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TMI Blog2010 (11) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... harsh that the ruling of the ARA would bind dealers, other than the applicant, in respect of goods or transactions in relation to which a clarification was sought - Under section 67(4)(iii) of the Act, the order of the ARA binds officers in the Commercial Tax Department below the rank of the Commissioner of Commercial Taxes - appeal disposed off. - Writ Petition Nos. 1582,2119 of 2010 - - - Dated:- 25-11-2010 - GODA RAGHURAM AND RAMESH RANGANATHANJJ. , JJ. Taxes is not bound by the ruling of the ARA. Use of the word officers in section 67(4)(iii) makes it clear that the order of the ARA would not bind the STAT, or this court in the exercise of its jurisdiction under section 34 of the Act. Orders of the STAT would bind all officers/quasi-judicial authorities of the Commercial Taxes Department, including the Commissioner, not withstanding a ruling of the ARA to the contrary, more so as an appeal lies to the STAT against the ruling of the ARA. Under the proviso to section 67(4), the remedy of an appeal to the STAT is available only to the applicant-dealer for the words used therein are the dealer , and not any dealer . Once the applicant-dealer prefers an appeal, the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not provide; (3) what remedy has the Legislature resolved and appointed to cure the disease; and (4) the true reason of the remedy. The judge has always to make such construction as shall suppress the mischief and advance the remedy1. (Commissioner of Income-tax v. Swarna Bar Restaurant judgment in I.T.T.A. Nos. 613 of 2006 and batch dated September 9, 2010). It is evident that an appellate remedy is now provided to all dealers against whom orders are passed by officers of the Commercial Taxes Department following the ruling of the ARA, as the Legislature was conscious that the order of the ARA would bind even such dealers, who had not sought a ruling from the ARA, in respect of goods or transactions in relation to which a clarification was sought. It is with a view to provide such dealers an appellate remedy that section 33(1) was substituted by Act 4 of 2009 providing the remedy of an appeal to any dealer who had suffered an order passed by an authority following the ruling of the ARA, even though he had not sought a clarification from the ARA under section 67 of the Act. If the construction, placed on behalf of the petitioners, on section 67(4)(ii) of the Act is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 31, as the said authority, being an officer/authority of the Commercial Taxes Department, is also bound by the ruling of the ARA. While the pre-deposit, in the case of an appeal to the appellate authority under section 31, is 12.5 per cent of the disputed tax, the said authority is not entitled to take a view contrary to the ruling of the ARA in view of section 67(4)(iii) of the Act and the dealer would, necessarily, have had to prefer a second appeal to the STAT. The pre-deposit, for preferring an appeal to the STAT, is 50 per cent of the disputed tax, interest and penalty irrespective of whether the appeal is preferred under clause (a) or (c) of section 33(1) of the Act. The Legislature has, under section 33(1)(c) of the Act, chosen only to provide the remedy of an appeal to the STAT against an order passed by the assessing, appellate or revisional authorities, (officer of the Commercial Taxes Department below the rank of Commis sioner), and the mere fact that it has not provided a remedy of appeal, to a non-applicant-dealer, to the STAT against the order of the ARA would neither render section 67(4)(ii) of the Act ultra vires nor would it neces sitate the conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neous, or that it was prejudicial to the interests of the Revenue, when the assessing officer had followed a binding ruling of the ARA. Section 245S of the Income-tax Act relates to the applicability of advance ruling. Under sub-section (1)(b) thereof the advance ruling, pronounced by the authority under section 245R, shall be binding only in respect of the transaction in relation to which the ruling had been sought. Except for the word goods , section 67(4)(ii) of the Act is in pari materia with section 245S(1)(b) of the Income-tax Act. In Prudential Assurance Company [2010] 324 ITR 381, the Bombay High Court was not called upon to examine the scope and ambit of section 245S(1)(b) of the Income-tax Act. Reliance placed on the said judgment is, therefore, misplaced. We, accordingly, hold that in view of section 67(4)(ii) of the Act the ruling of the ARA is also binding on dealers, other than the applicant, in respect of the goods or transactions in relation to which a clarification was sought. It is made clear that it is only the principle, on which the ruling of the ARA is based, which is binding under clauses (i) to (iii) of section 67(4), and not a clarification/ruling de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the decision making process would be delayed resulting in loss of revenue to the State; if an order of the ARA is considered as not qua the applicant then, in the light of section 67(5), even for reviewing an order already passed a notice is required to be given to all dealers other than the applicant; only the applicant, who sought the ruling, is required to be put on notice before an order is reviewed, which suggests that the scheme of advance ruling is qua the applicant; section 67(5) cannot also be understood as referable to non-applicants; the affected parties are the applicants who sought the ruling and the Department; it does not envisage notice to all the assessees who are engaged in a similar line of business, and whose liability will be affected by exercising the power of review, amendment or revocation; in case an appeal against the ruling of the ARA, under section 33(1)(c), is held available to non-applicants and other dealers also, the authorities under section 33(1)(c) would only be required to pass an order simply following the ruling, and such orders need not be preceded by a show-cause notice since filing of objections to such a notice would be a futile exercise; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower of revision, under section 32(1) and (2), cannot be exercised by the revisional authority in respect of any issue or question which is the subject-matter of appeal before the Tribunal. The bar, under sub-section (3) of section 67, would not apply either to the proceedings pending before the STAT under section 33 of the Act, or those before this court under section 34, as such a bar is limited only to officers and authorities of the Commercial Taxes Department. The requirement of the proviso to section 67(2), of giving the applicant an opportunity of being heard, is to enable him to satisfy the ARA that the matter, pending before any officer or authority of the Department or the Tribunal or the court, is not on a question raised in the application filed before the ARA. The requirement of the ARA recording reasons, for rejec tion of the application, is to enable the STAT to examine the validity of the ruling of the ARA, (i.e., the principle on which the ruling is based), in the appeal preferred thereagainst by the applicant. As noted hereinabove, the manner in which the ARA should clarify an aspect, relating to the implementation of the Act, is required to be prescribed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be in conformity with the provisions of the Act. (Ispat Industries Ltd. v. Commissioner of Customs [2006] 12 SCC 583), and not the other way round. A rule has to be read as supplemental to the provisions of the parent Act. It cannot be interpreted in a way as to come into conflict with the parent Act, in which case the Act will prevail. (S.T. O., Moradabad v. H. Farid Ahmed and Sons [1975] 36 STC 567 (SC); [1976] 1 SCC 245). A piece of subordinate legislation should be read in the light of the statutory scheme of the Act. (Bombay Dyeing Mfg. Co. Ltd. (3) v. Bombay Environmental Action Group [2006] 3 SCC 434). Rules made for carrying out the purposes of the Act cannot be so framed as not to carry out the purpose of the Act, and cannot be in conflict therewith. (Laghu Udyog Bharati v. Union of India [1999] 115 STC 616 (SC); [1999] 6 SCC 418.) It is a recognised canon of construction that an expression used in a rule made in exercise of the power conferred by a statute must, unless there is anything repugnant in the subject or context, have the same meaning as is assigned to it under the statute. (Onkarlal Nandlal v. State of Rajasthan [1985] 60 STC 314 (SC); [1985] 4 SCC 404) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequences just or unjust, beneficial or mischievous. In construing enacted words we are not concerned with the policy involved or with the results, injurious or otherwise, which may follow from giving effect to the language used. Even if the literal interpretation results in hardship or inconvenience, it has to be followed. Hence departure from the literal rule should only be done in very rare cases, and ordinarily there should be judicial restraint in this regard. (Raghunath Rai Bareja [2007] 2 SCC 230 and King Emperor v. Benoari Lal Sarma AIR 1945 PC 48). As regards the submission that the proviso to section 67(2) is qua the applicant-dealer only, as it does not provide other dealers with an oppor tunity of being heard, it must be borne in mind that the Legislature may, by express provision, exclude application of the principles of natural justice or restrict its application in the manner provided under the statute. Rules of natural justice are not statutory rules. These rules are not cast in a rigid mould nor can they be put in a legal strait-jacket. They are not immutable but flexible. These Rules can be adapted and modified by statutes and statutory rules. (Union of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eyond the provisions of the statute. (D. Rama krishna Reddy v. Addl. Revenue Divisional Officers [2000] 7 SCC 12). Since such authorities/Tribunals are required to function in accordance with the provisions of the Act the restriction under section 67(3), as a result of which they are required to defer a decision on any issue in respect of which an application is pending before the ARA, cannot be said to interfere with their quasi-judicial functions under the Act. As noted hereinabove, rule 66(7) of the Rules requires the ARA to pass an order within four weeks from the date of the order admitting the application. It is only when an application is admitted can it be said to be pending before the ARA. Since a statutory obligation is cast on the ARA to pass orders, in a pending appli cation, within four weeks the quasi-judicial authorities are merely required to defer adjudication for a period of four weeks. This delay, when viewed in the context of the ruling of the ARA ensuring uniformity in orders passed by quasi-judicial authorities under the Act, cannot be said to be so inordinate as to necessitate section 67(4)(ii) of the Act being held ultra vires article 14 of the Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Administrator, Municipal Corporation, Bilaspur v. Dattatraya Dahankar AIR 1992 SC 1846), and when a literal meaning may result in absurdity. Courts must, however, keep in mind that an interpretation which reduces one of the provisions to a dead letter or useless lumber is not harmonious construction. To harmonise is not to destroy any statutory provision or to render it otiose. (Sultana Begum v. Prem Chand Jain [1997] 1 SCC 373.) Conclusion The learned counsel for the petitioners would submit that, since the vires of clause (ii) of sub-section (4) of section 67 of the Act is under challenge, they have not made any submissions on merits and, in the event this court does not accept the submissions, the petitioners may be permitted to contest the matter before the appropriate forum as prescribed under the Act. While the submission of the learned Standing Counsel for Commercial Taxes, that the authorities under the Act cannot condone the delay in preferring an appeal beyond the period prescribed in the Act, cannot be brushed aside, it must also not be lost sight of that it is only on account of pendency of these writ petitions before this court, wherein the vires of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority; and to have constructed apartments, and effected sale of apart ments in a single sale deed along with the land owners. It is their case that they paid one per cent tax on the total sale consideration of Rs. 2,01,92,000. The respondent issued notice dated October 22, 2008 informing the peti tioner of the advance ruling dated May 23, 2006 and July 30, 2006, in the case of M/s. Matyas Hill County Pvt. Ltd., Hyderabad and Lumbani Construction Pvt. Ltd., wherein it was clarified that the development agreement for construction and sale of apartments fell outside the scope of section 4(7)(d) of the Act; the type of construction undertaken by them fell under section 4(7)(c); and they were liable to pay tax at four per cent of the total consideration received by them. The petitioner was called upon to pay the differential tax of three per cent amounting to Rs. 6,05,760. The peti tioner s reply dated December 3, 2008 was of no avail, and an order of assessment dated October 30, 2009 was passed. In W.P. No. 1582 of 2010, the show-cause notice issued by the fifth respondent dated December 30, 2009, proposing to revise the order of the assessment in exercise of his powers under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scope of section 67 of the Act falls for consideration in this case also, W. P. No. 1582 of 2010 was tagged with W.P. No. 2119 of 2010; both the writ petitions were heard together; and are now being disposed of by a common order. Sri T. Ramesh Babu and Sri K. Raji Reddy, the learned counsel for the petitioners, made oral and written submissions. Sri A.V. Krishna Koundinya and Sri P. Balaji Verma, the learned Special Standing Counsel for Com mercial Taxes, put forth their submissions on behalf of the respondents. Is section 67(4)(ii) of the Act arbitrary and ultra vires article 14 of the Constitution of India? Except to contend that section 67(4)(ii) of the Act is arbitrary, and in violation of article 14 of the Constitution of India, the basis on which such a submission is founded is not stated. It is for the person who assails a legislation as violative of article 14, to establish that it is so. This burden is all the heavier when the legislation under attack is a taxing statute. (East India Tobacco Company v. State of Andhra Pradesh [1962] 13 STC 529 (SC); [1963] 1 SCR 404). For attracting article 14, necessary facts are required to be pleaded, and the grounds taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfined to the applicant only, as is evident from the proviso to section 67(4), which is the basis for filing an appeal before the Tribunal; the appeal under section 33 comes with an onerous condition requiring the appellant to pay 50 per cent of the tax, penalty and interest which is due as per the order of the Authority following the ruling; while the assessee, in whose case the ARA s decision is not followed for whatsoever reason, has a right of appeal to the Appellate Deputy Commissioner by paying only 12.5 per cent of the disputed tax, other assessees, who receive an order from the authority following the ruling, are forced to prefer an appeal to the Tribunal on the onerous condition of paying 50 per cent of the disputed tax; Act 4/09 only enables a non-applicant, in whose case the decision is followed, to prefer an appeal against such order, but does not provide for a direct appeal against the decision of the ARA itself; section 33 cannot remedy the situation and sort out the anomaly in section 67 in restricting the remedy of an appeal, against the decision of the ARA, only to the applicant-dealer; and section 67(4) of the Act is similar to section 245S of the Income-tax Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the goods or transactions in relation to which a clarification was sought; and (iii) on all the officers other than the Commissioner. Under its proviso, the order of the Authority would bind only if the dealer does not file an appeal, before the Sales Tax Appellate Tribunal (STAT), within 30 days of the ruling. Section 67(5) confers on the ARA the power to review, amend or revoke its ruling at any time, for good and sufficient cause, by giving an opportunity to the affected parties. An order, giving effect to such review or amendment or revocation, is not subject to the period of limitation. Section 67(6) enables the Commissioner to refer any matter for the opinion of the ARA, without prejudice to his authority. Under rule 66(7) of the Rules, if an application is admitted under subrule (4), the ARA shall, after examining such further material as may be placed before it by the applicant or obtained by the ARA, pass such order as is deemed fit on the questions specified in the application, after giving an opportunity to the applicant of being heard, if he so desires. The ARA is required to pass an order within four weeks from the date of the order admitting the application, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63] 48 ITR 1 (SC); [1963] 3 SCR 893, and are to be construed like in any other statute. (J. K. Synthetics Ltd. v. Commercial Taxes Officer [1994] 94 STC 422 (SC); AIR 1994 SC 2393, Whitney [1926] AC 37 (HL), Mahaliram Ramjidas [1940] 8 ITR 442 (PC), India United Mills Ltd. [1955] 27 ITR 20 (SC); [1955] 1 SCR 810 and Gursahai Saigal [1963] 48 ITR 1 (SC); [1963] 3 SCR 893). The rule of strict construction of a taxing statute does not apply to a provision which merely lays down the machinery for the calculation or procedure for the collection of tax. (ITC Ltd. v. Commissioner of Central Excise, New Delhi [2004] 7 SCC 591 and Gursahai Saigal [1963] 48 ITR 1 (SC); [1963] 3 SCR 893). Likewise if two constructions are possible, and a strict construction would lead to an absurd result, then the construction which is in keeping with the object of the statutory provision may be adopted. (ITC Ltd. [2004] 7 SCC 591, Commissioner of Income-tax. v. J.H. Gotla, Yadagir [1985] 156 ITR 323 (SC); [1985] 4 SCC 343). Similarly if there is a provision conferring a right of appeal in a fiscal/tax statute it should be read in a reasonable and practical manner. (Commissioner of Income-tax, A.P. v. Ashoka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guous, and admits of only one meaning, no question of construction of a statute arises, for the Act speaks for itself. The meaning must be collected from the expressed intention of the Legislature. (State of Uttar Pradesh v. Dr. Vijay Anand Maharaj [1963] 1 SCR 1). In construing a statutory provision, the first and the foremost rule of construction is the literal construction. All that the court has to see at the very outset is what does that provision say. If the provision is unambiguous and if from that provision the legislative intent is clear, the court need not call into aid other rules of construction of statutes, and the other rules of construction are to be called into aid only when the legislative intention is not clear. (Raghu nath Rai Bareja [2007] 2 SCC 230 and Hira Lal Rattan Lal v. Sales Tax Officer [1973] 31 STC 178 (SC); [1973] 1 SCC 216). If the words used are capable of one construction only, it would not be open to the courts to adopt any other hypothetical construction on the ground that such hypothetical construction is more consistent with the alleged object and policy of the Act. The words used in the material provisions of the statute must be interpreted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax v. Smt. Sodra Devi [1957] 32 ITR 615 (SC); AIR 1957 SC 832). A provision is not ambiguous merely because it contains a word which in different contexts is capable of different meanings. It would be hard to find anywhere a sentence of any length which does not contain such a word. A provision is ambiguous only if it contains a word or phrase which, in that particular context, is capable of having more than one meaning. (Kirkness (Inspector of Taxes) v. John Hudson Co., Ltd. [1955] AC 696 (HL)). It is only when the material words are capable of two constructions, one of which is likely to defeat or impair the policy of the Act whilst the other construction is likely to assist the achievement of the said policy, would courts prefer to adopt the latter construction. It is only in such cases that it becomes relevant to consider the mischief and defect which the Act purports to remedy and correct (Kanai Lal Sur [1958] SCR 360). In the instant case, however, we find no reason to resort to any secondary canon. Courts have adhered to the principle that effort should be made to give meaning to each and every word used by the Legislature and it is not a sound principle of constructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asanna [2010] 5 SCC 622). There is a line, though thin, which separates adjudication from legislation. That line should not be crossed or erased. Courts expound the law, they do not legislate. (State of Kerala v. Mathai Verghese [1986] 4 SCC 746 and Deoki Nandan Aggarwal [1992] Supp 1 SCC 323). A judge is not entitled to add something more than what is there in the statute by way of a supposed intention of the Legislature. (Union of India v. Elphinstone Spinning and Weaving Co. Ltd. [2001] 4 SCC 139). The legislative casus omissus cannot be supplied by the judicial interpretative process. (Maruti Wire Industries Pvt. Ltd. v. Sales Tax Officer, First Circle, Mattancherry [2001] 122 STC 410 (SC); [2001] 3 SCC 735 and Govind Singh [2005] 10 SCC 437). The Legislature has, under section 67(4)(ii), made the ruling of the ARA binding in respect of goods or transactions in relation to which a clarification is sought, and has not restricted its application only to the applicant. Notwithstanding that the clarification has been given at the behest of the applicant-dealer, if the goods or transaction of another dealer are identical to those for which a clarification was sought, the ruling of t ..... 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