M/S Martin And Harris Pvt. Ltd vs The State Of Bihar
2023 Latest Caselaw 4536 Patna

          IN THE HIGH COURT OF JUDICATURE AT PATNA
                        Miscellaneous Appeal No. 342 of 2013
     ======================================================

M/s Martin and Harris Pvt. Ltd. Naya Tola, P.S. - Kadam Kuan, P.O. - Bankipore, in the town and district of Patna through its Branch Manager, Sri Sanjay Kumar S/o Late Shyam Sundar Pd., resident of Naya Tola, P.S. - Kadam Kuan, P.O. - Bankipore, in the town and district of Patna.

... ... Appellant/s Versus

1. The State of Bihar.

2. The Commercial Taxes Tribunal, Patna Bench, Patna.

3. Joint Commissioner of Commercial Taxes (Appeals), Central Division, Patna.

... ... Respondent/s ====================================================== with Miscellaneous Appeal No. 336 of 2013 ====================================================== M/s Martin and Harris Pvt. Ltd. Naya Tola, P.S.-Kadam Kuan, P.O.- Bankipore, in the town and district of Patna through its Branch Manager, Sri Sanjay Kumar S/o Late Shyam Sundar Pd., resident of Naya Tola, P.s.-Kadam Kuan, P.O.-Bankipore, in the town and district of Patna.

... ... Appellant/s Versus

1. The State of Bihar.

2. The Commercial Taxes Tribunal Patna Bench, Patna.

3. Joint Commissioner of Commercial Taxes (Appeals), Central Division, Patna.

... ... Respondent/s ====================================================== with Miscellaneous Appeal No. 343 of 2013 ====================================================== M/s Martin and Harris Pvt. Ltd. Nata Tola, P.S.- Kadam Kuan, P.O.- Bankipore, in the town and district of Patna through its Branch Manager, Sri Sanjay Kumar S/o Late Shyam Sundar Pd., resident of Naya Tola, P.S.- Kadam Kuan, P.O.- Bankipore, in the town and district of Patna.

... ... Appellant/s Versus

1. The State of Bihar.

2. The Commercial Taxes Tribunal, Patna Bench, Patna.

3. Joint Commissioner of Commercial Taxes (Appeals), Central Division, Patna.

... ... Respondent/s ====================================================== with Miscellaneous Appeal No. 344 of 2013 Patna High Court MA No. 342 of 2013 dt. 13-09-2023

====================================================== M/s Martin and Harris Pvt. Ltd., Naya Tola, P.S.- Kadam Kuan, P.O.

-Bankipore, in the town and district of Patna through its Branch Manager, Sri Sanjay Kumar S/o Late Shyam Sundar Pd., resident of Naya Tola, P.S.- Kadam Kuan, P.O.-Bankipore, in the town and district of Patna.

... ... Appellant/s Versus

1. The State of Bihar.

2. The Commercial Taxes Tribunal, Patna Bench, Patna.

3. Joint Commissioner of Commercial Taxes (Appeals), Central Division, Patna.

... ... Respondent/s ====================================================== Appearance :

(In all the Miscellaneous Appeals ) For the Appellant/s : Mr. H.L. Tikku, Sr. Advocate Mr. M.S. Smith, Advocate Mr. Amish Kumar, Advocate Mr. Shankar Kumar Choudhary, Advocate For the Respondent/s : Mr. P.K. Shahi, Sr. Advocate Mr. Vikash Kumar, Advocate ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE PARTHA SARTHY

CAV JUDGMENT (Per: HONOURABLE THE CHIEF JUSTICE)

Date : 13 -09-2023

The assessment years with which the appeals are

concerned are 2001-02, 2002-03, 2003-04 and 2004-05.

2. The following questions of law were framed for

consideration in the appeal :-

(1) Whether the provision granting exemption has to be interpreted keeping in mind the objective and the legislative intent behind the said exemption and not by adopting the literal meaning?

(2) Whether it was permissible for the Tribunal to deviate from the view taken in Patna High Court MA No. 342 of 2013 dt. 13-09-2023

the previous years and deny exemption in absence of any material change in the facts and circumstances of the appellant's case and act contrary to the law settled by the Hon'ble Supreme Court in the case reported in 193 ITR 321 (SC) followed by the Delhi High Court in 264 ITR 276 (Del)?

3. The aforesaid questions arise in the context of

the exemption granted by the State Government under Section 7

of the Bihar Finance Act, 1981(for brevity 'the Act of 1981').

Sub-section (3) of the Section 7 empowers the State

Government by notification and subject to such conditions or

restrictions as it may impose, to exempt sale or purchase of any

goods or class of description of goods or dealers from payment

of tax. The State Government has brought out a notification

dated 01.09.1993, including Serial No. 29 under the Schedule of

the Act of 1981, wherein 'condoms and all types of oral

contraceptives pills' were granted exemption from payment of

tax.

4. The assessee is concerned with two variants of an

Intrauterine Device (for brevity, IUD) used by females for the

purpose of contraception with the commercial nomenclature of

'Multiload'. The appellant is also engaged in the sale of

contraceptive pills which have been granted exemption by the

tax authorities. In fact, in the earlier years the appellant was Patna High Court MA No. 342 of 2013 dt. 13-09-2023

granted exemption for the sale of Multiload also and the

subsequent denial of exemption in the instant assessment year

being 2001-02, without any change in circumstances, gave rise

to the second question raised in the appeal. The first question

has been raised insofar as the established principles for

considering an exemption from tax and the relevance of the

object and intention of the Legislature in granting such

exemption.

5. Learned Senior Counsel Shri. H.M.Tiku

appeared for the appellant and emphatically pointed out that the

intention behind the exemption was population control and any

contraceptive device should fall within the exemption. In the

earlier assessment years, there was an exemption granted for the

very same product, which was introduced in the market

sometime in the year 1997, by the appellant. The Multiload used

for contraception merely for the reason that it is used in females

cannot be denied such exemption which would be applicable to

all devices used for contraception; when the exemption itself is

aimed at ensuring population control.

6. Considering the legislative intent behind the

exemption, the tax authority cannot take a different view. It is

also pointed out that even in the impugned order the minority Patna High Court MA No. 342 of 2013 dt. 13-09-2023

view was in favour of the appellant. As far as the change in

opinion of the tax authority, declining exemption, contrary to the

earlier assessment years, without any change in circumstances,

the learned Senior Counsel relies on Radhasoami Satsang,

Saomi Bagh, Agra v. CIT, (1992) 1 SCC 659, Commissioner of

Income-Tax v. A.R.J. Security Printers, (2003) 264 ITR 276

(Delhi), and Prem Kumar Chopra v. Assistant Commissioner

of Income Tax, Circle 46(1) and Ors. [2023] 456 ITR (Delhi). It

is argued that consistency as has been held by the Delhi High

Court is an antidote to the vice of arbitrariness and if there are

not sufficient reasons to deviate from a decision taken by the

coordinate authorities, then it would suffer from the vice of

arbitrariness.

7. CCE v. Parle Exports (P) Ltd., (1989) 1 SCC

345, is relied on to contend that an exemption has to be looked

at in accordance with the purpose and provisions of the Act and

when there are two views possible, the authority should lean in

favour of the assessee and also in the context of difference of

opinion from the earlier years, the benefit should go to the

subject. For further buttressing the contention of purposive

interpretation reliance is placed on Abhiram Singh v. C.D.

Commachen, (2017) 2 SCC 629 and Commr. of Customs v. Patna High Court MA No. 342 of 2013 dt. 13-09-2023

Dilip Kumar & Co., (2018) 9 SCC 1.

8. The learned Advocate General Shri. P.K. Shahi

appearing for the State cautions this Court from transgressing

beyond the scope and ambit of the words employed in the

exemption notification. An exemption notification as has been

held by the Hon'ble Supreme Court has to be construed very

strictly and only if, the subjects fall under it would the benefit of

exemption be conferred. In the present case the contraceptive

pills sold by the assessee has been granted exemption and in the

earlier years the Assessing Officers had erroneously granted

exemption to the assessee for the device used by females for

contraception; which was not included in the exemption

notification. The submission of the learned Senior Counsel of

the assessee that the product was introduced in 1997, would put

to peril the argument raised of purposive interpretation based on

the intent of the Legislature in granting exemption. The

particular device used by females was never in the

contemplation of the Legislature at the time when the

notification was issued and exemption was restricted to

condoms and oral contraceptive pills; invoking the power under

the Act of 1981.

9. Every contraceptive device introduced later to Patna High Court MA No. 342 of 2013 dt. 13-09-2023

the exemption notification cannot be granted the benefit of

exemption unless it falls under either the description of a

condom or a contraceptive pill. In understanding the words

employed; dictionary meaning and purposive interpretation

should be adopted only when there is an anomaly in the words

employed and if it is clear and specific there is no reason to

resort to aids of interpretation. Condoms and oral contraceptive

pills are a class apart from the device sold by the appellant is the

forceful contention. Reliance is also placed on Dilip Kumar

(supra) to contend that a very strict interpretation has to be

given to an exemption notification.

10. We have to first look at the decisions placed

before us. In Radhasoami Satsang Saomi Bagh (supra),

questions came up regarding the nature & character of the

assessee to decide on the exemption claimed under Section 11

and 12 of the Income tax Act, 1961. The refund applications of

the assessee were accepted by the Department in various years

and in the relevant assessment years, for the first time refund

was not allowed, treating the assessee as an Association of

Persons and not a trust, entitled to exemption. The specific

contention raised by the assessee was that in the absence of any

change in circumstances, the Revenue should have felt bound by Patna High Court MA No. 342 of 2013 dt. 13-09-2023

the previous decisions and no attempt should have been made to

reopen the question. The Hon'ble Supreme Court after

reiterating the principle that res judicata does not strictly apply

to income-tax proceedings, held that when a fundamental aspect

permeating through the different assessment years has been

found as a fact, one way or the other, and the parties were

allowed to maintain the same position, it would not be

appropriate to allow the position to be changed in a subsequent

year. If there is no material change justifying the Revenue to

take a different view, then there is no reason why the question

should be reopened and a contrary decision taken from that

taken in the earlier years. We have to specifically notice that the

question raised was exemption, with respect to the nature and

constitution of the assessee. The authorities had over the years

found the assessee to be entitled to an exemption and there has

been no change in circumstances; in the nature of the activities

carried on by the trust or in its constitution, which led to the said

dictum being laid down. As is trite there can be no dictum,

completely divorced from the facts.

11. The decision in A.R.J. Security Printers (supra)

by the Delhi High Court, was also on whether the printing of

lottery tickets, can be said to be an industrial undertaking Patna High Court MA No. 342 of 2013 dt. 13-09-2023

entitled to a deduction under Section 80-I of the Act, which

again is on the aspect of the nature of the industry carried on.

Prem Kumar Chopra (supra) was a decision in which two

inconsistent decisions on the same subject matter were passed

for the successive years which fact is distinct from the present

case and will not be applicable, herein.

12. Herein, the question raised is of the interpretation

of the specific words employed in the exemption notification.

The principle which would be applicable is that every

assessment year gives rise to a separate cause of action. When a

patently erroneous decision has been taken, based on a wrong

interpretation of the words employed in the notification, in the

earlier years, there could be no review of the same in those

relevant years, especially since that would result in a mere

change of opinion. However, when assessment proceedings are

taken up in a subsequent assessment year, the Assessing Officer

is entitled to give his own interpretation to the words employed

in the exemption notification, which if found to be correct and

the earlier interpretation wrong, it cannot be set at naught

merely on the ground that the Department had erroneously

allowed the exemption in the earlier years, contrary to the plain

meaning coming out of the words employed in the notification Patna High Court MA No. 342 of 2013 dt. 13-09-2023

by the Legislature. There is then, no cause to ferret out the

intention of the Legislature, to read into the words employed,

those things that would apparently not be included.

13. Parle Exports (P) Ltd. (supra) considered the

question whether the non-alcoholic beverages manufactured by

the assessee should be included under the exemption granted to

'food products and food preparations'. We specifically refer to

paragraph 20 and extract the same hereunder :-

"20. The question of interpretation involves determining the meaning of a text contained in one or more documents. Judges are often criticised for being tied too closely to the statutory words and for failing to give effect to the intention of the Parliament or the lawmaker. Such language, it has been said, in Cross's "Statutory Interpretation" (Second Edn.) at page 21, appears to suggest that there are two units of enquiry in statutory interpretation -- the statutory text and the intention of the Parliament -- and the Judge must seek to harmonise the two. This, however, is not correct. According to the tradition of our law, primacy is to be given to the text in which the intention of the law-giver has been expressed. Cross refers to Blackstone's observations that the fairest and most rational method to interpret the will of the law maker is by exploring his intentions at the time when the law was made, by signs the most natural and probable. And these signs are either the words, the context, the subject-matter, the effects and consequences, or the spirit and reason of the law. We have no doubt, in our opinion, that having regard to the language used it would not be in consonance with the spirit and the reason of law to give exemption for non-alcoholic beverage bases under the notification in question. Bearing the aforesaid purpose, in our opinion, it cannot be contended that expensive items like Gold-Spot base, Limca-base or Thums up -

Patna High Court MA No. 342 of 2013 dt. 13-09-2023

base were intended to be given exemption at the cost of public exchequer."

(Emphasis by underlining, supplied by us)

14. We emphasize the declaration made by the

Hon'ble Supreme Court that having regard to the language used

in the exemption notification, it would not be in consonance

with the spirit and the reason of law to give exemption to non-

alcoholic beverage bases, under the notification in question. It

has to be observed that the said finding was rendered after

noticing the well settled principle that when two views

regarding a notification are possible, it should be construed in

favour of the subject. However, when there is an exception to

the general rule of taxation, it has to be construed strictly against

those who invoke its benefit, but once the assessee or the goods

fall under the exemption, there should be a liberal interpretation;

ensuring that no violence is done to the language employed and

that this does not result in an absurd construction of the

exemption notification.

15. Dilip Kumar and Company (supra) relied on by

both parties, puts into proper prospective, the principles of

interpretation of statutes and that of exceptions to the taxing

statute, after dealing with a number of precedents. The issue

referred to the Constitution Bench was as to the interpretative Patna High Court MA No. 342 of 2013 dt. 13-09-2023

rule to be applied, while interpreting a tax exemption;

provisions/notifications when there is an ambiguity as to its

applicability, with reference to the entitlement of the assessee or

the rate of tax to be applied. The referring Bench doubted the

correctness of the ratio in Sun Export Corporation, Bombay v.

Collector of Customs, Bombay, (1997) 6 SCC 564. In the said

decision, a three-Judge Bench ruled that ambiguity in a tax

exemption provision or notification must be always interpreted

to favour the assessee, claiming the benefit of exemption. The

decision in Collector and Customs and Central Excise, Guntur

and Ors v. Surendra Cotton Oil Mills and Fertilizers Co. And

Ors. (2001) 1 SCC 578, regarding the interpretation of an

exemption notification was quoted with approval, in the matter

of interpretation of charging section of a taxation statue. It was

reiterated that the strict rule of interpretation is mandatory and if

there are two views possible in the matter of interpretation of a

charging section, the one favourable to the assessee need to be

applied. However, it was noticed that there is some confusion

regarding the matter of interpretation of an exemption

notification published under the taxation statute; which was held

to be quite distinct and different from interpreting a taxing

provision.

Patna High Court MA No. 342 of 2013 dt. 13-09-2023

16. While emphasizing the need to construe a statute

strictly by its literal or plain meaning, it was held that the

contextual or purposive interpretation cannot be applied nor any

resort be made to look to other supporting material, even in a

taxation statute; where there is no room for any intendment.

Copiously referring to the various authorities, it was

categorically stated that there exists 'unsatisfactory state of law'

in relation to interpretation of exemption clauses. On the one

hand, while ambiguity in the taxing statute should inure to the

benefit of the subject/assessee, any ambiguity in the exemption

clause in a notification should lean in favour of the revenue;

unless the assessee clearly demonstrates that it squarely falls

within the parameters enumerated in the exemption notification

and satisfies all the conditions precedent, for availing such

exemption.

17. The declaration in Sun Export Corporation

(supra), that the ambiguity in an exemption notification should

be interpreted in favour of the assessee was held to be contrary

to the binding precedents on the subject. Novopan India Ltd. v.

Collector of Central Excise and Customs, (1994) Supp (3) SCC

606, a three-Judge Bench decision was extracted from. It was

held:

"The principle that in case of ambiguity, a taxing Patna High Court MA No. 342 of 2013 dt. 13-09-2023

statute should be construed in favour of the assessee -- assuming that the said principle is good and sound -- does not apply to the construction of an exception or an exempting provision, they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State."

The reference was answered holding as under in paragraph 66:-

"66.1. Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. 66.2. When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the Revenue. 66.3. The ratio in Sun Export case [Sun Export Corpn. v. Collector of Customs, (1997) 6 SCC 564] is not correct and all the decisions which took similar view as in Sun Export case [Sun Export Corpn. v. Collector of Customs, (1997) 6 SCC 564] stand overruled."

18. In the present case, the exemption notification is

very clear that, it grants exemption to condoms and oral

contraceptive pills. There is no reason why the legislative intent

should be imported, that too of population control, to bring in

every product developed as a contraceptive, which enables

population control. It is not as if the Legislature was not aware

of the very many measures and various devices used for

contraception even at the time when the notification was Patna High Court MA No. 342 of 2013 dt. 13-09-2023

introduced. Though the specific product, 'Multiload' was not in

vogue, within the country, at the time of issuance of the

notification, there were many devices used for contraception

which could be implanted or used on a female, other than oral

contraceptive pills, which have not been brought under the

specific exemption notification. 'Condoms' as it is understood in

common parlance is a sheath used on the male genital organ. We

are not looking at the wisdom of the Legislature which only

granted & restricted exemption to the specific contraceptive

device used on males and the oral pills used for contraception.

The words employed only grants exemption to those products

under the exemption notification and there is no ground to

judicially extend the exemption notification to devices which do

not clearly fall under the notification, on mere perception of the

laudable object, of population control, behind the exemption

notification.

19. From a conspectus of the principles coming out

from the cited decisions; an exemption notification has to be

strictly construed, the same being in the nature of an exception

from the general rule of taxation and once ambiguity or doubt

about the applicability is effaced and the subject falls within the

four corners of the notification, then full play should be given to Patna High Court MA No. 342 of 2013 dt. 13-09-2023

it and then there should be a wider and liberal construction. As

far as a purposive interpretation is concerned it is an aid to

interpretation resorted to, when there is an ambiguity in the

words employed.

20. The minority opinion of the Chairman of the

Tribunal looked at the objective, which was stated to be family

planning and also the definition of the word 'condom'; which as

per the Oxford Learner's Dictionary, January, 2000 edition,

contains the word female condoms also. It was found that there

was no reason to interpret the word 'condom' with a gender bias

and whoever uses it, the contraceptive character of the same is

relevant to consider the exemption and it does not necessarily go

by the user. It was also found that in the earlier years the tax

authorities have been granting exemption for the very same

product and hence, they are estopped from finding otherwise,

especially in the context of there being no change in factual

circumstances.

21. The majority view found that the principles of

res judicata does not apply in taxation, especially, since every

assessment year is deemed to be a separate cause of action, as

has been held in Radhasoami Satsang Saomi Bagh (supra).

Emphasis was laid on the specific entry and the words Patna High Court MA No. 342 of 2013 dt. 13-09-2023

employed, which does not include or cover the product sold by

the appellant. Reference was made to the definition given in

Chambers dictionary which specifically defined 'condom' to be

a device used by the males. Relying on the literal interpretation,

it was found that there is no ambiguity in the words used and the

product, which is sought exemption. It is neither a condom nor

an oral contraceptive pill; though it may be a contraceptive

device. Reference was made to the exemption granted by the

other States, which included the specific product or the

description brought, within its ambit the said product.

22. As is trite, one has to go by the words employed

in the statute or the exemption notification and aids of

interpretation should be resorted to, only when there is an

ambiguity. In the present case there is no reason to deviate from

the literal meaning; 'the golden rule of interpretation'. The

specific product was never in the contemplation of the

Legislature at the time of the notification for exemption. A

purposive interpretation fails, especially, since female

contraceptive devices were available, though not 'Multiload',

even at the time of the exemption notification, which was not

specifically brought in, as has been noticed in the majority

opinion. In Tamil Nadu 'Condoms and Contraceptives' were Patna High Court MA No. 342 of 2013 dt. 13-09-2023

granted exemption which would definitely bring an IUD also

within the scope of the exemption granted. In the State of

Kerala, specifically contraceptive pills and devices were granted

exemption, when Andhra Pradesh exempted oral contraceptive

pills and Intrauterine Contraceptive Devices. Hence, wherever,

the specific device has been granted exemption, the same is

permissible and if it does not fall within the scope and ambit of

the words employed, it has to be outside the cover of exemption

and there is no reason to look at the legislative intent. Family

planning definitely would have been in the mind of the

Legislature when the exemption was granted, but we cannot

question the wisdom of the Legislature, which exempted only

condoms and oral contraceptive pills; the words employed

calling for no aid to interpretation since there is no ambiguity.

The IUDs were specifically excluded from exemption while in

certain States they were granted the exemption.

23. In this context, we specifically refer to the

supplementary affidavit of the appellant, which in paragraph no.

8 while classifying IUD also as a contraceptive specifically

describes condoms and OCP (Oral Contraceptive Pills) as other

forms of contraceptives. Hence, there are different

nomenclatures for the numerous contraceptives available in the Patna High Court MA No. 342 of 2013 dt. 13-09-2023

market and as has been explained in the counter affidavit, there

are different methods of contraception. There is no blanket

exemption granted to all contraceptive devices nor is the

measure or method of contraception, the subject of the

exemption notification. The exemption notification refers to

specific products being condoms and oral contraceptive pills

which alone would fall under the notification.

24. As far as the earlier orders of exemption, the

assessing officer does not intend to revise the assessment of the

earlier years. It is trite that every assessment year is a separate

cause of action and it is well within the power of the taxing

authority to decide on an exemption and if there is a valid

reason for deviating from the earlier decision; there can be no

fault found, if the interpretation is the correct one. The assessing

authority having found the exemption to be applicable to the

product in the earlier years; in the subject year found that the

product does not fall within the scope of the clear words

employed in the exemption notification; which is found to be a

valid reasoning, going by the words employed in the

notification.

25. It is also to be pertinently noticed that the

Government has by the Bihar Value Added Tax Act, 2005, Patna High Court MA No. 342 of 2013 dt. 13-09-2023

specifically included 'condoms and contraceptives' in the list of

tax-free commodities, which would take within its ambit any

contraceptive device. Hence, when the Legislature intended to

bring in all contraceptive devices, it specifically indicated so

and words cannot be added or principles incorporated by resort

to legislative intent, in an exemption notification, deviating from

the specific words employed therein.

26. The appeals stand dismissed answering both the

questions of law, against the assessee and in favour of the

revenue.

(K. Vinod Chandran, CJ)

Partha Sarthy, J: I agree

(Partha Sarthy, J)

Aditya/-

AFR/NAFR                AFR
CAV DATE                29.08.2023.
Uploading Date          13.09.2023.
Transmission Date