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TMI Blog2013 (5) TMI 699X X X X Extracts X X X X X X X X Extracts X X X X ..... .3.2008, there appears to be an omission, that omission is sought to be corrected by way of substitution. This Court clearly holds that substitution has the effect of replacing the old Serial No.18 of Part B of Fourth Schedule of Act 32/2006 and the substitution will therefore entail goods described in Serial No.18 of Part-B of Fourth Schedule of Amending Act 32/2008 the benefit of exemption as is applicable from the inception of Act 32/2006. The new replaces the old and that is substitution and as a consequence, exemption becomes inevitable. The department's plea that the exemption will not apply to the period from 1.1.2007 to 31.3.2008 cannot be accepted, as substitution in this case will have to relate back to 1.1.2007 itself, when Act 32/2006 came into force. It needs no further clarification to state that even in terms of the decision Namputhiris Pickle Industries v. State of Kerala and another [1998 (3) TMI 594 - SUPREME COURT OF INDIA] the powder form of chilly continues to be one and the same item. This statement is made only to amplify that despite substitution by way of Act 32/2008, the petitioners are entitled to exemption in respect of the powder form of chilly, turmeri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tamil Nadu General Sales Tax Act, 1959 (for brevity, "the TNGST Act"), chilly, coriander and turmeric were exempted goods falling under Serial No.16 of Part B of the Third Schedule to the TNGST Act with effect from 17.7.1996. However, chilly power, coriander powder and turmeric powder did not fall within the purview of the Third Schedule to the TNGST Act. 4. The Madras Chillies Merchants Association requested the Government of Tamil Nadu to clarify whether chilly powder, pepper powder and coriander powder are taxable or not consequent to withdrawal of levy of tax on the sale of chilly, turmeric and coriander. This was considered by the Government of Tamil Nadu and on the basis of several decisions of the Courts, namely (i) Rajasthan Roller Flour Mills v. State of Rajasthan, 91 STC 403 (SC); (ii) Krishna Chander Dutta (Spice) Private Limited v. Commercial Tax Officer and others, 93 STC 180 (SC); and (iii) Namputhiris Pickle Industries v. State of Kerala and another, 92 STC 1 (Full Bench of Kerala High Court), it was concluded that mere change into powder does not change the essential nature of the commodity or its substantial identity and that when the above goods are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akai Powder, Jaggery and Gur including Jagerry powder and Nattusakkarai sold by any dealer whose total turnover in respect of those items does not exceed ₹ 300 Crores in a year.'" 7. In the year 2008, by the Tamil Nadu Value Added Tax (Amendment) Act, 2009 (for brevity, "Act 32/2008"), certain provisions of Act 32/2006 came to be amended. Section 3 of Act 32/2008 is an amendment to Fourth Schedule to Act 32/2006 and the relevant portions necessary for the present adjudication are as follows: "Section 3. Amendment of Fourth Schedule. - In the Fourth Schedule to the principal Act, in Part-B,- (1) for item 12 and the entries relating thereto, the following item and entries shall be substituted, namely:- "12. Bread, bun and rusk (branded or otherwise)"; (2) for item 18 and the entries relating thereto, the following item and entries shall be substituted, namely:- "18. Chillies and chilly powder, coriander and coriander powder, turmeric and turmeric powder, shikakai and shikakai powder, tamarind and asafoetida (Hing) sold by any dealer whose total turnover in respect of those item does not exceed rupees three hundred crores in a year.&q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.33172922996/2006-07 and TIN No.33172922996/2007-08. The said notices were challenged in W.P.Nos.16111 to 16114 of 2011. The petitioners, inter alia, challenged the said notices contending that the goods continued to be exempted goods and more particularly, a plea in terms of Section 88(3)(i) of Act 32/2006 was urged before the learned Single Judge. The said provision reads as follows: "Section 88. Repeal and savings.- (1) and (2) *** (3) Notwithstanding the repeal of the said Act or 1970 Act, as the case may be, -- (a) to (h) *** (i) all rules, regulations, notifications, clarifications or orders made or issued under any of the provisions of the said Act or 1970 Act, as the case may be, and continuing in force on the date immediately before the commencement of this Act, shall continue in force on or after such date in so far as they are not inconsistent with the provisions of this Act or the rules made thereunder until they are repealed or amended." The main plea that was urged before the learned Single Judge was that the rules, regulations, notifications and clarifications which are in force under the TNGST Act will continue to be in force under Act 32/2006. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ikakai powder and when that exemption is not in accordance with law, the authorities are entitled to issue the revised assessment orders." 12. The petitioners took up the matter by way of appeals in W.A.Nos.1705 to 1708 of 2011. A Division Bench of this Court, by judgment dated 19.9.2011, declined to interfere with the order of the learned Single Judge primarily on the ground that without giving reply to the notices writ petitions have been filed. The view taken by the learned Single Judge with regard to non-applicability of the exemption prior to Act 32/2008 was approved by the Division Bench. It is also stated by the petitioners that their further appeals to the Supreme Court in SLP No.33324 of 2011, etc. on the above plea were dismissed. 13. Thereafter, the respondent issued fresh notices on 7.3.2012 and the petitioners filed their objections on 13.3.2012, inter alia contending that the goods, namely chilly powder, turmeric powder and coriander powder, are no different from chilly, turmeric and coriander and, therefore, the goods will continue to fall under Serial No.18 of Part B of Fourth Schedule to Act 32/2006 and will be entitled to the benefit of exemption which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the position as it was prior to 1.1.2007. The substitution was made more to undo the error which had crept in during the period from 1.1.2007 to 31.3.2008. The petitioners' counsel advanced the plea that the substitution under Act 32/2008 is only to ensure that the benefit which applies to the product and its powder form is not denied. By referring to the objects and reasons, (i.e.) to grant tax relief, the Government clarified by way of substituting the word "powder" in relation to chilly, turmeric and coriander, so as to have effect from the date of the New Act 32/2006. The word substitution has different connotation when compared to the use of the word inserted or added. The word substitution would mean that what is substituted will stand substituted from the inception. Whereas insertion and addition would come into play on the relevant date. That is to say, insertion and addition is on the date of Amending Act 32/2008. Whereas substitution is to Act 32/2006 and will have the effect from 1.1.2007 when Act 32/2006 came into force. ii. In support of the plea that substitution takes effect from 1.1.2007 by way of replacement, the learned counsel for the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the proposition, it is to be found in West U.P. Sugar Mills Assn. v. State of U.P., (2002) 2 SCC 645, State of Rajasthan v. Mangilal Pindwal, (1996) 5 SCC 60, Koteswar Vittal Kamath v. K. Rangappa Baliga and Co., (1969) 1 SCC 255 and A.L.V.R.S.T. Veerappa Chettiar v. S. Michael, AIR 1963 C 933. In West U.P. Sugar Mills Assn. case a three-Judge Bench of this Court held that the State Government by substituting the new rule in place of the old one never intended to keep alive the old rule. Having regard to the totality of the circumstances centring around the issue the Court held that the substitution had the effect of just deleting the old rule and making the new rule operative. In Mangilal Pindwal case this Court upheld the legislative practice of an amendment by substitution being incorporated in the text of a statute which had ceased to exist and held that the substitution would have the effect of amending the operation of law during the period in which it was in force. In Koteswar case a three-Judge Bench of this Court emphasised the distinction between supersession of a rule and substitution of a rule and held that the process of substitution consists of two steps: first, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention of the legislature was to exempt chilly powder, turmeric powder and coriander powder, as in the case of the chilly, turmeric and coriander without differentiation. To buttress the said argument, he relied upon a decision in Commissioner of Income Tax (Central), Calcutta v. B.N.Bhattacharjee and another, AIR 1979 SC 1725, wherein it was held as under: "45. We are mindful that a strictly grammatical construction is departed from in this process and a mildly legislative flavour is imparted by this interpretation. The judicial process does not stand helpless with folded hands but engineers its way to discern meaning when a new construction with a view to rationalisation is needed. Lord Denning, in his recent book "The Discipline of Law" made a seminal observation on ironing out the creases by quoting a passage from Seaford Court Estates Ltd. v. Asher, (1949) 2 KB 481: 'Whenever a statute comes up for consideration it must be remembered that it is not within human powers to foresee the manifold sets of facts which may arise, and, even if were, it is not possible to provide for them in terms free from all ambiguity. The English language is not an instrument o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is woven, but he can and should iron out the creases.' 17. The courts must always seek to find out the intention of the legislature. Though the courts must find out the intention of the statute from the language used, but language more often than not is an imperfect instrument of expression of human thought. As Lord Denning said it would be idle to expect every statutory provision to be drafted with divine prescience and perfect clarity. As Judge Learned Hand said, we must not make a fortress out of dictionary but remember that statutes must have some purpose or object, whose imaginative discovery is judicial craftsmanship. We need not always cling to literalness and should seek to endeavour to avoid an unjust or absurd result. We should not make a mockery of legislation. To make sense out of an unhappily worded provision, where the purpose is apparent to the judicial eye 'some' violence to language is permissible. (See K.P. Varghese v. Income Tax Officer, Ernakulam 131 ITR 597 and Luke v. Inland Revenue Commissioner, (1964) 54 ITR 692). iv. The learned counsel for the petitioners referred to a decision of the Supreme Court in O.S.Singh and another v. Union o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have arisen if at all the assessee, namely the respondent had either deliberately or inadvertently not placed the entire transactions before the assessing officer and thereby the assessing officer had no opportunity to consider any particular item of turnover, which would fall within the ambit of escapement from assessment. In the case on hand, it was admitted that the entire sales turnover relating to "monafilament niwar" was made available by the assessee before the original authority, who with his eyes wide-open thought it fit at that point of time that the said item was exempted from tax by virtue of the circular instructions issued by the Commissioner of Commercial Tax dated March 31, 1993. The issue cannot therefore be brought under the concept of "escapement assessment", for which alone invoking of section 16(1)(a) of the Act, is permissible under the provisions of the Act." The above stated view of the Division Bench will apply to the case of the petitioners as the returns were filed and exemption was granted by the competent authority. There is, therefore, no question of escaped assessment. vi. It is the further case of the petitioners and plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n form from the parent substance, they are nothing but wheat in substance for purposes of the sales tax law. They followed the decision in Dhanbad Flour Mills v. State of Bihar [1989] 75 STC 47 of the Patna High Court, where a similar view was taken. 16. Following the decisions of the Supreme Court referred to above, which now have emphasised the essential nature of the substantial identity tests, and the decisions of the High Courts above referred to, we hold that when chillies are converted into chilli powder, they essentially and substantially remain the same commodities and are therefore not taxable under entry 27 of the First Schedule, once again when sold in the powdered form. We accordingly overrule Ambika Provision Stores v. State of Kerala [1987] 67 STC 170. To the extent that Ambika Provision Stores' case [1987] 67 STC 170 is accepted in Rani Food Products' case (C.M.P. No. 5651 of 1988 decided on 13th September, 1988) the latter is also overruled to that extent. We also hold that exhibit P2 clarification of the Government that chillies in the powdered form are again taxable and that too under entry 27 of the First Schedule to the Act is clearly erroneous. We dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed. and confirmed the decision of the Bombay High Court. This decision is relied upon by the learned counsel for the petitioners to contend that chilly and chilly powder continue to be the same product and, therefore, if exemption is granted to chilly under Serial No.18 of Part B of Fourth Schedule to Act 32/2006, it will also include chilly powder. The substitution by Act 32/2008 in Serial No.18 is merely to substitute the old entry in Act 32/2006 with the new entry to have effect as of 1.1.2007 when the New Act 32/2006 came into effect. As a consequence, the exemption to chilly, coriander and turmeric and its powder form is applicable from 1.1.2007 without differentiation. This plea is, therefore, made by the petitioners both in law and on facts. 16. The learned counsel for the petitioners contended that the plea as was raised in the earlier round of litigation with regard to the applicability of Section 88(3)(i) of Act 32/2006 is not canvassed at this point of time as they have already raised that plea and lost before this Court as well as the higher forum. The petitioners are canvassing the writ petitions on other legal and factual plea which were not substantially dealt with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment was to promote exports, providing incentives to exporters by way of benefit in the form of duty drawback and providing for such benefits being with the main purpose of augmenting the foreign exchange reserve etc., the significance of the 100% EOU undertaking in terms of the relevant provisions of export-import policy is only to the establishment of a 100% EOU in terms of the policy and nothing more and at any rate the export-import policy cannot regulate or override the provisions of the Act, Rules and the notifications issued under these statutory provisions. In fact, there is no conflict or scope for understanding in the manner as is sought to be submitted by the learned counsel for the respondent-assessee. To this effect is the view taken by the courts including the Supreme Court and the interpretation to be placed in respect of an exemption provision is well settled in law, for us to either to get confused or to take a contrary view and to put the matters beyond any semblance of doubt or controversy we may safely refer to and rely upon the observations contained in the judgment of the Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH-1 vs MAHANN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statutory provision which may in express terms or by necessary implication empower the authority concerned to make a rule or regulation with retrospective effect. But where no such language is to be found it has been held by the courts that the persons or authority exercising subordinate legislative functions cannot make a rule, regulation or bye-law which can operate with retrospective effect; (see Subha Rao, J., in Dr Indramani Pyarelal Gupta v. W.R. Nathu & Others, (1963) 1 SCR 721, the majority not having expressed any different opinion on the point; Modi Food Products Ltd. v. Commissioner of Sales Tax U.P., AIR 1956 All 35; India Sugar Refineries Ltd. v. State of Mysore, AIR 1960 Mysore 326 and General S. Shivdev Singh v. State of Punjab, 1959 PLR 514.)" (emphasis supplied) (iii) A decision of the Supreme Court in Bombay Oil Industries Private Limited v. Union of India and others, 1995 Supp (1) SCC 295, wherein it has been held as under: "10. Before parting we may note one submission of the learned counsel. They submitted that laying down of Condition 2 in notification dated 2-8-1976 was a clear error on the part of the Central Government which was corrected by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In D.R. Venkatchalam v. Dy. Transport Commr., (1977) 2 SCC 273 it was observed that courts must avoid the danger of a priori determination of the meaning of a provision based on their own preconceived notions of ideological structure or scheme into which the provision to be interpreted is somewhat fitted. They are not entitled to usurp legislative function under the disguise of interpretation. 14. While interpreting a provision the court only interprets the law and cannot legislate it. If a provision of law is misused and subjected to the abuse of process of law, it is for the legislature to amend, modify or repeal it, if deemed necessary. (See Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd., (2000) 5 SCC 515). The legislative casus omissus cannot be supplied by judicial interpretative process. Language of Section 6(1) is plain and unambiguous. There is no scope for reading something into it, as was done in N.Narasimhaiah v. State of Karnataka, (1996) 3 SCC 88. In State of Karnataka v. D.C.Nanjudaiah, (1995) 5 SCC 206 the period was further stretched to have the time period run from date of service of the High Court's order. Such a view cannot be reconciled with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot entitled for exemption before 1.4.2008 in view of G.O.Ms.No.36, dated 1.4.2008. Without submitting any explanation to the aforesaid show cause notice, the appellants have chosen to file the writ petition. The only grievance of the appellant is that even before issuance of G.O.Ms.No.36, dated 1.4.2008, they were enjoying the exemption granted under the TNVAT Act and this exemption has not been taken away by the issuance of the subsequent G.O.Ms.No.36, dated 1.4.2008. This contention of the learned Senior Counsel was already met by the learned single Judge by drawing the various provisions of the Act and the clauses found in the G.O.Ms.No.36, dated 1.4.2008. From a reading of the impugned order in the light of the provisions of the Act and the G.O.Ms.No.36, dated 1.4.2008, we are convinced that the decision of the learned single Judge does not call for any interference. The learned single Judge has rightly come to a conclusion that the petitioners would be entitled for the exemption only after the issuance of the G.O., and not before that. Though the learned Senior Counsel has drawn our attention to various provisions of the Act and the TNVAT Act, we are not in a position to take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent that the remedy of appeal will be from Caesar to Caesar. Accordingly, I hold that the writ petitions are maintainable. EXEMPTION AND GOODS 20.1. Insofar as the exemption is concerned, there cannot be two opinions that chilly and chilly powder, turmeric and turmeric powder and coriander and coriander powder are one and the same in view of the decision of the Full Bench of the Kerala High Court in Namputhiris Pickle Industries v. State of Kerala, supra, wherein they have extensively dealt with the commodity, namely Chilly, and what is the effect of the powder form of the said goods. The Kerala High Court has categorically held that the mere change in the powder form does not change the essential nature of the commodity relying upon Tungabhadra Industries' case, [1960] 11 STC 827 or the substantial identity test as stated in Pio Foods' case [1980] 46 STC 63. They have given a clear finding that there is only a change in the form and there is no change in the substantial identity. This decision was upheld by the Supreme Court on the said finding as well in State of Kerala and another v. Namputhiris Pickle Industries, (2000) 117 STC 312. 20.2. This decision of the Full Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parently to bring into force amended Serial No.18 of Part-B of Fourth Schedule by Act 32/2008 from the time of operation of the law, namely Serial No.18 of Part B of the Fourth Schedule of Act 32/2006. If the intention of the State prior to coming into force of Act 32/2006 is to grant exemption to powder form of chilly, turmeric and coriander and that is confirmed by the substitution made in Serial No.18 of Part B of the Fourth Schedule to Act 32/2008, it is evident that the substitution made is only to state the obvious, namely to fill up the lacunae for the period from 1.1.2007 to 31.3.2008. The old entry has been substituted by the new entry into Act 32/2006. It is not a case of insertion or addition of a new entry. What is substituted would stand substituted from inception (i.e) with effect from 1.1.2007. Whereas insertion or addition will be relevant to the date of amendment (i.e.) 1.4.2008. By substitution, the amended Serial No.18 of Part B of the Fourth Schedule replaces old Serial No.18 of Part-B of Fourth Schedule of Act 32/2006. The old Serial No.18 of Part-B of Fourth Schedule becomes dead letter for all purposes. The implication of the word substituted is defined by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The new replaces the old and that is substitution and as a consequence, exemption becomes inevitable. The department's plea that the exemption will not apply to the period from 1.1.2007 to 31.3.2008 cannot be accepted, as substitution in this case will have to relate back to 1.1.2007 itself, when Act 32/2006 came into force. 21.6. It needs no further clarification to state that even in terms of the decision of the Full Bench of the Kerala High Court in Namputhiris Pickle Industries v. State of Kerala and another, supra, which has been upheld by the Supreme Court in State of Kerala and another v. Namputhiris Pickle Industries, supra, the powder form of chilly continues to be one and the same item. This statement is made only to amplify that despite substitution by way of Act 32/2008, the petitioners are entitled to exemption in respect of the powder form of chilly, turmeric and coriander on the mere entry in Serial No.18 of Part-B of Fourth Schedule to Act 32/2006. 21.7. When there is no differentiation between the two forms of the goods, the substitution is more in the nature of clarification of a pre-existing right which has accrued to the petitioners, that is to say that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stions viz., common questions in TRC Nos.1, 2 and 4 of 2005, is one which can be put into one question as to whether the customs notification No.67/1998 read with circular of even number and customs notification No.74/1999 read with circular of even number, would come in the way of an Assessee like the respondent a DTA unit from claiming the benefit of duty drawback available to a domestic exporter in terms of the provisions of 75 of the Act." In the light of this provision, the Division Bench came to hold that the notification read with Rules expressly deny the benefit of drawback in certain situations and in respect of certain goods and, therefore, if there is a contravention of the same, the benefit cannot be extended. There is no quarrel to the proposition that the language of the notification, Rules and Sections has to be strictly construed. There is also no doubt that in interpreting taxing provisions, the exemption provision found in taxing statutes has to be express and there is no exemption by implication or logical deduction. In other words, strict interpretation should be resorted to. 21.8.2. In the present case, we are concerned not with a case of exemption notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting what was not available in the earlier notification. In that case, the Supreme Court held that the later notification cannot be said to be clarificatory notification nor can it have any retrospective effect. In that case, there was certain deletion with regard to the colour of the imported Tallow. The ratio laid down in that case will not apply to the present case as chilly and chilly powder, coriander and coriander powder, and turmeric and turmeric powder under the TNGST Act and also under Act 32/2008 were considered as one and the same goods and not different goods and that has been affirmed by the Full Bench of the Kerala High Court and the Supreme Court and the Government has accepted it to be same goods. If that be the case, there is no change even during the period between 1.1.2007 and 31.3.2008 insofar as the said goods are concerned. It does not change the character of the goods merely because by substitution the word "powder" has been added. This position is accepted by the Government in the Government Order in G.O.(D) No.383, Commercial Taxes Department, dated 22.10.1998, which has been referred to supra. Therefore, the plea that the amendment will not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the four corners of the statute. That situation does not arise in the present case, as there is no anomaly. The legislature intended to treat particular goods in particular manner in both forms. Even if the word "powder form" was not available at a particular point of time, the words chilly, coriander and turmeric, by itself would include the powder form as well. Such being the intention of the legislature and the Government, the question of different construction by the Court does not arise. Therefore, the decision in Padma Sundara Rao (Dead) and others case, supra, does not apply to the facts of the present case. 21.12. The Division Bench decision of this Court dated 19.9.2011 made in W.A.Nos.1705 to 1708 of 2011, in the case of the petitioners, and the reasoning contained therein that the petitioners will be entitled to exemption only after the issuance of the government order and not before that is based on interpretation of G.O.Ms.No.36, Commercial Taxes and Registration (B2) Department, dated 1.4.2008. However, the plea of the petitioners is that both the goods are one and same and the decisions of the Full Bench of the Kerala High Court and the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already before the competent authority. The decision of the Division Bench of this Court clearly applies to the facts of the present case and on this plea also the petitioners are entitled to succeed, as the pre-revision notice and the proceedings consequent thereon, which are under challenge, fall foul of the plea of escaped assessment. 23. In view of the finding of this Court that the chilly, coriander and turmeric are one and the same as their powder form, as has been held by the Full Bench of the Kerala High Court and the Supreme Court; the understanding of the Government in G.O.(D) No.383, Commercial Taxes Department, dated 22.10.1998; the clarification issued on 9.12.2002 under Section 28-A of the TNGST Act; and the reasoning of this Court on substitution, it is clear that exemption remained even during the period in question, namely from 1.1.2007 to 31.3.2008. This Court has no hesitation to hold that the proceedings under Section 27 of Act 32/2006, which are under challenge, are without jurisdiction and contrary to law. The said proceedings deserve to be set aside. In the result, these writ petitions are allowed and the impugned orders are quashed. No costs. Consequently ..... X X X X Extracts X X X X X X X X Extracts X X X X
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