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Member-Secretary, Andhra … vs Andhra Pradesh Rayons Ltd. & Ors on 30 September, 1988

Supreme Court of India
Member-Secretary, Andhra … vs Andhra Pradesh Rayons Ltd. & Ors on 30 September, 1988
Equivalent citations: 1989 AIR 611, 1988 SCR Supl. (3) 380
Author: S Mukharji
Bench: Mukharji, Sabyasachi (J)
           PETITIONER:
MEMBER-SECRETARY, ANDHRA PRADESH STATEBOARD FOR PREVENTION A

	Vs.

RESPONDENT:
ANDHRA PRADESH RAYONS LTD. & ORS.

DATE OF JUDGMENT30/09/1988

BENCH:
MUKHARJI, SABYASACHI (J)
BENCH:
MUKHARJI, SABYASACHI (J)
KANIA, M.H.
RANGNATHAN, S.

CITATION:
 1989 AIR  611		  1988 SCR  Supl. (3) 380
 1989 SCC  (1)	44	  JT 1988 (4)	154
 1988 SCALE  (2)1811
 CITATOR INFO :
 R	    1992 SC 224	 (11,19)


ACT:
    Water  (Prevention and Control of Pollution)  cess	Act,
1977: Section 3 and Schedule I--Cess--Levy and collection of
Industry  manufacturing Rayon Grade pulp--Neither  chemical,
textile nor paper industry.
%
    Statutory Interpretation: Taxing Statute--Interpretation
of--No	room  for any intendment--No  equity  about  tax--No
presumption  as	 to tax--Whether any industry  falls  within
realm  of taxation--To be judged by predominant purpose	 and
process--Not by any ancillary or Incidental process  carried
on by the industry.



HEADNOTE:
    The	   respondent,	 Andhra	  Pradesh    Rayons    Ltd.,
manufacturing  Rayon  Grade Pulp, a base  material  for	 the
manufacture of synthetics or man-made fabrics, was  assessed
by the petitioner under the provisions of Water	 (Prevention
and Control of Pollution) Cess Act, 1977 which provided	 for
levy  and  collection  of  Water  cess	from  the  specified
industries  enumerated in Schedule I of the Act. On  appeal,
the  Appellate	 late  Committee  confirmed  the  order	  of
assessment   on	  the  ground  that   the   respondent	 was
manufacturing Rayon Grade Pulp which came under the category
of Textile industry.
    The	  respondent  filed  a	writ  in  the	High   Court
challenging  the levy Inter alia on the ground that  it	 was
not  one  of the industries mentioned in the  Schedule.	 The
High Court upheld this contention.
    Before this Court, it was sought to be canvessed by	 the
petitioner that Rayon Grade Pulp was covered either by	Item
No. 7 of the Schedule, which was chemical industry, or	item
No.  10 which was textile industry, or item No.11 which	 was
paper industry.
Dismissing the petition, it was,
						   PG NO 380
						   PG NO 381
    HELD:  (I)	The  Act  being fiscal	in  nature  must  be
strictly construed. The question as to what is covered	must
be  found  out from the language according  to	its  natural
meaning, fairly and squarely read. [385F; 386B]
    (2)	 In a taxing Act one has to look merely at  what  is
clearly said. There is no room for any intendment. There  is
no  equity about a tax, there is no presumption as  to	tax.
Nothing is to be read in, nothing is to be implied. [385H]
    (3) Whether a particular industry is an industry covered
in  Schedule  I	 has  to be judged  normally  by  what	that
industry  produces  mainly,  its  predominant  purpose	 and
process,  and  not by any ancillary  or	 incidental  process
carried on by it. [386D]
    (4)	 Chemical  process would be involved  to  a  certain
extent,	 more  or less in all industries,  but	an  industry
would  be  known as a chemical industry if  it	carries	 out
predominantly	chemical  activities  and  is  involved	  in
chemical endeavours. [386E]
    (5)	 Taxing consideration may stem	from  administrative
experience  and	 other	factors of  life  and  not  artistic
visualisation  or  neat	 logic and so  the  literal,  though
pedestrian, interpretation must prevail. [386C]
    (6) One of the well recognised canons of construction is
that  the  legislature	speaks its mind by  use	 of  correct
expression and unless there is any ambiguity in the language
of   the   provision  the   Court  should   accept   literal
construction if it does not lead to an absurdity. [387E]
    (7)	 There	is  no absurdity  in  the  literal  meaning.
Broadly	 and literally it can be said that the	Rayon  Grade
Pulp  is neither chemical industry nor textile industry	 nor
paper industry. [387G;386H]
    In	Re Micklethwait., [1885] II EX 452. 456;  Tenant  v.
Smith,	[1892] AC 150; St. Aubyan v. AG., [1951] 2 All	E.R.
473;  Cape Brandy Syndicate v. IRC., [1921] 1 KB 64  at	 71;
Gursahai  Saigal v. C.I.T. Punjab, [1963] 3 SCR 893;  C.I.T.
Madras v. MR. P. Firm, Muar, [1965] 1 SCR 815; Controller of
Estate Duty, Gujarat v. Kantilal Trikamlal, [1977] 1 SCR  9;
IRC v. Duke of Westminster, [1936] AC 1 at 24; AV  Fernandez
v. The State of Kerala, [1957] SCR 837; Martand Dairy & Farm
v. Union of India, [1975] Supp. SCR 265; Lt Col. Prithi	 Pal
Singh Bedi v. Union of India, [1983] 1 SCR 393, referred to.
						   PG NO 382
    M/s.  Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. Mavoor  v.
The  Appellate Committee for Water Cess, Trivandrum,  A.I.R.
1983 Kerala 110. overruled.



JUDGMENT:

CIVIL APPELLATE JURISDICTION: Special Leave Petition (C)
No. 8566 of 1988.

From the Judgment and Order dated 9.10.1987 of the
Andhra Pradesh High Court in W.P. No. 306 of 1983.
R. Mohan for the Petitioner.

The Judgment of the Court was delivered by
SABYASACHI MUKHARJI, J. This petition is for leave to
appeal under Article 136 of the Constitution from the
judgment and order of the High Court of Andhra Pradesh dated
9th October, 1987. The question that was urged before the
High Court and the question which is sought to be raised in
this petition is whether the respondent Pradesh Rayons Ltd.
which is manufacturing Rayon Grade Pulp, a base material for
manufacturing of synthetics or manmade fabrics is an
industry as mentioned in Schedule I of the Water (Prevention
and Control of Pollution) cess Act, 1977 for the purposes
of levy of Water Cess under the Act. The water (Prevention
and Control Of Pollution) Act, 1974 was passed by the
Parliament to “provide for the prevention and control of
water pollution and the maintaining or restoring of
wholesomeness of water, for the establishment, with a view
to carrying out the purposes aforesaid, of Boards for the
prevention and control of water pollution, for conferring on
and assigning to such Boards powers and functions relating
thereto and for matters connected therewith”. For the
aforesaid purposes, the Act contemplated creation of State
Boards at State level and the Central Board at the national
level. Thereafter, the Water (Prevention and Control of
Pollution) Cess Act, 1977 being Act 36 of 1977 was passed
(hereinafter called ‘the Act’). The preamble to the said Act
states that the said Act was “to provide for the levy and
collection of a cess on water consumed by persons carrying
on certain industries and by local authorities, with a view
to augment the resources of the Central Board and the State
PG NO 383
Boards for the prevention and control of water pollution
constituted under the Water (Prevention and Control of
Pollution) Act, 1974”. Therefore, the said Act was passed
only for the purpose of providing for levy and collection of
cess on water consumed by persons carrying on certain
industries with a view to augment the resources of the
Central Board and the State Boards. Section 2(c) stipulates
A `specified industry’ means any industry specified in
Schedule T. Section 3 provides as follows:

“3. Levy and collection of cess.–(1) There shall be
levied and collected a cess for the purposes of the Water
(Preven-tion and Control of Pollution) Act, 1974 and
utilisation thereunder.

(2) The cess under sub-section ( I) shall be payable by-

(a) every person carrying on any specified industry; and

(b) every local authority,
and shall be calculated on the basis of the water
consumed by such person or local authority, as the case may
be, for any of the purposes specified in column (1) of
Schedule II, at such rate, not exceeding the rate specified
in the corresponding entry in column (2) thereof, as the
Central Government may, by notification in the Official
Gazette, from time to time, specify.”

Therefore, this section provides for levy and collection
of cess from the specified industries. Specified industry
is one which is mentioned in Schedule I which is as follows:

“1. Ferrous metallurgical industry.

2. Non-ferrous metallurgical industry.

3. Mining industry.

4. Ore processing industry.

5. Petroleum industry.

6. Petro-chemical industry.

7. Chemical industry.

8. Ceramic industry.

PG NO 384

9. Cement industry.

10. Textile industry

11. Paper industry.

12. Fertilizer industry.

13. Coal (including coke) industry.

14. Power (thermal and diesel) generating industry.

15. Processing of animal or vegetable products industry.”

Therefore, the short question, is, whether the industry
run by the respondent herein for manufacturing Rayon Grade
Pulp, a base material for manufacture of synthetics or man-
made fabrics is one of the industries mentioned in Schedule
I hereinbefore.

In this case, the respondent company was registered as
company in 1975. The supply of energy to the company
commenced on August 22, 1981 and the production began from
September 1, 1981. The company manufactures rayon grade pulp
of 26250 tonnes per annum. The Company was served with a
notice on 12th August, 1981 to furnish the quantum of water
consumed for assessment under the Act. Based on the returns
filed by the respondent as required under section S of the
Act, assessment of water cess was made by an order dated
31st December 1981. Aggrieved by the said order the
respondent filed an appeal before the Appellate Committee
constituted under the Act. The Appellate committee by its
order dated 30th November, 1982 conformed the orders of the
assessment passed by the petitioner. Before the Appellate
Committee various contentions were urged and only one of
such contention survives now and is agitated before us,
namely, that the Rayon Industry is nOt included in Schedule
I of the said Act. The Appellate Committee by its order said
as follows:

“We are unable to agree with the arguments advanced by
the learned counsel. The appellant industry is manufacturing
Rayon Grade Pulp which comes under the category of textile
industry as it involves the production of Rayon Grade Pulp.
a base material for manufacture of synthetic of man-made
fibres.”
PG NO 385
From the aforesaid, it appears that the Appellate
Committee was of the view that the respondent herein was
manufacturing Rayon Grade Pulp which comes under the
category of Textile mentioned in Schedule I of the Act.
Textile industry is item No. 10 in the aforesaid Schedule.
Aggrieved by the decision of the Appellate Committee, the
respondent herein filed writ petition challenging the
constitutional validity of the Act as well as the levy of
cess on water on the ground that it was not one of the
industries mentioned in the Schedule. The High Court by its
order dated 9th October, 1987 rejected the contention
relating to the constitutional validity but upheld the
contention that the respondent’s industry was not an
industry which is mentioned in Schedule I and as such was
not liable to pay cess. It is the propriety or the
correctness of that decision which is sought to be canvassed
before us by this petition. It must, therefore, be made
clear that we are not concerned with the correctness or
otherwise of the decision of the High Court about the
constitutional validity of the Act in question. That is not
at issue before us since the petitioner, Andhra Pradesh
State Board for Prevention and Control of Water Pollution
has not challenged that finding. The only question is
whether the respondent is an industry as mentioned in the
aforesaid schedule. The High Court in the impugned judgment
has held that Rayon Grade Pulp is not covered by any of the
items specified in the said Schedule. We are of the opinion
that the High Court was right. Before us it was sought to be
canvassed that Rayon Grade Pulp is covered either by Item
No. 7 which is chemical industry or 13y item No. 10 which is
textile industry or item No. I1 which is paper industry. We
are unable to accept the contention.

It has to be borne in mind that this Act with which we
are concerned is an Act imposing liability for cess. The Act
is fiscal in nature. The Act must, therefore, be strictly
construed in order to find out whether a liability is
fastened on a particular industry. The subject is not to be
taxed without clear words for that purpose; and also that
every Act of Parliament must be read according to its
natural construction of words. See the observations in Re
Micklethwait, [1885] 11 EX 452, 456. Also see the
observations in Tenant v. Smith, [1892] AC 150 and Lord
Halsbury’s observations at page 154. See also the
observations of Lord Simonds in St. Aubyn v. AG, [1951] 2
All E.R. 473 at 485. Justice Rowlatt of England said a long
time ago, that in a taxing ACt one has to look merely at
what is clearly said. There is no room for any intendment.
There is no equity about a tax. There is no presumption at
to tax. Nothing is to be read in, nothing is to be implied.
One has to look fairly at the language used. See the
observations in Cape Brandy Syndicate v. IRC, [1921]J 1 KB
PG NO 386
64 at 71. This Court has also reiterated the same view in
Gursahai Saigal v. C.I.T. Punjab, [1963] 3 SCR 893; S.L. T.
Madras v. V. MR. P. Firm, Muar,
[1965] I SCR 815. and
Controller of Estate Duty Gujarat v. Kantilal Trikamlal,
[1977] 1 SCR 9.

The question as to what is covered must be found out
from the language according to its natural meaning fairly
and squarely read. See the observations in IRC v. Duke of
Westminster, [1936] AC I at 24, and of this Court in A V
Fernandez v. The State of Kerala,
[1957] SCR 837. Justice
Krishna Iyer of this Court in Martand Dairy & Farm v. Union
of India,
[1975] Suppl. SCR 265 has observed that taxing
consideration may stem from administrative experience and
other factors of life and not artistic visualisation or neat
logic and so the literal, though pedestrian, interpretation
must prevail.

In this case where the question is whether a particular
industry is an industry as covered in Schedule I of the Act,
it has to be judged normally by what that industry produces
mainly. Every industry carries out multifarious activities
to reach its goal through various multifarious methods.
Whether a particular industry falls within the realm of
taxation, must be judged by the predominant purpose and
process and not by any ancillary or incidental process
carried on by a particular industry in running its business.
Chemical process would be involved to a certain extent,
more or less in all industries, but an industry would be
known as a chemical industry if it carries out predominantly
chemical activities and is involved in chemical endeavours.
We fail to see that Rayon Grade Pulp could be considered
even remotely connected as such with chemical industry or
textile industry or paper industry. In all preparations,
there is certain chemical process but that does not make all
industries chemical industries. The expression “chemical”
means, according to Collins English Dictionary. any
substance used in or resulting from a reaction involving
changes to atoms or molecules or used in chemistry. The
Concise Oxford Dictionary, 8th Edition page 170 defines
“chemical” as made by or relating to, chemistry. Broadly
and literally, in our opinion, it can be said that the Rayon
Grade Pulp is neither chemical industry nor textile industry
nor paper industry. We find it difficult on a broad and
literal construction to bring the industry of the respondent
into any of these categories. In other words, to find out
the intention of the legislation, if possible it should be
PG NO 387
found out from the language used in case of doubt. The
purpose of legislation should be sought for to clarify the
ambiguity only, if any. The fairest and most rational
method, says Blackstone, to interpret the will of the
legislator 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 consequence, or the spirit
and reason of the law. See Commentaries on the Laws of
England by Blackstone (facsimile of 1st edition of 1765,
University of Chicago Press, 1979 Vol. 1 p. 59.). The words
are generally to be understood `in their usual and most
known signification’, although terms of art `must be taken
according to the acceptation of the learning in each art,
trade and science. If words happen still to be dubious, we
may establish their meaning from the context, which includes
the preamble to the statute and laws made by the same
legislator on the same subject. Words are always to be
understood as having regard to the subject matter of the
legislation. See Cross Statutory Interpretation, 2nd Edition
page 21.

This Court in Lt Col. Prithi Pal Singh Bedi etc. v.
Union of India & Ors., [1983] I S.C.R. 393 at page 404 of
the report reiterated that the dominant purpose in
construing a statute is to ascertain the intention of the
Parliament. One of the well recognised canons of
construction is that the legislature speaks its mind by use
of correct expression and unless there is any ambiguity in
the language of the provision the Court should adopt literal
construction if it does not lead to an absurdity. Therefore,
the first question to be posed is whether there is any
ambiguity in the language used. If there is none, it would
mean the language used, speaks the mind of Parliament and
there is no need to look somewhere else to discover the
intention or meaning. If the literal construction leads to
an absurdity, external aids to construction can be resorted
to. To ascertain the literal meaning it is equally necessary
first to ascertain the juxtaposition in which the rule is
placed, the purpose for which it is enacted and the object
which it is required to subserve and the authority by which
the rule is framed.

Bearing the aforesaid principle in mind, we find that
there is no absurdity in the literal meaning. The purpose of
the Act is to realise money from those whose activities lead
to pollution and who must bear the expenses of the
maintenance and running of the State Board. It is a fiscal
provision and must, therefore, not only be literally
construed but also be strictly construed. Having regard to
the literal expression used and bearing in mind the purpose
for the legislation, we arrive at a result that certain
PG NO 388
industries have to pay the expenses of the maintenance and
functioning of the State Boards. Considering the principle
broadly and from commonsense point of view, we find nothing
to warrant the conclusion that Rayon Grade Pulp is included
in either of the industries as canvassed on behalf of the
petitioner here and as held by the High Court in the
judgment under appeal.

In this case, we must also note that neither the water
Pollution Board nor any authorities under the Act nor the
High Court proceeded on any evidence how these expressions
are used in the particular industry or understood in the
trade generally. In other words, no principle of
understanding in “common parlance” is involved in the
instance case.

In that view of the matter, we are of the opinion that
the contention sought for by the petitioner is of no
substance.

Our attention, however, was drawn to the decision of a
learned single Judge of the High Court of Kerala in M/s.
Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd., Mavoor v. The
Appellate Committee for Water Cess, Trivandrum and others,
A.I.R. 1983 Kerala 110. There, the learned single Judge of
the Kerala High Court held that industry manufacturing
rayon-grade pulp is chemical industry. The High Court has
observed that the product of the Pulp Division of a rayon
silk manufacturing company is rayon-grade pulp, extracted
from bamboo or wood. The High Court noted that the pulp
produced in the Pulp Division of the company is the raw
material for the Staple Fibre Division. The High Court
further observed that the pulp in question is a chemical
used as chemical raw material, in the form known as chemical
cellulose, for preparation of fibres. The High Court noted
that for the scientist cellulose is a carbohydrate an
organic compound, a saccharide and for the layman also it is
a chemical like salt and sugar. Manufacture of pulp from
wood or bamboo involves consumption of large quantities of
water which get polluted in the process; and “chemical
industry” in the context in which it is used in Schedule I
of the Act, can therefore, include an industry manufacturing
rayon-grade pulp. We are unable, with respect, to accept the
circuitous process of reasoning of the Kerala High Court. As
mentioned hereinbefore, looked at from this circuitous
method every industry would be chemical industry. It could
not have been the intention to include all industries
because every industry has to go to certain chemical process
more or less and, therefore, it could not be so construed.
Such expression should, therefore, be construed reasonably,
strictly and from a commonsense point of view. The High
PG NO 389
Court of Kerala has set out in the said judgment the
company’s case in that case which also produced Rayon Grade
Pulp and the manufacturing process consisted only of
isolating cellulose present in bamboo and wood by removal of
“lignin” and other contents, and that the resultant product
is not chemical cellulose. It explained the process as
under:

“The actual process of manufacture of Rayon grade pulp
is by feeding the raw materials on the conveyors leading to
the chippers, where they are chipped into small pieces in
uniform sizes. The raw materials are washed by a continuous
stream of water before they are fed into chippers for
removal of their adhering mud and dirt. The chips are then
conveyed into Digesters, where they are subjected to acid
pre-hydrolysis, using dilute sulphuric acid solution. The
spent liquor is then drained out, and the chips washed to
remove the acid. The chips are again cooked using a solution
containing cooking chemicals at high temperature of above
160C. After the chips are thus cooked the pressure is
released, and the material is collected in a blow tank, from
where the chipped pulp is sent to “Knotter Screen” for
removal of uncooked particles. The pulp is washed in a
series of washers in a counter-current manner. The washed
pulp is bleached in a multi-staged Bleaching Plant, and
converted into sheets in a continuous machine. The pulp
sheets so obtained are sent to other factories for their
conversion into Staple Fibre.”

The said High Court also relied on a passage from the
“Book of Popular Science” Grolier, 1969, Vol. 7, p. 55 which
reads as follows:

“Just what is a chemical, after all? Presumably it is a
pure chemical substance (an element or compound) and not a
mixture. Thus sulphuric acid is a chemical .. But common
salt and sugar, with which all of us are familiar, are also
pure chemical substances …. The truly chemical industries,
which manufacture chemicals, are seldom well known to the
public. This is because we, as consumers, do not ordinarily
make use of chemicals in their pure form. Instead they are
converted into products that reach the consumer only after a
number of operations ….”

(Emphasis supplied)
PG NO 390
As mentioned hereinbefore, the expression should be
understood not in technical sense but from broad commonsense
point of view to find out what it truly means by those who
deal with them. Bearing the aforesaid perspective in mind,
we are unable to agree with the view of the Kerala High
Court expressed in the aforesaid judgment. In that
conspectus of the Kerala High Court everything would be
included in the process of chemical.

In the aforesaid view of the matter we are of the
opinion that the High Court of Andhra Pradesh in the
impugned judgment was right and the High Court of Kerala in
the judgment referred to hereinbefore was not right.
In the aforesaid view of the matter this petition fails
and is accordingly dismissed.

R.S.S.				      Petition dismissed



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