanced  proportionate  benefits  under  this  Scheme”.

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11. The  ‘Very  Prestigious  Unit’  means  a  new  industrial  unit  established  in  any  Panchayat  Samiti in the State during the operative period of  the Scheme and the other important requirement is  the  investment  in  such  industrial  unit  must  be  Rs.100/- crores or more.  The second limb of the  definition  clause  provides  for  a  new  industrial  unit  to  acquire  the  status  of  Very  Prestigious  Unit.  The  project  cost  as  appraised  by  the  financial  institution  shall  be  considered  as  investment  made  by  a  new  unit.  The  progressive  investment of the amount of project cost as soon  as  it  reaches  or  crosses  the  point  of  Rs.100/-  crores  during  the  operation  of  the  Scheme,  the  industrial unit shall acquire the status of a Very  Prestigious  Unit  in  order  to  claim  enhanced  proportionate benefits under the Scheme.

12. Clause  2(k)  provides  for  constitution  of  Screening  Committee  for  the  purpose  of

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consideration and to grant Eligibility Certificate  under the New Incentive Scheme both for small and  medium and also large scale industrial units to  avail benefit under the New Incentive Scheme. The  note appended to this sub-clause speaks of Small  Scale Units, Medium Scale Units and Large Scale  Units.  Small  Scale  Units  means  a  unit  of  which  investment in plant and machinery does not exceed  Rs.60/- Lakhs, a Medium Scale Unit means  a unit  of which the project cost does not exceed Rs. Five  Crores and Large Scale Unit means a unit of which  the project cost exceeds Rs. Five Crores.  

13. Clause  3  of  the  notification  speaks  of  applicability of the Scheme.  By this clause, the  State Government has made the Scheme applicable to  (a)  new  industrial  units,  (b)  industrial  units  going in for expansion or diversification and (c)  sick units.   

14. Clause 4 of the Scheme provides for exemption

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from  Payment  of  Sales  Tax  as  per  parameters  mentioned  in  Annexure  ‘C’  to  the  said  notification. This clause also envisages that the  industrial  unit  which  is  granted  an  eligibility  certificate  by  the  Screening  Committee  is  alone  exempted to claim benefit of this notification.   

15. Annexure ‘C’ provides for the quantum of sales  tax exemption under the Scheme. Para C therein is  relevant for the purpose of this case, therefore,  omitting  what  is  not  necessary  is  extracted  hereunder:-

ANNEXURE ‘C’

QUANTUM OF SALES TAX EXEMPTION UNDER THE NEW  INCENTIVE SCHEME

Item  No.

Type of Units Extent of  the  percentage  of exemption  from tax

Maximum  exemption  in terms of  percentage  of  fixed  capital  

Maximum  time limit  for  availing  exemption  from tax

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investment  (FCI)

1. New Units  (Other than  the units  mentioned at  items 1A to  1F)

75% of total  tax  liability

100% of FCI  in case of  medium and  large scale  units and  125% of FCI  in case of  small scale  units

Seven  years

1A. Leather based  New Unit

90% of total  tax  liability

100% of FCI  in case of  medium and  large scale  units and  125% of FCI  in case of  SSI units  

Seven  years

1B. New Units in  Ceramic,  Glass,  Electronics  and  Telecommuni- cations  industry  having a FCI  between Rs.5  crores and  Rs.25 crores

90% of total  tax  liability  for first  three years,  80% for next  three years  and 75% for  the  remaining  period.

100% of FCI Nine  years.

1C. New Units in  Ceramic,  Glass,  Electronics,  and  Telecommuni- cations  industry  having a FCI  of Rs.25  crores or  more

100% of  total tax  liability  for the  first four  years, 90%  for the next  four years  and 75% for  the  remaining  period.

100% of FCI Eleven  years.

1D New labour 75% of total 145% of FCI Seven

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intensive  units as  defined in  the Capital  Investment  Subsidy  Scheme, 1990

tax  liability

in case of  SSI units  and 120% of  FCI in case  of medium  and large  scale  units.

years.

1E. New Cement  units except  in Tribal  Sub-Plan  area.

75%, 50% &  25% of total  tax  liability in  case of  small,  medium and  large scale  units  respectively

125% of FCI  in case of  small scale  units  subject to  an overall  limit of  Rs.1.00  crore and  100% of FCI  in case of  medium and  large scale  units.

Seven  years.

1F. Large  scale  granite  and  marble units.

25% of total  tax  liability

100% of FCI Seven  years.

2. Units (Other  than (a)   cement unit  except in  Tribal Sub- Plan area and  (b) large  scale granite  and marble  units going  in for  expansion or  diversificati on.

75% of total  tax  liability

100%  of  additional  FCI

Seven  years

2A. Leather based  units going  in for  expansion or  diversificat-

75% of total  tax  liability

100%  of  additional  FCI

Seven  years

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ion 3. Sick Units 50% of total  

tax  liability

100% of FCI  in case of  medium and  large scale  units &  125% of FCI  in case of  small scale  units.

Seven  years

4. New Units  producing  pollution  control  equipments/  Pioneering  units/  Prestigious  units.

75% of total  tax  liability

100% of FCI Nine years

5. New Very  Prestigious  units (Other  than cement  units except  in Tribal  Sub-plan  Area)

90% of total  tax  liability

100% of FCI Eleven  years

6. 100% Export  Oriented  Prestigious/  Pioneering  units

100% of  total tax  liability

100% of FCI Nine years

7. 100% Export  Oriented Very  Prestigious  Units

100% of  total tax  liability

100% of FCI Eleven  years

16. As we have observed earlier, Annexure-C has five  columns.  The  second  column  speaks  of  type  of  units, the third column speaks of the extent of

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percentage  of  exemption  from  tax,  the  fourth  column provides for the maximum exemption in terms  of percentage of FCI and the fifth and the last  column  provides  the  maximum  time  limit  for  availing exemption from tax. Prior to issuance of  notification  dated  13.12.1996,  Annexure  ‘C’  was  primarily  confined  to  ‘New  Units’.   After  the  introduction of notification dated 13.12.1996, the  exclusion is made to the expression ‘New Units’ by  specifically including certain type of industrial  units  by  inserting  items  1A  to  1F.  Item  1E  specifically talks of New Cement Units except in  Tribal Sub-Plan area. The extent of percentage of  exemption from tax under Item 1E depends on the  type of unit or the industry. If it is a small  scale unit, the extent of exemption is 75%, if it  is medium scale, the extent of exemption is 50%,  and  if  it  is  large  scale  unit,  the  extent  of  percentage  of  exemption  from  tax  is  25%.  The  maximum time limit for availing exemption from tax  is restricted to seven years. Item 4 speaks of New

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Units  producing  pollution  control  equipments,  pioneering  units  and  prestigious  units.   The  extent of the percentage of exemption from tax is  75% of total liability and the maximum time limit  for availing exemption from tax is 9 years from  the date of commercial production.  Item 5 relates  to New Very Prestigious Units other than cement  units except in Tribal Sub-plan Area and the total  percentage of exemption from tax is 90% of total  tax  liability  and  the  maximum  time  limit  for  availing exemption from tax is eleven years.

17. Reverting  to  state  the  facts,  the  respondent- assessee had applied to the State Level Screening  Committee for claiming benefit of exemption at 75%  under the Scheme. The Committee rejected the claim  of the respondent-assessee and observed that since  the  respondent-assessee  is  a  large  scale  unit  covered under the specific provision of Item 1E of  Annexure ‘C’, it is entitled to 25% exemption, by  its order dated 15.01.1998.

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18. Being  aggrieved  by  the  said  order,  the  respondent-assessee filed appeal before Rajasthan  Tax  Board,  Ajmer  (for  short,  ‘the  Board’)  in  respect of the calculation of eligible FCI as well  as the exemption under the Scheme. The Board while  remanding the matter to the State Level Screening  Committee  held  that  the  respondent-assessee  is  entitled  to  75%  tax  exemption  by  holding  the  respondent-unit  as  Prestigious  Unit  under  the  Scheme.

19. The revenue being aggrieved by the decision of  the Board, filed Tax Revision Petition before the  High Court under Section 86(2) of the Act.  The  High Court dismissed the revision petition filed  by  the  revenue  and  upheld  the  decision  of  the  Board  by  holding  that  the  respondent-unit  is  a  Prestigious  Unit  and  therefore,  entitled  to  75%  tax exemption under the Scheme.

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20. Aggrieved by the order so passed by the High  Court, the Revenue is before us in this appeal.

21. We have heard learned counsel for the parties to  the  lis and  perused  the  documents  on  record  as  well as the order(s) passed by the authorities and  the High Court, respectively.

22. Shri Rohington Nariman, learned senior counsel  appearing for the appellant submits that the case  pleaded  by  respondent-unit  right  from  the  beginning  of  filing  the  application  before  the  State Level Screening Committee was that the new  unit had made an investment of more than Rs.500/-  crores  by  way  of  fixed  capital  assets  and  therefore they should be placed under the category  of ‘Prestigious Unit’ and accordingly be granted  eligibility certificate to claim 75% of exemption  from tax for the maximum time limit provided under  the  Scheme.   In  aid  of  this  submission,  the

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learned senior counsel would draw our attention to  the  application  and  the  accompanying  affidavit  filed by the respondent-new unit before the State  Level  Screening  Committee.  He  would  further  contend  that  the  respondent-unit  before  all  the  authorities  below  including  the  High  Court  had  adopted  the  stand  that  the  fixed  capital  investment  excluding  investment  made  before  05.03.1987  was  more  than  Rs.532/-  crores  and  therefore  the  respondent-unit  is  a  Prestigious  Unit entitled to an exemption of 75% of total tax  liability.  It  is  further  contended  that  the  respondent-new  unit  being  New  Cement  Unit  and  further being large scale unit though can avail  the benefit of the incentive scheme under 1E of  Annexure ‘C’ which provides for exemption upto 25%  of total liabilities, it cannot avail the benefit  of exemption at the rate of 75% under Item 4 as  Prestigious  Unit.  He  would  further  submit  that  benefit  to  cement  industry  is  confined  to  the  extent envisaged under the Item 1E of Annexure-C

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as the said item is a specific provision relating  to  cement  industry  and  thus  would  prevail  over  other provisions which are general in character in  terms  of  reference  to  new  cement  unit.  Alternatively,  it  is  contended  that  the  respondent-unit being new cement unit, it may fall  under `New Very Prestigious Unit’, however Item 5  of Annexure `C’ speaks of the New Very Prestigious  Units other than cement units except those located  in  Sub-Plan  area,  respondent-unit  may  not  be  entitled to avail the benefit of the Scheme.   

23. Per contra, learned counsel, Shri Sudhir Gupta  would  justify  the  reasoning  and  the  conclusion  reached  by  the  High  Court  while  rejecting  the  revenue’s revision petition and thereby confirming  the view expressed by the Board. He would,  inter  alia, submit that Item 1E is only an exception to  the general rule envisaged in Item 1 and not an  exception to the other Items in the Annexure-C,  i.e., Items 2 to 7 as it is not intended to govern

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the entire field of exemptions made available to  the cement industry so as to deny the benefits to  a  unit  even  if  it  falls  under  another  Item  envisaging  better  incentives.  He  would  further  submit that since new cement unit is specifically  excluded  from  application  of  Item  1  (new  units  generally),  Item  2  (expanding/diversifying  unit)  and Item 5 (very prestigious unit) but not   Item  4  (prestigious  units),  Item  6  (export  oriented  prestigious/pioneering  unit)  and  Item  7  (export  oriented  very  prestigious  units),  it  falls  that  the  intention  behind  such  express  exclusion  is  such  that  but  for  the  said  exclusion,  cement  industries would be included in the said entries.  He  would  strenuously  submit  that  since  the  tax  exemption  clauses  are  made  with  a  beneficent  object, i.e., to encourage investment in specified  rural/semi-urban areas, their construction must be  liberal  such  as  to  confer  the  most  beneficial  meaning to the provisions.

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24. The facts which are not in dispute are that the  respondent-assessee  (hereinafter  referred  to  as  ‘the  Company’)  established  a  new  cement  unit  within  Panchayat  Samiti,  Pindwara  and  commenced  commercial production some time in the year 1997.  It engaged itself in the manufacture of cement.  The total capital investment – (FCI) in the new  industrial unit claimed by the Company was Rupees  53252.87 Lakhs (Rs.532.52/- crores)

25. The Company had applied for grant of Eligibility  Certificate for exemption from payment of Central  Sales Tax and Rajasthan Sales Tax before the State  Level  Screening  Committee,  Jaipur,  under  the  Scheme. However, the Screening Committee accepted  only  Rs.5553.72  Lakhs  (Rs.55.32  crores)  as  FCI  eligible  for  availing  the  benefits  under  the  Scheme.  On  the  aforesaid  basis  the  State  Level  Screening Committee certified that the company is  entitled to avail exemption of tax to the extent

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of 25% of the tax liability by treating the same  to be a Large Scale Industry. In the appeal, the  Board took the view since the Company had invested  more than Rs.25 crores and has employed more than  250 workmen, it has the status of `New Prestigious  Unit’ and thus, falls within the definition of a  Prestigious Unit and should be governed by Item 4  of  Annexure  `C’  being  entitled  to  avail  75%  of  total  tax  liability.   This  view,  as  we  have  already observed, is accepted by the High Court,  while dismissing the tax revision petition filed  by the revenue.

26. At the outset, we would observe that the High  Court  has  erred  in  reaching  its  conclusion  by  holding that (a) the respondent-company would fall  into  all  the  three  categories  of  industries  referred to in the Scheme, that is to say it is a  new  unit  which  is  a  ‘Large  Scale  Unit’,  a  “Prestigious  New  Unit”  and  also  a  “Very  Prestigious Unit”; (b) the classification of a new

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unit,  viz.  small  scale,  medium  scale  and  large  scale  under  item  1E  on  the  basis  of  scale  of  investment does not denude a new industrial unit  of any type of the special status of “Pioneer”,  “Prestigious”  and  “Very  Prestigious”  unit  under  items 4 and 5 to also exclude operation of General  entry; and (c) the special entry would not exclude  the applicability of general entry in context of  the Scheme so as to exclude the operation of items  4,  6  and  7.  Thereby  implying  that  though  there  exists an overlap between the general and special  provision,  the  general  provision  would  also  be  sustained and the two would co-exist.  

27. Before we deal with the fact situation in the  present  appeal,  we  reiterate  the  settled  legal  position in law, that is, if in a Statutory Rule  or  Statutory  Notification,  there  are  two  expressions  used,  one  in  General  Terms  and  the  other  in  special  words,  under  the  rules  of  interpretation, it has to be understood that the

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special words were not meant to be included in the  general expression.  Alternatively, it can be said  that  where  a  Statute  contains  both  a  General  Provision as well as specific provision, the later  must prevail.

28. We are mindful of the principle that the Court  should  examine  every  word  of  a  statute  in  its  context and must use context in its widest sense.  We are also in acquaintance with observations of  this Court in  Reserve Bank of India v.  Peerless  General Finance and Investment Co. Ltd., 1987 SCR  (2)  1  where  Chinnappa  Reddy,  J.  noting  the  importance of the context in which every word is  used in the matter of interpretation of statutes  held thus:  

“Interpretation must depend on the text and  the  context.  They  are  the  basis  of  interpretation. One may well say if the text  is the texture, context is what gives the  colour.  Neither  can  be  ignored.  Both  are  important. That interpretation is best which  makes the textual interpretation match the  contextual.  A  statute  is  best  interpreted

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when we know why it was enacted. With this  knowledge, the statute must be read, first  as  a  whole  and  then  section  by  section,  clause by clause, phrase by phrase and word  by word. If a statute is looked at, in the  context of its enactment, with the glasses  of  the  statute-maker,  provided  by  such  context, its scheme, the sections, clauses,  phrases and words may take colour and appear  different than when the statute is looked at  without the glasses provided by the context.  With these glasses we must look at the Act  as a whole and discover what each section,  each clause, each phrase and each word is  meant and designed to say as to fit into the  scheme  of  the  entire  Act.  No  part  of  a  statute  and  no  word  of  a  statute  can  be  construed in isolation. Statutes have to be  construed so that every word has a place and  everything is in its place.”

29. It is well established that when a general law  and a special law dealing with some aspect dealt  with by the general law are in question, the rule  adopted  and  applied  is  one  of  harmonious  construction  whereby  the  general  law,  to  the  extent dealt with by the special law, is impliedly  repealed. This principle finds its origins in the  latin maxim of generalia specialibus non derogant,  i.e.,  general  law  yields  to  special  law  should

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they operate in the same field on same subject.  (Vepa  P.  Sarathi,  Interpretation  of  Statutes,  5th  Ed.,  Eastern  Book  Company;  N.  S.  Bindra’s  Interpretation  of  Statutes,  8th Ed.,  The  Law  Book  Company; Craies on Statute Law, S.G.G.Edkar, 7th Ed.,  Sweet & Maxwell; Justice G.P. Singh, Principles of  Statutory  Interpretation,  13th Ed.,  LexisNexis;  Craies  on  Legislation,  Daniel  Greenberg,  9th Ed.,  Thomson Sweet & Maxwell, Maxwell on Interpretation of  Statutes, 12th Ed., Lexis Nexis)  

30. Generally,  the  principle  has  found  vast  application in cases of there being two statutes:  general or specific with the latter treating the  common  subject  matter  more  specifically  or  minutely than the former. Corpus Juris Secundum,  82  C.J.S.  Statutes  §  482  states  that  when  construing  a  general  and  a  specific  statute  pertaining to the same topic, it is necessary to  consider  the  statutes  as  consistent  with  one  another  and  such  statutes  therefore  should  be  harmonized,  if  possible,  with  the  objective  of  giving effect to a consistent legislative policy.  On the other hand, where a general statute and a  specific  statute  relating  to  the  same  subject

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matter  cannot  be  reconciled,  the  special  or  specific  statute  ordinarily  will  control.  The  provision more specifically directed to the matter  at  issue  prevails  as  an  exception  to  or  qualification  of  the  provision  which  is  more  general in nature, provided that the specific or  special  statute  clearly  includes  the  matter  in  controversy.

(Edmond  v.  U.S.,  520  U.S.  651,  Warden,  Lewisburg  Penitentiary v. Marrero, 417 U.S. 653)

31.  The maxim generalia specialibus non derogant is  dealt with in  Volume 44 (1)  of the 4th ed.  of  Halsbury's Laws of England  at paragraph 1300 as  follows:

“The  principle  descends  clearly  from decisions of  the House  of  Lords in Seward  v.  Owner  of  “The Vera  Cruz”, (1884) 10 App Cas 59 and the Privy  Council in Barker v Edger, [1898] AC 748  and has been affirmed and put into effect  on  many  occasions.... If  Parliament  has  considered all the circumstances of, and  made special provision for, a particular  case, the presumption is that a subsequent  enactment  of  a purely general  character  would not have been intended to interfere  with  that  provision;  and  therefore,  if

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such  an  enactment,  although  inconsistent  in substance,  is  capable  of  reasonable  and sensible application without extending  to the case in question, it is prima facie  to be construed as not so extending. The  special provision stands as an exceptional  proviso upon the general. If, however, it  appears  from  a  consideration  of  the  general  enactment  in  the  light  of  admissible circumstances that Parliament's  true intention was to establish thereby a  rule  of  universal  application,  then  the  special  provision  must  give  way  to  the  general.”

32. The question in  Seward v. Owner of the “Vera  Cruz”, (1884) 10 App Cas 59 was whether Section 7  of  the  Admiralty  Court  Act  of  1861,  which  gave  jurisdiction  to  that  Court  over  “any  claim  for  damage done by any ship” also gave jurisdiction  over claims for loss of life which would otherwise  come under the Fatal Accidents Act, 1846. It was  held that the general words of Section 7 of the  Admiralty  Court  Act  did  not  exclude  the  applicability  of  the  Fatal  Accidents  Act  and  therefore, the Admiralty Court had no jurisdiction  to entertain a claim for damages for loss of life.

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33. The  adoption  of  the  aforesaid  rule  in  application  of  principle  of  harmonious  construction  has  been  explained  by  Kasliwal  J.  while  expressing his  partial  dissent  to  the  majority  judgment  in St.  Stephen’s  College  v.  University of Delhi, (1992) 1 SCC 558 as follows:  

“140. …The golden rule of interpretation  is  that  words  should  be  read  in  the  ordinary, natural and grammatical meaning  and  the  principle  of  harmonious  construction merely applies the rule that  where there is a general provision of law  dealing  with  a  subject,  and  a  special  provision dealing with the same subject,  the special prevails over the general. If  it  is  not  constructed  in  that  way  the  result would be that the special provision  would  be  wholly  defeated.  The  House  of  Lords observed in  Warburton v.  Loveland,  (1824-34) All ER Rep 589 as under:

“No rule of construction can require that  when  the  words  of  one  part  of  statute  convey  a  clear  meaning  …  it  shall  be  necessary  to  introduce  another  part  of  statute  which  speaks  with  less  perspicuity, and of which the words may be  capable  of  such  construction,  as  by  possibility  to  diminish  the  efficacy of  the first part.”

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(Anandji Haridas and Co. (P) Ltd. v. S.P.  Kasture,  (1968)  1  SCR  661,  Patna  Improvement  Trust  v.  Lakshmi  Devi,  1963  Supp (2) SCR 812, Ethiopian Airlines v.  Ganesh  Narain  Saboo,  (2011)  8  SCC  539,  Usmanbhai  Dawoodbhai  Memon  v.  State  of  Gujarat,  (1988)  2  SCC  271,  South  India  Corpn.  (P)  Ltd.  v.  Secy.,  Board  of  Revenue,  Trivandrum,  (1964)  4  SCR  280,  Maharashtra State  Board of Secondary and  Higher  Secondary  Education  v.  Paritosh  Bhupeshkumar Sheth, (1984) 4 SCC 27)

34.  In  J.K. Cotton Spinning & Weaving Mills Co.  Ltd.  v.  State  of  U.P.,  (1961)  3  SCR  185,  this  Court has clarified that  not only does this rule  of construction resolve the conflicts between the  general provision in one statute and the special  provision  in  another,  it  also  finds  utility  in  resolving a conflict between general and special  provisions in the same legislative instrument too  and observed that:

“9. …We reach the same result by applying  another  well  known  rule  of  construction  that general provisions yield to special  provisions.  The  learned  Attorney-General  seemed to suggest that while this rule of  construction is applicable to resolve the  conflict between the general provision in  one  Act  and  the  special  provision  in

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another  Act,  the  rule  cannot  apply  in  resolving a conflict between general and  special provisions in the same legislative  instrument. This suggestion does not find  support in either principle or authority.  The  rule  that  general  provisions  should  yield  to  specific  provisions  is  not  an  arbitrary  principle  made  by  lawyers  and  Judges  but  springs  from  the  common  understanding of men and women that when  the same person gives two directions one  covering  a  large  number  of  matters  in  general and another to only some of them  his  intention  is  that  these  latter  directions should prevail as regards these  while as regards all the rest the earlier  direction should have effect. In Pretty v.  Solly (quoted in Craies on Statute Law at  p.m.  206,  6th  Edn.)  Romilly,  M.R.,  mentioned the rule thus:  “The  rule  is,  that  whenever  there  is  a  particular  enactment  and  a  general  enactment  in  the  same  statute  and  the  latter,  taken  in  its  most  comprehensive  sense,  would  overrule  the  former,  the  particular  enactment  must  be  operative,  and the general enactment must be taken to  affect only the other parts of the statute  to which it may properly apply.” The  rule  has  been  applied  as  between  different provisions of the same statute  in numerous cases some of which only need  be  mentioned:  De  Winton  v.  Brecon,  Churchill  v.  Crease,  United  States  v.  Chase and Carroll v. Greenwich Ins. Co.

10.  Applying  this  rule  of  construction  that  in  cases  of  conflict  between  a  specific provision and a general provision

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36. In Waverly Jute Mills Co. Ltd. v. Raymon & Co.  (India) (P) Ltd.,  (1963) 3 SCR 209 and Union of  India v. India Fisheries (P) Ltd., AIR 1966 SC 35  this  Court  has  observed  that  when  there  is  an  apparent  conflict  between  two  independent  provisions  of  law,  the  special  provision  must  prevail.  In CCE  v.  Jayant  Oil  Mills  (P)  Ltd.,  (1989)  3  SCC  343 this  Court  has  accepted  the  aforesaid  rule  as   “the  basic  rule  of  construction” that is to say “a more specific item  should be preferred to one less so.”  In  Sarabjit  Rick Singh v. Union of India,  (2008) 2 SCC 417  this  Court  has  in  fact  followed  the  aforesaid  precedents thus:  

“58.  The  Act  is  a  special  statute.  It  shall,  therefore,  prevail  over the  provisions of a general statute like the  Code of Criminal Procedure.”

37. This Court has noticed the application of the  said rule in construction of taxing statutes along  with the proposition that the provisions must be

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given the most beneficial interpretation in CIT v.  Shahzada Nand & Sons, (1966) 3 SCR 379:

“10.  …The  classic  statement  of  Rowlatt,  J.,  in  Cape  Brandy  Syndicate  v.  IRC,  (1921) 1 KB 64, 71 still holds the field.  It reads: “In a Taxing Act one has to look merely  at what is clearly said. There is no  room for any intendment. There is no  equity  about  a  tax.  There  is  no  presumption as to a tax. Nothing is to  be read in, nothing is to be implied.  One  can  only  look  fairly  at  the  language used.”

To this may be added a rider: in a case of  reasonable  doubt,  the  construction  most  beneficial  to  the  subject  is  to  be  adopted. But even so, the fundamental rule  of  construction  is  the  same  for  all  statutes,  whether  fiscal  or  otherwise.  “The  underlying  principle  is  that  the  meaning and intention of a statute must be  collected from the plain and unambiguous  expression used therein rather than from  any notions which may be entertained by  the  court  as  to  what  is  just  or  expedient.” The  expressed  intention  must  guide  the  court.  Another  rule  of  construction  which  is  relevant  to  the  present enquiry is expressed in the maxim,  generalia specialibus non derogant, which  means  that  when  there  is  a  conflict  between a general and a special provision,  the  latter  shall  prevail.  The  said  principle  has  been  stated  in  Craies  on  Statute Law, 5th Edn., at p. 205, thus:

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“The rule is, that whenever there is a  particular  enactment  and  a  general  enactment in the same statute, and the  latter, taken in its most comprehensive  sense, would overrule the former, the  particular enactment must be operative,  and the general enactment must be taken  to affect only the other parts of the  statute  to  which  it  may  properly  apply.”

…When the words of a section are clear,  but its scope is sought to be curtailed by  construction,  the  approach  suggested  by  Lord Coke in Heydon case, (1584) 3 Rep 7b,  yield better results: “To arrive at the real meaning, it is  always  necessary  to  get  an  exact  conception  of  the  aim,  scope,  and  object of the whole Act: to consider,  according to Lord Coke: (1) What was  the law before the Act was passed; (2)  What  was  the  mischief  or  defect  for  which  the  law  had  not  provided;  (3)  What  remedy  Parliament  has  appointed;  and (4) The reason of the remedy.””

 (emphasis supplied)

38. In LIC v. D.J. Bahadur,  (1981) 1 SCC 315 this  Court  was  confronted  with  the  question  as  to  whether the LIC Act is a special legislation or a  general legislation and while considering the rule  in discussion, this Court observed thus:

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“49. …the legal maxim generalia specialibus  non derogant is ordinarily attracted where  there is a conflict between a special and a  general statute and an argument of implied  repeal  is  raised.  Craies states  the  law  correctly: “The general rule, that prior statutes  are held to be repealed by implication  by subsequent statutes if the two are  repugnant, is said not to apply if the  prior  enactment  is  special  and  the  subsequent  enactment  is  general,  the  rule  of  law  being,  as  stated  by  Lord  Selbourne in Sewards v. Vera Cruz, ‘that  where there are general words in a later  Act capable of reasonable and sensible  application  without  extending  them  to  subjects specially dealt with by earlier  legislation, you are not to hold that  earlier  and  special  legislation  indirectly  repealed,  altered,  or  derogated from merely by force of such  general words, without any indication of  a particular intention to do so. There  is  a  well-known  rule  which  has  application to this case, which is that  a subsequent general Act does not affect  a prior special Act by implication. That  this is the law cannot be doubted, and  the cases on the subject will be found  collected  in  the  third  edition  of  Maxwell  is  generalia  specialibus  non  derogant — i.e. general provisions will  not abrogate special provisions.’  When  the legislature has given its attention  to a separate subject and made provision  for  it,  the  presumption  is  that  a  subsequent  general  enactment  is  not  intended to interfere with the special  provision  unless  it  manifests  that

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intention very clearly. Each enactment  must  be  construed  in  that  respect  according to its own subject-matter and  its own terms.”

39. In  Ashoka  Marketing  Ltd.  v.  Punjab  National  Bank,  (1990)  4  SCC  406 this  Court  has  placed  reliance  upon  Bennion,  Statutory  Interpretation  (supra) and J.K. Cotton Spinning & Weaving Mills  case (supra), amongst others, and explaining the  rationale of this rule has reiterated the law as  under:  

“52.  In  U.P.  State  Electricity  Board  v.  Hari Shanker Jain this Court has observed:   “In  passing  a  special  Act,  Parliament  devotes  its  entire  consideration  to  a  particular subject. When a general Act is  subsequently  passed,  it  is  logical  to  presume that Parliament has not repealed  or modified the former special Act unless  it  appears  that  the  special  Act  again  received consideration from Parliament.”

53. In  Life Insurance Corporation v. D.J.  Bahadur Krishna Iyer, J. has pointed out :  

“In determining whether a statute is a  special or a general one, the focus must

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be on the principal subject matter plus  the  particular  perspective.  For  certain  purposes, an Act may be general and for  certain other purpose it may be special  and  we  cannot  blur  distinctions  when  dealing with finer points of law.””

40. In  U.P. SEB v. Hari Shankar Jain,  (1978) 4 SCC  16, this Court has concluded that if Section 79(c)  of the Electricity Supply Act generally provides  for the making of regulations providing for the  conditions  of  service  of  the  employees  of  the  Board,  it  can  only  be  regarded  as  a  general  provision  which  must  yield  to  the  special  provisions of the Industrial Employment (Standing  Orders) Act in respect of matters covered by the  latter Act, and observed that:  

“9. The reason for the rule that a  general provision should yield to a  specific  provision  is  this:  In  passing  a  special  Act,  Parliament  devotes its entire consideration to  a particular subject. When a general  Act  is  subsequently  passed,  it  is  logical  to  presume  that  Parliament

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has  not  repealed  or  modified  the  former Special Act unless it appears  that the Special Act again received  consideration  from  Parliament.  Vide  London  and  Blackwall  Railway  v.  Limehouse  District  Board  of  Works,  and Thorpe v. Adams.  

41. In  Gobind Sugar Mills Ltd. v. State of Bihar,  (1999) 7 SCC 76 this Court has observed that while  determining the question whether a statute is a  general or a special one, focus must be on the  principal subject-matter coupled with a particular  perspective  with  reference  to  the  intendment  of  the Act. With this basic principle in mind, the  provisions must be examined to find out whether it  is  possible  to  construe  harmoniously  the  two  provisions. If it is not possible then an effort  will  have  to  be  made  to  ascertain  whether  the  legislature  had  intended  to  accord  a  special  treatment  vis-à-vis  the  general  entries  and  a  further endeavour will have to be made to find out

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whether  the  specific  provision  excludes  the  applicability of the general ones. Once we come to  the conclusion that intention of the legislation  is to exclude the general provision then the rule  “general  provision  should  yield  to  special  provision” is squarely attracted.

42. Having  noticed  the  aforesaid,  it  could  be  concluded that the rule of statutory construction  that the specific governs the general is not an  absolute rule but is merely a strong indication of  statutory meaning that can be overcome by textual  indications  that  point  in  the  other  direction.  This  rule  is  particularly  applicable  where  the  legislature has enacted comprehensive scheme and  has deliberately targeted specific problems with  specific solutions. A subject specific provision  relating to a specific, defined and descriptable  subject is regarded as an exception to and would  prevail  over  a  general  provision  relating  to  a  broad subject.

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43. In  the  instant  case,  the  item  1E  is  subject  specific provision introduced by an amendment in  1996 to the Scheme. The said amendment removed “new  cement industries” from the non-eligible Annexure- B  and  placed  it  into  Annexure-C  amongst  the  eligible  industries.  It  classified  the  cement  units for eligibility of tax exemption into three  categories:  small,  medium  and  large.  The  said  categories  are  comprehensive  whereby  small  and  medium cement units have been prescribed to have  maximum FCIs of Rs.60/- lakhs and Rs.5/- crores,  respectively  and  large  to  be  over  the  FCI  of  Rs.5/-  crores.  The  maximum  ceiling  for  large  cement units has been purposefully left open and  thereby reflects that the intention clearly is to  provide  for  an  all-inclusive  provision  for  new  cement  units  so  as  to  avoid  any  ambiguity  in  determination  of  appropriate  provision  for  applicability  to  new  cement  units  to  seek  exemption.

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44. It leaves no doubt that what is specific has to  be  seen  in  contradistinction  with  the  other  items/entries.  The  provision  more  specific  than  the other on the same subject would prevail. Here  it  is  subject  specific  item  and  therefore  as  against items 1, 4, 6 and 7, which deal with units  of  all  industries  and  not  only  cement,  item  1E  restricted  to  only  cement  units  would  be  a  specific and special entry and thus would override  the general provision.

45. The  proposition  put  forth  by  the  respondent- Company  that  the  construction  which  is  most  beneficial  to  the  assessee  must  be  applied  and  adopted fails to impress upon us its application  in  this  case.  Howsoever,  it  is  true  that  the  canons of construction must be applied to extract  most beneficial re-conciliation of provisions. In  case of fiscal statute dealing with exemption, it  would  require  interpretation  benefiting  the

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assessee. But here the introduction of the subject  specific entry  vide amendment into general scheme  of  exemption  speaks  volumes  in  respect  of  intention  of  the  legislature  to  restrict  the  benefit  to  cement  industries  as  available  only  under Item 1E, which categorically classified them  into three as per their FCI. The specific entries  being  mutually  exclusive  have  been  placed  so  systematically  arranged  and  classified  in  the  Scheme. The construction of provisions must not be  divorced  from  the  object  of  introduction  of  subject specific provision while retaining other  generalized  provision  that  now  specifically  exclude  the  new  cement  industries,  which  could  otherwise  fall  into  its  ambit,  lest  such  interpretation  would  be  not  ab  absurdo (i.e.,  interpretation avoiding absurd results).

46. Therefore,  in  our  considered  view  the  respondent-Company  would  only  be  eligible  for  grant of exemption under Item 1E as a large new

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cement unit in accordance with its FCI being above  Rs.5/- crores. In light of the aforesaid, we are  of the considered opinion that the judgment and  order passed by the High Court ought to be set  aside and the appeals of the Revenue requires to  be allowed.

47. In the result, the appeal is allowed and the  judgment and order passed by the High Court is set  aside. No order as to costs.  

                             ....................J.                    [ H.L. DATTU ]  

 ....................J.

                  [ S.A. BOBDE ]                     

NEW DELHI, FEBRUARY 19, 2014.

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