JUDGMENT
S.R. Rajasekhara Murthy, J.
1. The petitioner is engaged in the business of converting raw cashew into cashew kernel. The petitioner purchases raw cashew nuts from unregistered dealers for his business. The petitioner’s manufacturing unit is recognised as a tiny-sector industrial unit for purposes of availing tax exemption extended by the Government of Karnataka as per notification dated March 31, 1983.
2. Under the said notification issued by the State Government in exercise of the powers conferred by section 8A of the Karnataka Sales Tax Act (“the Act”), the petitioner is exempt from tax or taxes payable under the Act on the turnover of goods manufactured in Karnataka and sold by all tiny-sector industrial units which are eligible for the exemption under the said notification.
3. The contention of the petitioner is that the department, on a literal interpretation of the notification, is of the opinion that only the sale turnover of finished products is exempt from levy of tax and not the purchase tax payable on the purchase turnover of raw cashew.
4. Several contentions are urged by Sri Indrakumar, the learned counsel for the petitioner. It was argued that, under explanation VI to the Second Schedule, which reads thus :
“Explanation VI. – Where a tax has been levied in respect of cashew under item 88, the kernel pressed out of the said cashew shall not be liable to tax under section 5”,
5. the sale turnover of the petitioner, in any event, would be exempt from tax since all manufacturers of cashew kernel including the petitioner would be entitled to exemption in terms of the explanation itself.
6. It was, therefore, argued that the petitioner would derive no benefit under the notification, if such an interpretation is put against the petitioner which is a tiny-sector industrial unit.
7. As per the explanation, the petitioner’s sale turnover of finished products of cashew kernel is exempt from the levy of tax, but he will have to pay tax on the purchase turnover of raw cashew. The argument of the petitioner is that by virtue of the interpretation sought to be placed by the department, the petitioner derives no benefit whatsoever as a tiny-sector industrial unit and would be placed on par with any other manufacturer of cashew kernel, in view of explanation VI of the Second Schedule.
8. The argument that is developed on this premise is, having regard to the object underlying the issuance of the notification in regard to the tiny-sector industrial units, the notification should receive a beneficent construction in order to give effect to the avowed object of the Government in extending tax incentives to tiny-sector industrial units for a period of five years.
9. The writ petition is opposed on behalf of the respondents and a statement of objections is filed in the case. It is the case of the department that what is exempt under the notification is only the sale turnover of the finished product and not the purchase tax payable under section 6 of the Act. It was urged by Sri C. V. Kumar, the learned Government Pleader, that the notification issued by the Government under section 8A of the Act does not admit of any other interpretation, and the exemption is only in respect of the tax payable on the sale turnover of finished products. The only question that arises for consideration on the arguments advanced by both sides is :
Whether the petitioner is entitled to exemption on its purchase turnover on a proper interpretation of the notification of the Government dated March 31, 1983 ?
10. The preamble to the notification reads thus :
“In exercise of the powers conferred by clause (b) of sub-section (1) of section 8A of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957), the Government of Karnataka hereby exempts, with effect from first day of April 1983, the tax or taxes payable under the said Act, on the turnover of the goods manufactured in Karnataka and sold by all tiny-sector industrial units as defined hereafter, for a period of 5 years from the respective date of commencement of their commercial production, subject to the following restrictions and conditions.”
11. This preamble should, in my opinion, be read, construed and interpreted in the light of the relevant entries 88 and 88A of the Second Schedule read with explanation VI.
12. Under explanation VI, which has been reproduced earlier, the kernel pressed out of raw cashew, which has suffered tax under the Act, is exempt from payment of tax at the point of sale of the finished product, namely, cashew kernel. The said explanation is applicable to all manufacturers of cashew kernel and the kernel pressed out of tax suffered cashew is exempt from levy of tax at sale point. Keeping this provision in view, if we examine the object and purpose of the Government notification, one reasonable way of interpreting the terms of the preamble is that the Government intended to exempt the tiny-sector units from payment of all taxes payable under the Act. Though the latter half of the preamble refers to the tax payable on the turnover of goods manufactured and sold by tiny-sector industrial units, the reasonable interpretation it admits of is, having regard to the object of extending tax concession to tiny-sector units, that the tiny-sector industrial units would be eligible for exemption from all taxes payable under the Act.
13. The expression, “on the turnover of goods manufactured and sold by all tiny-sector industrial units” should not control and read in such a way so as to take away the benefit of total exemption purported to be extended by the Government to tiny-sector industrial units. This is one way of looking at it. If this interpretation commands itself for acceptance, then without any further argument, the petitioner must succeed.
14. The other interpretation that is pressed for acceptance on behalf of the petitioner is, “beneficent construction” that should be placed while interpreting the Government notification. This Court had occasion to deal with similar contention in Sri Virupaksha Enterprises v. Commercial Tax Officer [1990] 77 STC 28. Though the facts which led to the acceptance of the said interpretation in the said case were different, the principle that was accepted by this Court should be made applicable to the facts of the present case as well. This Court applied the said principle in Sri Virupaksha Enterprises case [1990] 77 STC 28, from the sole point of preventing injustice, inconvenience or hardship to the person or persons who are eligible for exemption under the notification. This Court keeping in view the consequences that may follow adversely affecting the dealer, adopted an approach which would be reasonable and beneficial. The reasons given by this Court to apply the said principle of interpretation in the circumstances similar to the present case should hold good and apply while interpreting the Government notification in the present case also. The Division Bench upheld the view taken by the single Judge (S. R. Rajasekhara Murthy, J.), in Virupaksha Enterprises case [1990] 77 STC 28 and dismissed the writ appeals filed by the State.
15. Sri Indrakumar also relied upon the decision of the Supreme Court in Union of India v. Wood Papers Ltd. [1991] 83 STC 251; (1990) 47 ELT 700, and in particular, the observations made in paragraphs 2 and 3 of its judgment, that the court should, while interpreting the exemption provision, adopt a liberal construction, whereas, it should adopt a strict construction while applying the provision providing for levy. The Supreme Court also observed, the construction which results in inequitable results and is incongruous has to be avoided.
16. Another case of the Supreme Court cited by the learned counsel is Union of India v. Sukhshaw International (1989) 39 ELT 503. Sri Venkatachaliah, J., laid down in paragraph 9 of the judgment that a factual strict interpretation of a beneficial policy of the Government should not be adopted by courts, and observed that, what is given by one hand should not be taken away by the other. His Lordship, interpreting the conditions in paragraph 185(4) of the export policy of the Government of India issued by the Controller of Imports and Exports, adopted a harmonious construction and came to the conclusion that the view which commended itself to the court was not an unreasonable view.
17. Having regard to the enunciation, the Supreme Court made in the two cases referred to above, and the principle of “beneficent construction”, approved by this Court in Sri Virupaksha Enterprises case [1990] 77 STC 28 (Kar), the petitioner must succeed.
18. In the result, the writ petition is allowed and the endorsement of the Commercial Tax Officer, II Circle, Udupi, dated January 22, 1988 (annexure A), is quashed. As a result, the petitioner shall be entitled to exemption from payment of purchase tax under section 6 of the Act. It is made clear that this ruling shall be made applicable to all similar manufacturing units to which the notification in question is applicable.
19. I, therefore, issue a mandamus to the second respondent-State to exempt the petitioner from payment of purchase tax on its purchase turnover of raw cashew, and grant refund of tax paid.
20. Writ petition allowed.