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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 2240 OF 2006  

STATE OF JHARKHAND & ORS.         ..APPELLANTS

VERSUS M/S.LA OPALA R.G. LTD.            ..RESPONDENT

O R D E R

1. This  appeal  is  directed  against  the  judgment and order passed by the High Court of  Jharkhand  at  Ranchi  in  W.P.  [T]  No.4572  of  2004,  dated  22.06.2005.  By  the  impugned  judgment  and  order,  the  High  Court  has  set  aside  the  letter  issued  by  the  Assistant  Commissioner  of  Commercial  Taxes,  Deogarh  Circle,  dated  13.05.2004,  whereby  the  Assessing Authority has rejected the stand of  the respondent-dealer that it is eligible to

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pay reduced rate of tax under the notification  S.O.  No.25  (for  short,  “the  notification”)  issued by the Government of Jharkhand, dated  25.06.2001 and directed the respondent-dealer  to deposit taxes in relation to inter-State  sales at the rate of 4%.

2. The possible construction that could be  placed on the aforesaid notification is the  subject matter of this appeal.

3. The  conspectus  of  facts  is:  the  respondent-dealer is a Public Limited Company  incorporated  under  the  provisions  of  the  Companies Act, 1956 engaged in the manufacture  of glass and glassware made of Opal glass. The  industrial  unit  of  the  respondent-dealer  is  situated  at  Madhupur  in  Deoghar  district,  Jharkhand.

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4. The  respondent-dealer  is  a  dealer  registered under the provisions of the Bihar  Finance Act, 1981 and the Central Sales Tax  Act, 1956 (“the Act”, for short).  

5. The State Government, in exercise of its  powers under clause (b) of sub-section 5 of  Section  8  of  the  Act  has  issued  the  notification.  Since  the  construction  of  the  notification  is  in  issue,  we  deem  it  appropriate  to  extract  the  notification.  It  reads as under:

“S.O.25, dated the 25th June, 2001 –  In exercise of the powers conferred  by clause (b) of sub-section (5) of  Section 8f of the Central Sales Tax  Act,  1956  (Act  74  of  1958)  the  Governor of Jharkhand is pleased to  direct  that  tax  payable  under  sub- section (1) or (2) of Section 8 of  the said Act in respect of Sale of  all types of glass and glass sheets  in the course of interstate sale or  commerce from any place of business  in the State of Jharkhand shall be  calculated at the rate of three per  centum and no statutory form in this  regard shall be required.

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2. This notification shall come into  force  with  effect  from  16th June,  2001.”

6. Immediately  after  issuance  of  the  notification, the respondent-dealer by letter  dated 27.05.2002 had informed the authorities  under  the  Act,  that,  since  the  respondent- dealer would be covered by the notification,  the rate of tax payable on glassware in inter- state sales would be at the reduced rate of  3%.  Unfortunately,  the  authorities  did  not  respond to the request so made by the dealer.  

7. Later, the authorities issued a letter  dated  09.01.2004  to  the  respondent  manufacturer,  inter  alia,  directing  him  to  deposit  the  tax  in  relation  to  its  transactions  in  respect  of  the  inter-state  sales to registered and unregistered dealers  at the rate of 4% and 12%, respectively. The

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respondent was also directed to show-cause as  to why a penalty under Sections 16 and 16(9)  of the Bihar Finance Act, 1981 and the Act  should not be imposed and the respondent not  be directed to correct the returns and deposit  tax  at  the  rate  of  4%,  if  the  sales  is  effected to registered dealers and at the rate  of 12% if the inter-state sale is effected to  un-registered dealers.   

8. The  respondent-dealer  had  filed  its  reply, dated 16.01.2004, wherein it took the  stand that it was liable to charge and deposit  tax at the rate of 3 per cent on sale in the  course of inter-state trade in respect of its  products; that the returns had been correctly  filed and that the tax was validly deposited  at the rate of 3 per cent.

9. After  the  issuance  of  the  aforesaid  letter/notice, the authorities by their letter

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dated  13.05.2004,  rejected  its  stand  and  informed that the respondent would be liable  to pay tax at the rate of 4 per cent on its  inter-state  sales  if  made  to  a  registered  dealer and at the rate of 12 per cent if made  to an unregistered dealer.

10. Further,  the  respondent-assessee  was  informed by the authorities that the product  manufactured  by  him  is  glassware  and,  therefore, not covered under the notification  by letter dated 13.07.2004.

11. The  respondent-dealer,  being  aggrieved  by  the  communications  dated  09.01.2004,  13.05.2004  and  13.07.2004  had  filed  a  Writ  Petition before the High Court,  inter alia,  requesting the Court to issue a writ in the  nature of  certiorari to quash the aforesaid  letters and direct the authorities under the  Act to extend the benefit of the notification,

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which  has  come  into  force  with  effect  from  16.06.2001.

12. The  High  Court,  after  a  detailed  consideration of the issue before them, has  come  to  the  conclusion  that  the  glassware  manufactured  by  the  respondent-dealer  is  a  type of glass and therefore, it is entitled to  the benefit of reduced rate of tax under the  notification and, accordingly, has quashed the  said letters.

13. Being aggrieved by the said order of the  Division Bench of the High Court, the State is  before us in this appeal.

14. We  have  heard  Shri  Jayesh  Gaurav,  learned  counsel  for  the  appellant-State  and  Shri S.D. Sanjay, learned senior counsel for  the  respondent-dealer.  We  have  carefully  perused  the  documents  on  record  and  the  judgment and order impugned herein.

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15. Shri  Gaurav  would  submit  that  the  expression  “types  of  glass”  as  used  in  the  notification would not include the product in  question as it is merely a “form of glass”. He  would  provide  us  with  some  information  in  respect of types of glasses being classified  into  nine  types:  1)Soda  glass  or  soda-lime  glass,  2)Coloured  glass,  3)Plate  glass,  4)Safety  glass,  5)Laminated  glass,  6)Optical  glass, 7)Pyrex glass, 8)Photo-chromatic glass,  and 9)Lead crystal glass. He would therefore  contend  that  the  product,  “glassware”  not  being any of the aforesaid types of glass but  another form of glass would not be entitled to  benefit of the notification and that the High  Court has erred in its conclusion.

16. Per  contra, Shri  S.D.  Sanjay,  learned  senior counsel would justify the judgment and  order passed by the High Court and submit that

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the  products  of  the  respondent-dealer  are  covered by the notification as “glassware” is  the product in which different components are  fused together to give glass its final form in  accordance with the moulds in which they are  manufactured,  such  as  crockery,  vases,  etc.  and therefore, would fall in the category of  “types of glass”. He would further submit that  in  taxing  statutes,  a  notification  in  the  nature  of  granting  tax  incentives  for  the  promotion of economic growth and development  ought to be liberally construed and given a  purposive interpretation.

17. As we have indicated earlier, the short  point  that  falls  for  our  consideration  and  decision  in  the  case  is  the  possible  construction  that  could  be  placed  on  the  expression “types of glass and glass-sheets”  as contained in the notification issued by the

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State  Government  in  exercise  of  its  powers  under Section 8(5)(b) of the Act.

18. It is relevant to notice the contents of  the  notification  issued  by  the  State  Government. A dissection of the notification  would indicate the following, namely :

a) the Governor of Jharkhand in exercise of  his powers under clause (b) of sub-section (5)  of  Section  8  of  the  Act  has  issued  the  notification;

b) the notification speaks of reduction of  the rate of tax under the Act;

c) the reduced rate of tax is from 4% to  3%;

d) the notification further provides that no  statutory forms are required for the sale of  the types of glass or glass sheets which are  made to the registered dealers under the Act;

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e) if the sales of “all types of glass and  glass-sheets” are made to unregistered dealers  then the rate of tax would be at 12 per cent.

19. We do not concur with the proposition  put forth by Shri S.D. Sanjay, learned senior  counsel that a notification which grants tax  incentives should to be liberally construed in  support of his submission. It is settled rule  of construction of a notification that at the  outset a strict approach ought to be adopted  in  administering  whether  a  dealer/  manufacturer is covered by it at all and if  the  dealer/manufacturer  falls  within  the  notification,  then  the  provisions  of  the  notification be liberally construed.

20. Literally  speaking,  an  exemption  is  freedom from any liability, payment of tax or  duty. It may assume different applications in

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a growing economy such as provisioning for tax  holiday to new units, concessional rate of tax  to goods or persons for a limited period under  specific conditions and therefore, in Union of  India v. Wood Papers Ltd.,  (1990) 4 SCC 256  this Court has observed that construction of  an  exemption  notification  or  an  exemption  clause in contrast with the charging provision  has to be tested on different touchstone and  held that the eligibility clause in relation  to an exemption notification is given strict  meaning  and  the  notification  has  to  be  interpreted in terms of its language, however,  once  an  assessee  satisfies  the  eligibility  clause, the exemption clause therein may be  construed literally. This Court has explained  the rationale of adopting the said approach as  under:

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“4. … In fact an exemption provision  is like an exception and on normal  principle  of  construction  or  interpretation  of  statutes  it  is  construed strictly either because of  legislative intention or on economic  justification  of  inequitable  burden  or  progressive  approach  of  fiscal  provisions intended to augment State  revenue.  But  once  exception  or  exemption becomes applicable no rule  or  principle  requires  it  to  be  construed  strictly.  Truly  speaking  liberal and strict construction of an  exemption provision are to be invoked  at different stages of interpreting  it. When the question is whether a  subject falls in the notification or  in the exemption clause then it being  in  nature  of  exception  is  to  be  construed  strictly  and  against  the  subject but once ambiguity or doubt  about applicability is lifted and the  subject  falls  in  the  notification  then full play should be given to it  and it calls for a wider and liberal  construction…”

21. This Court in Gammon (I) Ltd. v. Commr.  of Customs, (2011) 12 SCC 499 while rejecting  the  plea of the appellant that the exemption  notification  should  receive  a  liberal  construction to further the object underlying

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it relied upon the decision of a Three-Judge  Bench  of  this  Court  in  Novopan  India  Ltd.,  which stated the aforesaid principle and the  object behind adopting literal interpretation  in  determining  eligibility  for  claiming  exemption or exception from tax as follows:  

“16. …The principle that in case of  ambiguity, a taxing statute should be  construed in favour of the assessee— assuming that the said principle is  good and sound—does not apply to the  construction  of  an  exception  or  an  exempting provision; they have to be  construed strictly. A person invoking  an  exception  or  an  exemption  provision to relieve him of the tax  liability must establish clearly that  he is covered by the said provision.  In  case  of  doubt  or  ambiguity,  benefit of it must go to the State.  This is for the reason explained in  Mangalore  Chemicals and  other  decisions  viz.  each  such  exception/exemption increases the tax  burden  on  other  members  of  the  community  correspondingly.  Once,  of  course,  the  provision  is  found  applicable to him, full effect must  be  given  to  it.  As  observed  by  a  Constitution Bench of this Court in  Hansraj Gordhandas v. CCE and Customs  that  such  a  notification  has  to  be  interpreted in the light of the words

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employed by it and not on any other  basis.  This  was  so  held  in  the  context  of  the  principle  that  in  a  taxing statute, there is no room for  any intendment, that regard must be  had to the clear meaning of the words  and  that  the  matter  should  be  governed  wholly  by  the  language  of  the  notification  i.e.  by  the  plain  terms of the exemption.”

(emphasis supplied)

22. In CCE v. Mahaan Dairies this Court has  observed that:  

“8. It is settled law that in order  to claim benefit of a notification, a  party must strictly comply with the  terms  of  the  notification.  If  on  wording  of  the  notification  the  benefit  is  not  available  then  by  stretching  the  words  of  the  notification  or  by  adding  words  to  the  notification  benefit  cannot  be  conferred.”

23. CCE v.  Bhalla Enterprises laid down a  proposition  that  notification  has  to  be  construed on the basis of the language used. A  similar view has been expressed by a Division  Bench of this Court in Tata Iron & Steel Co.

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Ltd. v.  State  of  Jharkhand,  Kartar  Rolling  Mills v. CCE, Eagle Flask Industries Ltd. v.  CCE, Govt. of India v. Indian Tobacco Assn.,  (2005)  7  SCC  396,  Collector  of  Customs  (Preventive) v. Malwa Industries Ltd., (2009)  12  SCC  735  and CCE v.  Rukmani  Pakkwell  Traders.  

24. Having said that, we would now examine  whether  the  notification would  at  all  be  applicable to the sale of product in question.

25. In  the  instant  case,  the  State  Government has issued a notification and has  used the expression “types of glass” and not  the  expression  “forms  of  glass”.  Therefore,  what requires to be examined is whether the  two  terms  would  be  identical  in  their  connotation and import.  

26. It  is  a  settled  law  that  in  taxing  statutes  the  terms  and  expressions  must  be

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seen in their common and popular parlance and  not  be  attributed  their  scientific  or  technical  meanings.  In  common  parlance,  the  two words “type” and “form” are not of the  same  import.  According  to  the  Oxford  Dictionary,  whereas  the  meaning  of  the  expression  “types”  is  “kind,  class,  breed,  group, family, genus”; the meaning of the word  “form” is “visible shape or configuration of  something”  or  the  “style,  design,  and  arrangement in an artistic work as distinct  from  its  content”.  Similarly,  Macmillian  Dictionary defines  “type”  as  “a group of  people or things with similar qualities or  features that make them different from other  groups” and “form” as “the particular way in  which something appears or exists or  a shape  of someone or something.” Therefore, “types”  are  based  on  the  broad  nature  of  the  item  intended  to  be  classified  and  in  terms  of

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“forms”,  the  distinguishable  feature  is  the  particular way in which the items exist. An  example could be the item “wax”. The types of  wax  would  include  animal,  vegetable,  petroleum,  mineral  or  synthetic  wax  whereas  the form of wax could be candles, lubricant  wax, sealing wax, etc.

27. Admittedly, glassware is a form of glass  and it is contended by the assessee that forms  of  glass  are  also  covered  by  the  said  notification.  The  term  glassware  would  generally  encompass  ornaments,  objects  and  articles  made  from  glass.  The  New  Oxford  Dictionary, the Merriam-Webster Dictionary and  the Macmillian Dictionary refer to the said  general meaning while defining it. Glassware  would  include  crockery  such  as  drinking  vessels (drinkware) and tableware and general  glass  items  such  as  vases,  pots,  etc.  Therefore,  it  cannot  be  accepted  that  the

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expression “types of glass” could have been  intended  to  refer  to  or  include  “forms  of  glass”.

28. In  the  present  case,  the  respondent- dealer is a manufacturer of glassware. In our  considered view, the glassware so manufactured  by the respondent-dealer though made of glass  cannot be considered or called as a “type of  glass” in light of the aforesaid discussion  and since the notification only provides for  the reduction in the rate of tax of types of  glass and not for “forms of glass” which is  manufactured by the respondent as glassware,  the  respondent  would  not  be  covered  by  the  notification. Keeping that aspect in mind, we  hold  that  the  respondent-dealer,  a  manufacturer  of  articles  of  glass,  is  not  entitled  to  derive  the  benefit  of  the  notification issued by the State Government,  dated 25.06.2001. In that view of the matter,

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we cannot sustain the impugned judgment and  order passed by the High Court.  

29. In the result, we allow this appeal and  set aside the judgment and order passed by the  High Court.  

30. Since the matter was pending for quite  some  time,  we  direct  the  appellants  not  to  levy penalty while recovering the difference  of tax payable only for the assessment years  2002-2003 to 2005-2006.  

No order as to costs.

Ordered accordingly.

.....................J. (H.L. DATTU)

.....................J. (S.A. BOBDE)

NEW DELHI; MARCH 27, 2014.