REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(s). 4837 OF 2011
M/s. ACHAL INDUSTRIES .…..Appellant(s)
VERSUS
STATE OF KARNATAKA ….Respondent(s)
WITH
CIVIL APPEAL NO(s). 4838 OF 2011
J U D G M E N T
Rastogi, J.
The present appeals have been preferred against the
impugned judgment dated 17th April, 2007 passed by the High
Court of Karnataka disposing of the Sales Tax Revision Petition
examining the applicability of the turnover tax as defined under
1
Section 6B(1) by the Karnataka Sales Tax Act, 1957(hereinafter
being referred to as “KST Act”).
2. The brief facts of the case which may be relevant for the
present purpose are that the appellant is a manufacturer and
registered dealer of the cashew kernels cashew shell oil, etc.
Assessments were made for the years 199091 to 19992000 by
the respective assessing authorities under Section 12(3) of the
Act. Against the assessment orders of the assessing authorities,
appeals/revision petitions were preferred before the
appellate/revisional authority and the contention advanced by
the learned counsel for the appellant was that levy of tax under
Section 6B of the Act, on the total turnover is a misconstruction
of the provision and it has to be on the “taxable turnover” which
may be in conformity with Article 286 of the Constitution of India
but that was neither accepted by the assessing authority nor at
the appellate/revisional stage against which the present appeals
have been preferred impugning the assessments made for the
years 199091 to 19992000 in the instant appeals.
2
3. The main thrust of the submission of Mr. Mohit Chaudhary,
learned counsel for the appellant is that Courts below have
manifestly erred in appreciating that the ‘total turnover’ as
defined under Section 6B(1) for the purpose of levy turnover tax
can in no event include the ‘turnover’ with reference to which the
State has no power to levy tax under the constitutional scheme
and the submission proceeds that the levy of tax under Section
6B can be on the ‘taxable turnover’ alone. Though the first limb
of the Section has adopted the word ‘total turnover’ but it is only
for the limited purpose of identifying the dealers and further
submits that the ‘turnover’ which is not liable to tax under the
provisions of the Act, cannot be included in the calculation of
‘total turnover’ for the purpose of assessment of turnover tax and
that is according to him the basic error which has been
committed in interpreting Section 6B(1) of the KST Act.
4. Learned counsel submits that the interpretation which has
been advanced by the respondent State if taken at its face value,
would amount to permitting the State to indirectly levy turnover
tax on part of a dealer’s total turnover which is non exigible to
3
intra sales tax and indeed would be beyond the legislative
competence of the State.
5. Learned counsel further submits that although the
constitutional validity of the provision has been upheld but still
open to the Court to read down the provision in a manner that it
do not offend the Constitutional scheme. The concept of ‘total
turnover’ has been incorporated under Section 6B(1) for the
purpose of identification of the dealers and for prescribing
rate/slabs and the actual levy is intended only on intrastate
turnover by reason of the proviso, it may be within the
competence of the State Legislature. In support of submission,
learned counsel has placed reliance on the decision of this Court
in Indra Das Vs. State of Assam 2011(3) SCC 380 and Rakesh
Kumar Paul Vs. State of Assam 2017(15) SCC 67.
6. Per contra, Mr. Devadatt Kamat, learned AAG appearing for
the respondent State submits that the issue in the instant
appeals stands conclusively answered by this Court in M/s.
Hoechst Pharmaceuticals Ltd. and Others Vs. State of Bihar
4
and Others 1983(4) SCC 45 and further submits that once the
constitutional validity of Section 6B has been upheld by the
jurisdictional High Court in the series of decisions, wherein the
challenge to Section 6B(1) offending Article 14 and 19(1)(g) of the
Constitution of India regarding the classification of dealers being
repelled and it was held that the inclusion of interstate export
and import turnover is only for the purpose of identifying dealers
and not for levying tax, that was within the competence of the
State Legislature. This Court has explained in M/s. Hoechst
Pharmaceuticals Ltd. and Others Vs. State of Bihar and
Others(supra) to reiterate the principle of economic superiority
for the purpose of levying turnover tax.
7. Learned counsel for the respondent State further submits
that in the instant case, the appellant filed returns for the
assessment years in question claiming certain deductions. When
such returns were assessed by the assessing authorities, it was
noticed that as far as the determination of the rate at which
‘turnover tax’ was to be levied, the dealer has made incorrect
deductions and in turn has furnished returns at a lower rate.
5
Upon assessment, the assessing authority determined the actual
slab applicable to the assessee for each assessment year and
levied the turnover tax accordingly and it is in conformity with
Section 6B(1) of the KST Act.
8. Before we proceed to examine the question raised any
further, it will be relevant to note the preamendment (1st April,
2000) of the KST Act, as under:
“2. Definitions. – (1) In this Act, unless the context
otherwise requires,
…
“(u) "tax" means a tax leviable under the provisions of
this Act;
[(u1) "taxable turnover" means the turnover on which
a dealer shall be liable to pay tax as determined after
making such deductions from his total turnover and in
such manner as may be prescribed, but shall not
include the turnover of purchase or sale in the course
of interState trade or commerce or in the course of
export of the goods out of the territory of India or in the
course of import of the goods into the territory of India;
(u2) "total turnover" means the aggregate turnover in
all goods of a dealer at all places of business in the
State, whether or not the whole or any portion of such
turnover is liable to tax, including the turnover of
purchase or sale in the course of interState trade or
commerce or in the course of export of the goods out of
the territory of India or in the course of import of the
goods into the territory of India;]
(v) "turnover" means the aggregate amount for which
goods are bought or sold, or supplied or distributed [or
delivered or otherwise disposed of in any of the ways
referred to in clause (t)] by a dealer, either directly or
through another, on his own account or on account of
6
others, whether for cash or for deferred payment or
other valuable consideration;
….
[6B. Levy of Turnover Tax. [(1) [Every registered
dealer and every dealer who is liable to get himself
registered under subsections (1) and (2) of Section 10]
whose total turnover in a year is not less than [ten
lakh] rupees whether or not the whole or any portion of
such turnover is liable to tax under any other
provisions of this Act, shall be liable to pay tax,
(i) at the rate of one and a quarter per cent of his total
turnover, if his total turnover is not less than ten lakh
rupees but is less than two hundred lakh rupees in a
year; or
(ii) at the rate of one and threefourths per cent of his total
turnover, if his total turnover is not less than two
hundred lakh rupees [but is less than five hundred
lakh rupees in a year; or]
(iii) at the rate of [two and three fourth per cent] of his total
turnover, if his total turnover is not less than five
hundred lakh rupees in a year]:
Provided that no tax under this subsection shall
be payable on that part of such turnover which relates
to,
(i) sale or purchase of goods specified in the Fifth
Schedule;
(ii) sale or purchase of good specified in the Fourth
Schedule;
(iii) sale or purchase of goods in the course of interState
trade or commerce;
….
Provided further that save as otherwise provided
in this subsection, no other deduction shall be made
7
from the total turnover of a dealer for the purposes of
this Section.”
9. The expression “total turnover” + “turnover” which has been
used under Section 6B has the same meaning as defined under
Section 2(1)(u2) and 2(v) of the Act. It may be further noticed
that under Section 6B, reference is made on ‘total turnover’ and
not the ‘turnover’ as defined under Section 2(v) of the KST Act
and taking note of the exemption provided under first proviso
clause(iii), exclusion has been made in reference to use of sale or
purchase of goods in the course of interstate trade or commerce.
It clearly indicates that the expression ‘total turnover’ which has
been incorporated as referred to under Section 6B(1) is for the
purpose of identification of the dealers and for prescribing
different rates/slabs. The first proviso to Section 6B(1) provides
an exhaustive list of deductions which are to be made in
computation of such turnover with a further stipulation as
referred to in second proviso that except for the manner provided
for in Section 6B(1), no other deduction shall be made from the
total turnover of a dealer.
8
10. This Court, in M/s. Hoechst Pharmaceuticals Ltd. and
Others case(supra), while examining the pari meteria provision of
subSection (1) of Section 5 of the Bihar Finance Act which
provides for levy of surcharge on gross turnover in relation to the
tax payable in reference to Article 286 of the Constitution of India
read with Entry 54 under List II of Seventh Schedule into
consideration held as under:
90. The decision in Fernandez case [AIR 1957 SC 657]
is therefore clearly an authority for the proposition that
the State Legislature notwithstanding Article 286 of the
Constitution while making a law under Entry 54 of List
II of the Seventh Schedule can, for purposes of the
registration of a dealer and submission of returns of
sales tax, include the transactions covered by Article
286 of the Constitution. That being so, the
constitutional validity of subsection (1) of Section 5 of
the Act which provides for the classification of dealers
whose gross turnover during a year exceeds Rs 5 lakhs
for the purpose of levy of surcharge, in addition to the
tax payable by him, is not assailable. So long as sales
in the course of interState trade and commerce or
sales outside the State and sales in the course of
import into, or export out of the territory of India are
not taxed, there is nothing to prevent the State
Legislature while making a law for the levy of a
surcharge under Entry 54 of List II of the Seventh
Schedule to take into account the total turnover of the
dealer within the State and provide, as has been done
by subsection (1) of Section 5 of the Act, that if the
gross turnover of such dealer exceeds Rs 5 lakhs in a
year, he shall, in addition to the tax, also pay a
surcharge at such rate not exceeding 10 per centum of
the tax as may be provided. The liability to pay a
surcharge is not on the gross turnover including the
transactions covered by Article 286 but is only on
inside sales and the surcharge is sought to be levied on
9
dealers who have a position of economic superiority.
The definition of gross turnover in Section 2(j) of the
Act is adopted not for the purpose of bringing to
surcharge interstate sales or outside sales or sales in
the course of import into, or export of goods out of the
territory of India, but is only for the purpose of
classifying dealers within the State and to identify the
class of dealers liable to pay such surcharge. The
underlying object is to classify dealers into those who
are economically superior and those who are not. That
is to say, the imposition of surcharge is on those who
have the capacity to bear the burden of additional tax.
There is sufficient territorial nexus between the
persons sought to be charged and the State seeking to
tax them. Sufficiency of territorial nexus involves a
consideration of two elements viz.: (a) the connection
must be real and not illusory, and (b) the liability
sought to be imposed must be pertinent to that
territorial connection: State of Bombay v.R.M.D.
Chamarbaugwala [AIR 1957 SC 699], Tata Iron & Steel
Co. Ltd. v. State of Bihar[(1958) SCR 1355]
and International Tourist Corporation v. State of
Haryana [(1981) 2 SCC 318]. The gross turnover of a
dealer is taken into account in subsection (1) of
Section 5 of the Act for the purpose of identifying the
class of dealers liable to pay a surcharge not on the
gross turnover but on the tax payable by them.
11. This Court also noticed the economic superiority principle
for the purpose of levy of turnover tax while holding that the
interpretation of statute would not depend upon contingency. It
is trite law which the Court would ordinary take recourse to
golden rule of strict interpretation while interpreting taxing
statutes. In construing penal statutes and taxation statutes, the
Court has to apply strict rule of interpretation and this is what
10
has been considered by this Court in Commissioner of
Customs(Import), Mumbai Vs. Dilip Kumar and Company and
Others 2018(9) SCC 1 in para 24 and 34 as under:
“24. In construing penal statutes and taxation
statutes, the Court has to apply strict rule of
interpretation. The penal statute which tends to
deprive a person of right to life and liberty has to be
given strict interpretation or else many innocents
might become victims of discretionary decisionmaking. Insofar as taxation statutes are concerned,
Article 265 of the Constitution prohibits the State from
extracting tax from the citizens without authority of
law. It is axiomatic that taxation statute has to be
interpreted strictly because the State cannot at their
whims and fancies burden the citizens without
authority of law. In other words, when the competent
Legislature mandates taxing certain persons/certain
objects in certain circumstances, it cannot be
expanded/interpreted to include those, which were not
intended by the legislature.
34. The passages extracted above, were quoted with
approval by this Court in at least two decisions
being CIT v. Kasturi and Sons Ltd. (1999) 3 SCC 346
and State of W.B. v. Kesoram Industries Ltd. (2004) 10
SCC 201 (hereinafter referred to as “Kesoram
Industries case”, for brevity). In the later decision, a
Bench of five Judges, after citing the above passage
from Justice G.P. Singh's treatise, summed up the
following principles applicable to the interpretation of a
taxing statute:
“(i) In interpreting a taxing statute, equitable
considerations are entirely out of place. A taxing
statute cannot be interpreted on any presumption or
assumption. A taxing statute has to be interpreted in
the light of what is clearly expressed; it cannot imply
anything which is not expressed; it cannot import
provisions in the statute so as to supply any deficiency;
11
(ii) Before taxing any person, it must be shown that he
falls within the ambit of the charging section by clear
words used in the section; and (iii) If the words are
ambiguous and open to two interpretations, the benefit
of interpretation is given to the subject and there is
nothing unjust in a taxpayer escaping if the letter of
the law fails to catch him on account of the
legislature's failure to express itself clearly.”
12. In the instant scheme of the Act of which reference has been
made in detail, the expression ‘total turnover’ has been referred
to for the purpose of identification/classification of dealers for
prescribing various rates/slabs of tax leviable to the dealer and
read with first and second proviso to Section 6B(1), this makes
the intention of the legislature clear and unambiguous that
except the deductions provided under the first proviso to Section
6B(1) nothing else can be deducted from the total turnover as
defined under Section 2(u2) for the purpose of levy of turnover
tax under Section 6B of the Act.
13. The submission of learned counsel for the appellant that the
‘total turnover’ in Section 6B(1) is to be read as ‘taxable
turnover’ and the determination of the rate of the turnover tax is
to be ascertained on the ‘taxable turnover’ on the face of it is
unsustainable and deserves outright rejection.
12
14. The judgments on which learned counsel has placed
reliance in Indra Das Vs. State of Assam (supra) is in context of
the fundamental rights in reference to the provisions of Terrorists
& Disruptive Activities (Prevention) Act, 1987, and it was
observed that the endeavour of the court should be to try to
sustain the validity of the statute by reading it down as possible.
15. The judgment in Subramanian Swamy and others Vs.
Raju through Member, Juvenile Justice Board and Another
2014(8) SCC 390 was in reference to a challenge to the validity of
the Juvenile Justice(Care and Protection of Children) Act, 2000.
Though the validity was repelled by this Court, the doctrine of
‘reading down’ was discussed. It was held to be inapplicable in
the facts of the said case.
16. In Rakesh Kumar Paul Vs. State of Assam(supra), this
Court has examined the interpretation of Section 167(2) of the
Code of Criminal Procedure, 1973 which has a reference to the
liberty of a citizen. Either of the cases referred to may not have
any remote relevance to the question which has come up before
us for consideration.
13
17. Consequently, in our considered view, the appeals are
without substance and the same are dismissed accordingly. No
costs.
18. Pending application(s), if any, stand disposed of.
…………………………J.
(A.M. KHANWILKAR)
………………………….J.
(AJAY RASTOGI)
NEW DELHI
March 28, 2019
14
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(s). 4837 OF 2011
M/s. ACHAL INDUSTRIES .…..Appellant(s)
VERSUS
STATE OF KARNATAKA ….Respondent(s)
WITH
CIVIL APPEAL NO(s). 4838 OF 2011
J U D G M E N T
Rastogi, J.
The present appeals have been preferred against the
impugned judgment dated 17th April, 2007 passed by the High
Court of Karnataka disposing of the Sales Tax Revision Petition
examining the applicability of the turnover tax as defined under
1
Section 6B(1) by the Karnataka Sales Tax Act, 1957(hereinafter
being referred to as “KST Act”).
2. The brief facts of the case which may be relevant for the
present purpose are that the appellant is a manufacturer and
registered dealer of the cashew kernels cashew shell oil, etc.
Assessments were made for the years 199091 to 19992000 by
the respective assessing authorities under Section 12(3) of the
Act. Against the assessment orders of the assessing authorities,
appeals/revision petitions were preferred before the
appellate/revisional authority and the contention advanced by
the learned counsel for the appellant was that levy of tax under
Section 6B of the Act, on the total turnover is a misconstruction
of the provision and it has to be on the “taxable turnover” which
may be in conformity with Article 286 of the Constitution of India
but that was neither accepted by the assessing authority nor at
the appellate/revisional stage against which the present appeals
have been preferred impugning the assessments made for the
years 199091 to 19992000 in the instant appeals.
2
3. The main thrust of the submission of Mr. Mohit Chaudhary,
learned counsel for the appellant is that Courts below have
manifestly erred in appreciating that the ‘total turnover’ as
defined under Section 6B(1) for the purpose of levy turnover tax
can in no event include the ‘turnover’ with reference to which the
State has no power to levy tax under the constitutional scheme
and the submission proceeds that the levy of tax under Section
6B can be on the ‘taxable turnover’ alone. Though the first limb
of the Section has adopted the word ‘total turnover’ but it is only
for the limited purpose of identifying the dealers and further
submits that the ‘turnover’ which is not liable to tax under the
provisions of the Act, cannot be included in the calculation of
‘total turnover’ for the purpose of assessment of turnover tax and
that is according to him the basic error which has been
committed in interpreting Section 6B(1) of the KST Act.
4. Learned counsel submits that the interpretation which has
been advanced by the respondent State if taken at its face value,
would amount to permitting the State to indirectly levy turnover
tax on part of a dealer’s total turnover which is non exigible to
3
intra sales tax and indeed would be beyond the legislative
competence of the State.
5. Learned counsel further submits that although the
constitutional validity of the provision has been upheld but still
open to the Court to read down the provision in a manner that it
do not offend the Constitutional scheme. The concept of ‘total
turnover’ has been incorporated under Section 6B(1) for the
purpose of identification of the dealers and for prescribing
rate/slabs and the actual levy is intended only on intrastate
turnover by reason of the proviso, it may be within the
competence of the State Legislature. In support of submission,
learned counsel has placed reliance on the decision of this Court
in Indra Das Vs. State of Assam 2011(3) SCC 380 and Rakesh
Kumar Paul Vs. State of Assam 2017(15) SCC 67.
6. Per contra, Mr. Devadatt Kamat, learned AAG appearing for
the respondent State submits that the issue in the instant
appeals stands conclusively answered by this Court in M/s.
Hoechst Pharmaceuticals Ltd. and Others Vs. State of Bihar
4
and Others 1983(4) SCC 45 and further submits that once the
constitutional validity of Section 6B has been upheld by the
jurisdictional High Court in the series of decisions, wherein the
challenge to Section 6B(1) offending Article 14 and 19(1)(g) of the
Constitution of India regarding the classification of dealers being
repelled and it was held that the inclusion of interstate export
and import turnover is only for the purpose of identifying dealers
and not for levying tax, that was within the competence of the
State Legislature. This Court has explained in M/s. Hoechst
Pharmaceuticals Ltd. and Others Vs. State of Bihar and
Others(supra) to reiterate the principle of economic superiority
for the purpose of levying turnover tax.
7. Learned counsel for the respondent State further submits
that in the instant case, the appellant filed returns for the
assessment years in question claiming certain deductions. When
such returns were assessed by the assessing authorities, it was
noticed that as far as the determination of the rate at which
‘turnover tax’ was to be levied, the dealer has made incorrect
deductions and in turn has furnished returns at a lower rate.
5
Upon assessment, the assessing authority determined the actual
slab applicable to the assessee for each assessment year and
levied the turnover tax accordingly and it is in conformity with
Section 6B(1) of the KST Act.
8. Before we proceed to examine the question raised any
further, it will be relevant to note the preamendment (1st April,
2000) of the KST Act, as under:
“2. Definitions. – (1) In this Act, unless the context
otherwise requires,
…
“(u) "tax" means a tax leviable under the provisions of
this Act;
[(u1) "taxable turnover" means the turnover on which
a dealer shall be liable to pay tax as determined after
making such deductions from his total turnover and in
such manner as may be prescribed, but shall not
include the turnover of purchase or sale in the course
of interState trade or commerce or in the course of
export of the goods out of the territory of India or in the
course of import of the goods into the territory of India;
(u2) "total turnover" means the aggregate turnover in
all goods of a dealer at all places of business in the
State, whether or not the whole or any portion of such
turnover is liable to tax, including the turnover of
purchase or sale in the course of interState trade or
commerce or in the course of export of the goods out of
the territory of India or in the course of import of the
goods into the territory of India;]
(v) "turnover" means the aggregate amount for which
goods are bought or sold, or supplied or distributed [or
delivered or otherwise disposed of in any of the ways
referred to in clause (t)] by a dealer, either directly or
through another, on his own account or on account of
6
others, whether for cash or for deferred payment or
other valuable consideration;
….
[6B. Levy of Turnover Tax. [(1) [Every registered
dealer and every dealer who is liable to get himself
registered under subsections (1) and (2) of Section 10]
whose total turnover in a year is not less than [ten
lakh] rupees whether or not the whole or any portion of
such turnover is liable to tax under any other
provisions of this Act, shall be liable to pay tax,
(i) at the rate of one and a quarter per cent of his total
turnover, if his total turnover is not less than ten lakh
rupees but is less than two hundred lakh rupees in a
year; or
(ii) at the rate of one and threefourths per cent of his total
turnover, if his total turnover is not less than two
hundred lakh rupees [but is less than five hundred
lakh rupees in a year; or]
(iii) at the rate of [two and three fourth per cent] of his total
turnover, if his total turnover is not less than five
hundred lakh rupees in a year]:
Provided that no tax under this subsection shall
be payable on that part of such turnover which relates
to,
(i) sale or purchase of goods specified in the Fifth
Schedule;
(ii) sale or purchase of good specified in the Fourth
Schedule;
(iii) sale or purchase of goods in the course of interState
trade or commerce;
….
Provided further that save as otherwise provided
in this subsection, no other deduction shall be made
7
from the total turnover of a dealer for the purposes of
this Section.”
9. The expression “total turnover” + “turnover” which has been
used under Section 6B has the same meaning as defined under
Section 2(1)(u2) and 2(v) of the Act. It may be further noticed
that under Section 6B, reference is made on ‘total turnover’ and
not the ‘turnover’ as defined under Section 2(v) of the KST Act
and taking note of the exemption provided under first proviso
clause(iii), exclusion has been made in reference to use of sale or
purchase of goods in the course of interstate trade or commerce.
It clearly indicates that the expression ‘total turnover’ which has
been incorporated as referred to under Section 6B(1) is for the
purpose of identification of the dealers and for prescribing
different rates/slabs. The first proviso to Section 6B(1) provides
an exhaustive list of deductions which are to be made in
computation of such turnover with a further stipulation as
referred to in second proviso that except for the manner provided
for in Section 6B(1), no other deduction shall be made from the
total turnover of a dealer.
8
10. This Court, in M/s. Hoechst Pharmaceuticals Ltd. and
Others case(supra), while examining the pari meteria provision of
subSection (1) of Section 5 of the Bihar Finance Act which
provides for levy of surcharge on gross turnover in relation to the
tax payable in reference to Article 286 of the Constitution of India
read with Entry 54 under List II of Seventh Schedule into
consideration held as under:
90. The decision in Fernandez case [AIR 1957 SC 657]
is therefore clearly an authority for the proposition that
the State Legislature notwithstanding Article 286 of the
Constitution while making a law under Entry 54 of List
II of the Seventh Schedule can, for purposes of the
registration of a dealer and submission of returns of
sales tax, include the transactions covered by Article
286 of the Constitution. That being so, the
constitutional validity of subsection (1) of Section 5 of
the Act which provides for the classification of dealers
whose gross turnover during a year exceeds Rs 5 lakhs
for the purpose of levy of surcharge, in addition to the
tax payable by him, is not assailable. So long as sales
in the course of interState trade and commerce or
sales outside the State and sales in the course of
import into, or export out of the territory of India are
not taxed, there is nothing to prevent the State
Legislature while making a law for the levy of a
surcharge under Entry 54 of List II of the Seventh
Schedule to take into account the total turnover of the
dealer within the State and provide, as has been done
by subsection (1) of Section 5 of the Act, that if the
gross turnover of such dealer exceeds Rs 5 lakhs in a
year, he shall, in addition to the tax, also pay a
surcharge at such rate not exceeding 10 per centum of
the tax as may be provided. The liability to pay a
surcharge is not on the gross turnover including the
transactions covered by Article 286 but is only on
inside sales and the surcharge is sought to be levied on
9
dealers who have a position of economic superiority.
The definition of gross turnover in Section 2(j) of the
Act is adopted not for the purpose of bringing to
surcharge interstate sales or outside sales or sales in
the course of import into, or export of goods out of the
territory of India, but is only for the purpose of
classifying dealers within the State and to identify the
class of dealers liable to pay such surcharge. The
underlying object is to classify dealers into those who
are economically superior and those who are not. That
is to say, the imposition of surcharge is on those who
have the capacity to bear the burden of additional tax.
There is sufficient territorial nexus between the
persons sought to be charged and the State seeking to
tax them. Sufficiency of territorial nexus involves a
consideration of two elements viz.: (a) the connection
must be real and not illusory, and (b) the liability
sought to be imposed must be pertinent to that
territorial connection: State of Bombay v.R.M.D.
Chamarbaugwala [AIR 1957 SC 699], Tata Iron & Steel
Co. Ltd. v. State of Bihar[(1958) SCR 1355]
and International Tourist Corporation v. State of
Haryana [(1981) 2 SCC 318]. The gross turnover of a
dealer is taken into account in subsection (1) of
Section 5 of the Act for the purpose of identifying the
class of dealers liable to pay a surcharge not on the
gross turnover but on the tax payable by them.
11. This Court also noticed the economic superiority principle
for the purpose of levy of turnover tax while holding that the
interpretation of statute would not depend upon contingency. It
is trite law which the Court would ordinary take recourse to
golden rule of strict interpretation while interpreting taxing
statutes. In construing penal statutes and taxation statutes, the
Court has to apply strict rule of interpretation and this is what
10
has been considered by this Court in Commissioner of
Customs(Import), Mumbai Vs. Dilip Kumar and Company and
Others 2018(9) SCC 1 in para 24 and 34 as under:
“24. In construing penal statutes and taxation
statutes, the Court has to apply strict rule of
interpretation. The penal statute which tends to
deprive a person of right to life and liberty has to be
given strict interpretation or else many innocents
might become victims of discretionary decisionmaking. Insofar as taxation statutes are concerned,
Article 265 of the Constitution prohibits the State from
extracting tax from the citizens without authority of
law. It is axiomatic that taxation statute has to be
interpreted strictly because the State cannot at their
whims and fancies burden the citizens without
authority of law. In other words, when the competent
Legislature mandates taxing certain persons/certain
objects in certain circumstances, it cannot be
expanded/interpreted to include those, which were not
intended by the legislature.
34. The passages extracted above, were quoted with
approval by this Court in at least two decisions
being CIT v. Kasturi and Sons Ltd. (1999) 3 SCC 346
and State of W.B. v. Kesoram Industries Ltd. (2004) 10
SCC 201 (hereinafter referred to as “Kesoram
Industries case”, for brevity). In the later decision, a
Bench of five Judges, after citing the above passage
from Justice G.P. Singh's treatise, summed up the
following principles applicable to the interpretation of a
taxing statute:
“(i) In interpreting a taxing statute, equitable
considerations are entirely out of place. A taxing
statute cannot be interpreted on any presumption or
assumption. A taxing statute has to be interpreted in
the light of what is clearly expressed; it cannot imply
anything which is not expressed; it cannot import
provisions in the statute so as to supply any deficiency;
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(ii) Before taxing any person, it must be shown that he
falls within the ambit of the charging section by clear
words used in the section; and (iii) If the words are
ambiguous and open to two interpretations, the benefit
of interpretation is given to the subject and there is
nothing unjust in a taxpayer escaping if the letter of
the law fails to catch him on account of the
legislature's failure to express itself clearly.”
12. In the instant scheme of the Act of which reference has been
made in detail, the expression ‘total turnover’ has been referred
to for the purpose of identification/classification of dealers for
prescribing various rates/slabs of tax leviable to the dealer and
read with first and second proviso to Section 6B(1), this makes
the intention of the legislature clear and unambiguous that
except the deductions provided under the first proviso to Section
6B(1) nothing else can be deducted from the total turnover as
defined under Section 2(u2) for the purpose of levy of turnover
tax under Section 6B of the Act.
13. The submission of learned counsel for the appellant that the
‘total turnover’ in Section 6B(1) is to be read as ‘taxable
turnover’ and the determination of the rate of the turnover tax is
to be ascertained on the ‘taxable turnover’ on the face of it is
unsustainable and deserves outright rejection.
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14. The judgments on which learned counsel has placed
reliance in Indra Das Vs. State of Assam (supra) is in context of
the fundamental rights in reference to the provisions of Terrorists
& Disruptive Activities (Prevention) Act, 1987, and it was
observed that the endeavour of the court should be to try to
sustain the validity of the statute by reading it down as possible.
15. The judgment in Subramanian Swamy and others Vs.
Raju through Member, Juvenile Justice Board and Another
2014(8) SCC 390 was in reference to a challenge to the validity of
the Juvenile Justice(Care and Protection of Children) Act, 2000.
Though the validity was repelled by this Court, the doctrine of
‘reading down’ was discussed. It was held to be inapplicable in
the facts of the said case.
16. In Rakesh Kumar Paul Vs. State of Assam(supra), this
Court has examined the interpretation of Section 167(2) of the
Code of Criminal Procedure, 1973 which has a reference to the
liberty of a citizen. Either of the cases referred to may not have
any remote relevance to the question which has come up before
us for consideration.
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17. Consequently, in our considered view, the appeals are
without substance and the same are dismissed accordingly. No
costs.
18. Pending application(s), if any, stand disposed of.
…………………………J.
(A.M. KHANWILKAR)
………………………….J.
(AJAY RASTOGI)
NEW DELHI
March 28, 2019
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