1998 Supreme(SC) 1045

1998(7) Supreme 566
Supreme Court of India
(From Allahabad High Court)
S.P. Bharucha, M.K. Mukherjee & G.T. Nanavati, JJ.
M/s. Pappu Sweets and Biscuits etc. -Appellant
versus
Commissioner of Trade Tax, U.P. Lucknow -Respondent
Civil Appeal No. 9282 of 1995
With
Civil Appeal No. 1692 of 1997
Decided on 6-10-1998
Counsel for the Parties :
For the Appellants : Dhruv Aggarwal, Advocate.
For the Respondent : A.K. Goel, Additional Attorney General, for State of U.P., Kavin Gulati, Pradeep Misra, Advocates.

Important Point
The word ‘sweetmeat’ and the words ‘commodities of like nature’ as used in the Notification dated 27.7.1991 issued under Section 4A of U.P. Sales Tax Act did not include within their sweep toffees manufactured by industrial units contemplated by the notification and therefore industrial units manufacturing toffees qualified for exemption from reduction in sales tax.

Headnote:(i) Uttar Pradesh Sales Tax Act, 1948 - Section 4A - Notification dated 27.7.1991-Exemption from sales tax-Industries not entitled to facil­ity of exemption-Entry 18 in Annexure II of Notification-‘Sweetmeat’ and words ‘commo­dities of like nature’ as used in Notification did not include within their sweep toffees manufactured by industrial units-Toffees manufacturing industrial units entitled to avail exemp­tion.

       (ii) Words and Phrases-Sweet­meat-Whether toffee is sweetmeat.

       Held : It is true that dictionary meaning of the word ‘sweetmeat’ is very wide and any food which is sweet and rich in sugar can be described as ‘sweetmeat’. Toffee is a confection of sugar and other materials and being rich in sugar would be ‘sweetmeat’ in its wider sense. But for deciding whether toffee is ‘sweetmeat’ as contemplated by the exemp­tion Notification, what is required to be considered is the object of the notification and the context in which that word is used in the notification. A close reading of the Notification discloses that the State in­tended to give benefit of exemption or reduction in rate to these new industrial units and existing units undertaking expansion, diversifi­cation or modernization which were to make substantial capital invest­ment. Paragraph 2 of the Notification prescribing conditions of having a licence or a latter of intent and of owning land or building or taking them on lease for a period of not less than 15 years and para­graph 3 prescribing fixed capital investment consisting of land, building, plant, machinery, equipment and apparatus are indicative of that intention. Entry 18 of Annexure II is also suggestive of the same intention. The items mentioned therein viz, ‘sweetmeat’, ‘namkeen’, ‘reori’ and ‘gazak’ are usually prepared by shopkeepers and restau­rants for selling them to their consumer-customers. They are not manufactured in factories having plants and machinery. The notification further discloses that the object of declaring exemption from payment of sales tax was to increase industrial activity within the State by encouraging setting up of new industrial units or expansion, diversification or modernization by the existing industrial units. At the same time the State did not desire to extend that benefit to all such industries. It was therefore specifically stated in the notification that industries mentioned in Annexure II shall not be entitled to the benefit of exemption from payment of tax or reduction in rate of tax. Presumably, the State did not desire further growth of such industries by suffering loss of revenue. What is however necessary to note is that Annexure II is an exclusionary part of the exemption notification. The High Court did not examine the issue from this angle and also failed to appreciate that exclusionary part of an exemption notification has to be construed rather strictly. Even though the word used in exclusionary part of an exemption noti­fication has a wide dictionary meaning or connotation, only that meaning should be given to it which would achieve rather than frustrate the objec­t of granting exemption and which does not lead to uncertainty or unintended results. A correct reading of the notification further discloses that the words ‘commodities of like nature’ in Entry 18 were meant to include commodities other than those specifically mentioned. What they indi­cate is that other commodities of like nature also were not to get benefit of the exemption. To that extent they did widen the scope of the Entry but they cannot be construed to have the effect of enlarging the meaning of the word ‘sweetmeat’. As that was not the purpose of including those words in the Entry, the High Court was not justified in holding that they gave an unlimited and unrestricted meaning to the word ‘Mithai’ or ‘sweatmeat’. The High Court has also not correctly applied the popular parlance test. As can be seen from the observations made by it that “There is no doubt that a toffee is a sweetmeat, as understood by the people where toffee originated” and that “Toffee and other things of that nature are of foreign origin and are sweets or sweetmeat according to those people and their nature cannot be changed simply because their origin is different from what is usually conveyed by the word `Mithai’ in this part of the country”, the High Court preferred to decide the issue by relying upon how toffee is understood by the people of the country where it originated rather than by considering how `toffee’ is understood in India and more. Considering the object of the notification and the intention of the State Government in granting exemption from payment of sales tax and applying the correct principles of interpretation in such cases, we hold that the word ‘sweetmeat’ and the words “commodities of like nature” as used in the Notification dated 27.7.91 did not include within their sweep toffees manufactured by industrial units as con­templated by the notification. (Paras 8 to 12 & 14)