2020 Supreme(SC) 424

SUPREME COURT OF INDIA
A.M. Khanwilkar, Dinesh Maheshwari, JJ.
THE COMMERCIAL TAX OFFICER & ANR. – Appellant(s)
Vs.
MOHAN BREWARIES AND DISTRILLERIES LIMITED – Respondent(s)
Civil Appeal No. 7164 of 2013; C.A. No. 7165 of 2013 and C.A. Nos. 4416-4419 of 2014
Decided on : 29-06-2020

IMPORTANT POINTS
(1) Purchase tax is leviable on purchase turnover of empty bottles purchased by assessee in course of its business of manufacture and sale of Beer and IMFL.
(2) Reference to decisions dealing with other statutes on same subject is regarded as a permissible aid to construction of provisions in a statute.
(3) No direction can be issued to enforce a clarification or circular contrary to declaration of law by Courts.

Headnote:

(A) Taxation – Purchase Tax – Exigibility – Principal point calling for determination is as to whether purchase tax under Section 7-A of Act is leviable on purchase turnover of empty bottles purchased by assessee in course of its business of manufacture and sale of Beer and IMFL – Section 7-A of Act is a charging as well as a remedial provision, its main object being to plug leakage and prevent evasion of tax and in interpreting such a provision, a construction which would defeat its purpose or render it otiose should be eschewed – Section 7-A (1) would become applicable if person who purchases goods is a dealer and is covered under Section 3(1) of the Act; purchase is made by him in course of his business; such purchase is either from a registered dealer or from any other person; goods purchased are those goods whose sale or purchase is liable to tax under the Act – It is test of irreversibility that remains fundamental to a query as to whether manufacture has taken place or not – So far empty bottles are concerned, even after being filled with liquor, they remain bottles only, retaining their original elements including shape, size and character – They are not consumed at all and there arise no question of they being consumed in manufacture – Bottles in question have not been consumed in manufacture of other goods for sale – Empty bottles have not even been used in manufacture – Elements (i) and (iii) pertaining to clause (a) of sub-section (1) of Section 7-A of the Act do not exist in this case – However, process of bottling with use of bottles in question has been an unalienable part of complete chain of processes that assessee was obliged to undertake for its business, i.e., manufacturing and selling liquor – By this process, bottles in question were used by assessee in such a manner that they were no longer available for sale in the form they were purchased from unregistered dealers – That being position, bottles in question have indeed been used otherwise by assessee – Activity of assessee in relation to bottles in question is clearly covered by element (iv) of clause (a) of sub-section (1) of Section 7-A of the Act – Use of goods in question for bottling takes turnover of their purchase within net of Section 7-A of the Act – Purchase tax under Section 7-A of the Act is leviable on purchase turnover of empty bottles purchased by assessee in course of its business of manufacture and sale of Beer and IMFL. [Section 7-A of Tamil Nadu General Sales Tax, 1959] (Paras 31, 42, 44, 44.1, 45, 49.3, 49.4, 50 and 53)

(B) Statute Law – Doctrine of pari materia – Reference to decisions dealing with other statutes on same subject is regarded as a permissible aid to construction of provisions in a statute – A statute must be read as a whole as words are to be understood in their context – Extension of this rule of context permits reference to other statutes in pari materia i.e. statutes dealing with same subject-matter or forming part of same system – Application of this rule of construction has merit of avoiding any apparent contradiction between a series of statutes dealing with same subject – Scope and ambit of provisions of purchase tax in different State enactments had been different on material particulars – For difference in phraseology, interpretation of one particular State Sales Tax Act cannot be ipso facto imported for interpreting another enactment. (Paras 26 and 29.1)

(C) Statute Law – Rule of ejusdem generis – Rule of ejusdem generis cannot be picked up and applied as an abstract proposition whenever general words are used after particular words and expressions – As regards words “or otherwise”, though, ordinarily, class or category to be covered thereby may have to be kindred to particular class or category preceding them but, such kinship could be even of general relatedness to particular words and need not be that of cognates or agnates or analogues. (Para 48.2)

(D) Words and Phrases – Use and Consumption – Import – Several of meanings of expressions “consume” and “consumption” denote using up a particular thing in a way that results in complete exhaustion of that thing – On the other hand, expression “use” denotes application or deployment of a particular thing as a means of achieving something or for accomplishment of a purpose – Word “use” is of wider import than “consumption” – In “use”, a thing shall be employed for accomplishment of a purpose but in “consume”, thing shall not only be employed but shall also get absorbed or devoured in accomplishment of the purpose. (Paras 40 and 40.4)

(E) Constitution of India – Article 141 – Law of the land – Clarifications/Circulars/Instructions issued by competent authority are binding on authorities under respective statutes but so far as declaration of law in regard to any particular statutory provision is concerned, view expressed in binding decision of this Court or High Court is to be given effect to – No direction can be issued to enforce a clarification or circular contrary to declaration of law by Courts. (Para 58)

Facts of the case:

Civil Appeal Nos. 7164 of 2013 and 7165 of 2013, filed respectively by the revenue and the assessee, are directed against the final judgement and order dated 10.09.2004, passed by a Division Bench of the High Court of Judicature at Madras in W.P. No. 25081 of 2002, whereby the High Court has allowed the writ petition filed by the assessee while holding, inter alia, that though the purchase turnover, with respect to the purchase of empty bottles from unregistered dealers under bought note, is exigible to purchase tax under Section 7-A of the Tamil Nadu General Sales Tax, 1959 but, the assessee is entitled for the benefit of Clarifications dated 09.11.1989 and 27.12.2000 issued by the revenue till the same were withdrawn prospectively by the Clarification dated 28.01.2002 and therefore, the revenue is not entitled to levy purchase tax for the said turnover of purchase of empty bottles for the assessment year 1996-97. These matters involve the interpretation of Section 7-A of the Tamil Nadu Act, providing for levy of purchase tax under certain circumstances, with root questions as to whether purchase tax is leviable on the purchase turnover of empty bottles purchased by the assessee in the course of its business of manufacture and sale of Beer and Indian Made Foreign Liquor and as to the operation and effect of the Clarifications dated 09.11.1989 issued by the Special Commissioner and Commissioner of Commercial Taxes, Chennai3 and dated 27.12.2000 issued by the Principal Commissioner and Commissioner of Commercial Taxes, Chennai4. On the sideways, a separate question is as to whether cash discount on the price offered by the assessee to the Tamil Nadu State Marketing Corporation Limited is taxable in view of Explanation 2(iii) to Section 2(r) of the Act?

Findings of Court:

So-called Clarifications dated 09.11.1989 and 27.12.2000 had not been of explaining the meaning of any doubtful term or expression in the statutory provision nor they were explaining the object and purport of the provision concerned. The said Clarifications/Circulars had merely been the expression of the understanding of the concerned officer, be it SCCT or PCCT, about operation of Section 7-A of the Act vis-à-vis the purchase turnover of the empty bottles purchased by the assessee. However, such understanding of the officer concerned turns out to be a pure misunderstanding, when it stands at contradiction or incongruous to the declaration of law by the Courts; and could only be ignored.

Result : Appeal filed by Revenue Partly allowed and Civil Appeals filed by Assessee dismissed.