2006 Supreme(SC) 1326

2007(2) Supreme 441
SUPREME COURT OF INDIA
(From Karnataka High Court)
Ashok Bhan and Dalveer Bhandari, JJ.
State of Karnataka & Ors.—Appellants
versus
Balaji Computer & Ors. —Respondents
Civil Appeal No. 1120 of 2006
With
Civil Appeal No. 1835 of 2006
Decided on 17-12-2006
Counsel for the Parties :
For the Appellants : Sanjay R. Hegde, Advocate.
For the Respondents : R.N. Narsimha Murthy, Sr. Advocate, N.N. Harish, T.N. Keshava Murthy and P.R. Ramasesh, Advocates.

IMPORTANT POINT
Parts of computer by employing legal fiction need to be treated as computer under Sr. No. 20(i) of the Part ‘C’ of the second Schedule of the Karnataka Sales Tax Act. When the legislature intended to exempt the computer then by employing the legal fiction, parts of computer and its peripheral are also exempted from payment of tax.

Headnote:(i) Karnataka Sales Tax Act, 1957 —Sections 3A, 6B, 8A, 12A—Levy of turnover tax on parts of computer and parts of computer peripherals—Challenged as arbitrary, ultra vires the Notifications dated 18.7.2000, 31.3.2001 and 30.3.2002—High Court held that parts of computer and parts of computer peripherals are to be treated as computers and computer peripherals falling under Entry 20 of part ‘C’ of the Second Schedule of the Act and are exempted from levy of turnover tax payable u/s 6B of the Act—Whether judgment of the High Court is sustainable—(Yes).

       Held : On plain construction of the Statute, it is clear that parts of computer, by legal fiction, need to be treated as computers under Sl. No. 20(i) of Part ‘C’ of the Second Schedule of the Act. When parts of computer and computer peripherals are treated as computers and computer peripherals, there cannot be any doubt that parts of computer and computer peripherals are not to be treated as computer and computer peripherals, whether in the light of the language employed in the exemption Notifications referred to in the preceding paragraphs of the judgment are parts of computer and computer peripherals are also exempted from levy of turnover tax.(Para 24)

       The reading of exemption Notifications, in that context, makes it clear that it intended to give exemption to all the items of computers and their parts. This is clear from the fact that the Notifications grant exemption to computers, computer peripherals, computer consumables and computer cleaning kits falling under Sl. No. 20 of Part ‘C’ of the Second Schedule of the Act. The same is the language employed in the Notifications. The exemption notifications intended to exempt all the items referred to in Sl. No. 20 of Part ‘C’ of the Second Schedule and the intention was not to grant exemption for all items referred to in Sl. No. 20 of Part ‘C’ of the Second Schedule of the Act. The Court observed that if the Government intended to exclude parts of computer and computer peripherals, the same would have been made clear by stating computers and computer peripherals falling under Sl. No. 20 of Part ‘C’ of the Second Schedule. The construction of the Statute and the intention of the framers of the Legislature also lead to a clear conclusion that parts of the computer and computers peripherals are also exempted from the levy of turnover tax.(Para 25)

       In the instant case, computer, computer peripherals, computer consumables, computer cleaning kits and computer software are exempted from levy of turnover tax. Under these circumstances, even assuming for the sake of argument that the exemption Notifications and circulars do not clearly specify as to whether they are exempted from turnover tax, it is not possible to take the view in the background in which exemption Notifications came to be issued that the State would have picked up only computer parts and parts of computer peripherals for levy of tax. Obviously, the intention of the State in granting exemption is to promote Information Technology industry in the State by attracting a large number of investors into the State and setting up of Information Technology industries and provide job opportunities to a large number of youth as aptly observed in the impugned judgment. When that being the object of exemption Notifications issued under Section 8-A of the Act and various items referred to in Sl. No. 20 of Part ‘C’ of the Second Schedule have been granted exemption even if it is assumed that the things are not made clear in the exemption Notifications, it is fair and reasonable to place the construction which is beneficial to the assessee by exempting levy of tax on parts of computer and computer peripherals.(Para 31)

       The appeals of the appellants are devoid of any merit because of the following reasons:

       1.In the impugned judgment, the Division Bench of the High Court was justified in observing that the parts of computer by employing legal fiction need to be treated as computer under Sr. No.20(i) of the Part ‘C’ of the Second Schedule of the Act;

       2.The computer itself is produced by assembling various parts or configuration. When the legislature intended to exempt the computer then by employing the legal fiction it would be appropriate to hold that parts of computer and its peripheral are also exempted from payment of tax;

       3.The language employed in the exemption notifications and items in respect of which exemption was granted had to be understood in the context in which exemption notifications were issued;

       4.The Rule of Construction by reference to contemporanea expositio is a well established rule for interpreting a statute by reference to the exposition it has received from contemporary authorities. When language of the statute is plain and unambiguous, the method of contemporanea expositio need not be employed;

       5.It is well settled that even if it is assumed that the things are not made clear and explicit in the exemption notifications, it is proper and reasonable to place the construction which is beneficial to the assessee by exempting levy of tax on parts of computer and computer peripherals;

       6.It is our duty and obligation to properly comprehend legislative intention while constructing the Statute. In the instant case, computer, computer peripherals, computer consumables, computer cleaning kit and computer software are exempted from the levy of tax. To reach the conclusion that the State intended only computer parts and computer peripherals for levy of tax would not be proper in this background; and

       7.Plain construction of the statute leads to a clear conclusion that the legislature intended to exempt computer and parts of computer and computer peripherals from levy of turnover tax.(Para 36)

       (ii) INTERPRETATION OF STATUTES—Method of contemporanea expositio—Interpretation of a statute by reference to exposition it has received from contemporary authorities—When language of statute is plain and unambiguous, method of contemporanea expositio need not employed—K.P. Varghese v. ITO, (1981) 4 SCC 173 : Relied on.(Paras 33 and 36)

       (iii) INTERPRETATION OF STATUTES—Exemption Notifications—When the things are not made clear and explicit in the exemption notifications, it is proper and reasonable to place the construction which is beneficial to the assessee.[Paras 36(5)]

       (iv) WORDS AND PHRASES—Word ‘namely’—Meanings—Dictionary meanings—Ordinarily, the word ‘namely’ imports enumeration of what is comprised in the preceding clause—It ordinarily serves the purpose of equating what follows with clause descried before.(Paras 20 and 21)

       (v) WORDS AND PHRASES—Expression ‘That is to say’—It is used to make clear and fix the meaning of what is to be explained or defined—Such words are not used, as a rule, to amplify a meaning while removing a possible doubt for which purpose the word ‘includes’ is generally employed.(Para 23)