Santosh Maize Through Its Manager vs The State Of Tamil Nadu Represented By The Special Commissioner And Commissioner Of Commercial Taxes & Anr.

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5731 OF 2009

Santhosh Maize & Industries Limited …APPELLANT

VS.

The State of Tamil Nadu & Anr. …RESPONDENTS

WITH

CIVIL APPEAL NO. 5732 OF 2009

JUDGMENT

DIPANKAR DATTA, J.

THE CHALLENGE

The present appeals before us, by special leave, have been carried by the

appellant from orders passed by a Division Bench of the Madras High Court

(“High Court”, hereafter). While the judgment and order dated 8 th

September, 2008 dismissing the writ petition 1 instituted by the appellant is Signature Not Verified Digitally signed by Nisha Khulbey Date: 2023.07.04

challenged in C.A. No. 5731 of 2009, the order dated 10 th February, 2009 17:10:17 IST Reason:

1

Writ Petition No. 14283 of 1999 1 dismissing a review application2 seeking a review of the aforesaid

judgment and order is under challenge in C.A. No. 5732 of 2009.

RELEVANT FACTS

2. The relevant facts, leading to institution of the present appeals, are

noticed hereunder:

a) The appellant, registered under the Tamil Nadu General Sales Tax Act,

1959 (“the Act”, hereafter), deals in maize starch since 1975. The

classification of maize starch under the Act is the subject of dispute in

the first of the two appeals.

b) The Government of Tamil Nadu, vide a Notification3 (“Exemption

Notification”, hereafter) exempted the products of millets including

maize from tax payable under the Act. The relevant extract of the

Exemption Notification reads as under:

“[…] the Governor of Tamil Nadu hereby exempts, with effect on and from the 1st April 1970, all sales of products of millets (like rice, flour, brokens and bran of cholam, cumbu, ragi, thinai, varagu, samai, kudiraivali, milo and maize) from the tax payable under the said Act.”

c) The Legislative Assembly of Tamil Nadu (“Legislature”, hereafter)

amended4 Schedule I to the Act, adding Part C and including Entry No.

53 therein, which imposed a 5% tax on ‘sago and starch of any kind’

w.e.f. 12th March, 1993. Later, through another amendment 5, ‘sago and

starch of any kind’ was moved to Entry No. 61 of Part B of Schedule I

2 Review Application No. 135 of 2008 in W.P. No. 14283 of 1999 3 No. 89 of 1970 dated 14th March, 1970 4 The TNGST (Amendment) Act, 1993 (Act No. 24 of 1993) 5 The TNGST (Second Amendment) Act, 1996 (Act No. 37 of 1996) 2 (“Taxation Entry No. 61”, hereafter) and the tax rate was reduced to

4% effective from 17th July, 1996.

d) The aforesaid amendment dated 12th March, 1993 sparked concerns

among maize starch dealers. One of them, M/s Lakshmi Starch, sought

a clarification from the Special Commissioner and Commissioner of

Commercial Taxes (“Commissioner”, hereafter). Vide Circular dated

14th December, 1993, the Commissioner clarified that the exemption

would remain in effect — a specific notification will prevail over a

general entry in the Schedule. It was further stated that the process of

obtaining maize starch from maize involves simple processing;

therefore, maize starch will be classified as ‘maize products’ and

covered by the Exemption Notification.

e) The Legislature next amended6 the Act w.e.f. 1st April, 1994. Entry No.

8 of Part B of Schedule III (“Exemption Entry No. 8”, hereafter) was

inserted exempting “products of millets (rice, flour, brokens and bran

of cholam, cumbu, ragi, thinai, varagu, samai, kudiraivali, milo and

maize)” from taxation under the Act. The amendment retained the

language of the Exemption Notification except that the word ‘like’ was

omitted. Although, in effect, the Exemption Notification lost force with

the amendment of the Schedule, nevertheless, the exemption on

maize starch remained unchanged based on subsequent clarifications

issued by the Commissioner on 31 st December, 1996 and 6th May,

1997.

6 The TNGST (Amendment) Act, 1994 (Act No. 32 of 1994) 3

f) However, this position was followed by two subsequent developments

- the latter being crucial for the present purpose. Firstly, Section 28-A

was inserted w.e.f. 6th November, 1997 by way of an amendment 7 to

the Act which empowered, by way of a statutory provision, the

Commissioner to issue clarifications concerning the rate of tax under

the Act. Secondly, after the insertion of Section 28-A, the

Commissioner issued a Circular dated 23 rd June, 1998, clarifying that

Exemption Entry No. 8 does not encompass maize starch; the said

entry only applies to products listed within the brackets and excludes

maize starch which is distinct from maize flour and not commonly

understood as such by ordinary people or even dealers. Being covered

by Entry 67 of Part D of Schedule I, it will be taxed at 11%. However, a

request having been received from the appellant for withdrawal of the

Circular dated 23rd June, 1998, the Commissioner vide a subsequent

Circular dated 8th October, 1998 cancelled the earlier Circular dated

23rd June, 1998 and clarified that maize starch is taxable from 1 st April,

1994, since Item 8 of Part B of Schedule III does not include maize

starch. In view of specific Entry No. 61 of Part D of Schedule I, i.e.,

“sago and starch of any kind”, it covers maize starch also, subject to a

4% tax to be levied w.e.f. 17th July, 1996 and not tax at 11%.

g) Questioning the aforesaid clarification, the appellant made a

representation before the Commissioner which came to be rejected on

28th June, 1999. The appellant was served with notices 8 for recovery of

general sales tax to the tune of Rs 7,69,729/- for FY 1998-1999,

7 The TNGST (Amendment) Act, 1997 (Act No. 60 of 1997) 8 Dated 25th June, 1999 and 6th July, 1999 4 followed by a provisional assessment notice9 issued by the

Commissioner. This triggered litigation between the parties.

THE HISTORY OF LITIGATION

3. The judicial trajectory of the case leading to the present stage is set out

hereunder:

a) Assessment proceedings having been initiated, the appellant

approached the Tamil Nadu Taxation Special Tribunal (“Tribunal”,

hereafter) questioning the provisional assessment notices and

challenging the validity of the Circular dated 8 th October, 1998. The

petitions10 came to be dismissed, vide judgment dated 29th July, 1999,

with the observation that it was not proper for the appellant to

independently challenge the said Circular and also contest the

assessment proceedings at the same time; the questions regarding

the validity of the Circular, therefore, could be contested in the

assessment proceedings.

b) It was, at this stage, that the appellant resorted to the writ jurisdiction

of the High Court seeking quashing of the order of the Tribunal dated

29th July, 1999 as well as praying that the Circular dated 08 th October,

1998 be declared as ultra vires Section 28-A, Exemption Entry No. 8,

and Articles 14, 19(1)(g) and 265 of the Constitution of India;

alternatively, it was prayed that the said Circular should only apply

9 Dated 27th July, 1999 10 Original Petition Nos. 881 and 883 of 1999 5 prospectively from 08th October, 1998 rather than retroactively from

17th July, 1996.

c) The Division Bench of the High Court initially dismissed the appellant's

writ petition on 25th August, 1999, stating that the appellant could

agitate all the points before the assessing authority, who would

proceed according to law. Dissatisfied with this ruling, the appellant

approached this Court11. By an order dated 3rd November, 2000, the

appeal was allowed, and the writ petition restored to file to be decided

by the High Court. This Court directed that since the validity of the

Circular dated 8th October, 1998 issued under Section 28A was under

challenge, it would be more appropriate for the High Court to decide

this legal point rather than remanding the case to the lower

authorities.

d) Upon hearing the parties, the Division Bench of the High Court

dismissed the writ petition on merits vide judgment dated 8th

September, 2008. The High Court was of the view that the Exemption

Notification and subsequent circulars issued by the Commissioner,

which sought to exempt maize starch from taxation, do not hold

binding authority as they lack statutory backing. This is because

Section 28-A, which empowers the Commissioner to issue

clarifications, only became effective from 6 th November, 1997. Circular

dated 8th October, 1998 carries legal validity as it was issued

subsequent to the insertion of Section 28-A. Having concluded that

maize starch will not be entitled to the benefit of exemption, the High 11 Civil Appeal Nos. 6176 of 2000 6 Court upheld the validity of the Circular dated 8 th October, 1998 which

classified maize starch under Entry No. 61 subject to a 4% tax.

e) Aggrieved by the decision, the appellant preferred a review

application. Observing that no case for interference had been set up

by the appellant, the High Court dismissed the review application vide

its order dated 10th February, 2009.

SUBMISSIONS OF THE PARTIES

4. Appearing on behalf of the appellant, Mr. K.K. Mani, learned counsel,

advanced the following submissions:

a) The High Court failed to consider the correct entry pertaining to the

assessment year 1998-99. Exemption Entry No. 8 clearly outlined an

exemption in favour of products of millet, including maize, because

maize starch is in the form of flour, though the flour is not obtained by

mere grinding of the grains, but rather through the treatment of maize

by soaking it in water, subjecting it to various processes, and

ultimately obtaining starch, which is sold as flour, and this process

would certainly result in the sole product of millet retaining the flour

form. This is distinct from Taxation Entry No. 61, which pertains to

‘sago and starch of any kind’ and sago being derived from tapioca, a

combined interpretation of the phrase ‘sago and starch of any kind’

would exclude maize starch and encompass only tapioca starch.

7

b) The decision in Reliance Trading Company, Kerala vs. State of

Kerala12 was referred to in support of the contention that an

exemption will only arise when there is a liability to pay tax. Section

3(2) read with Schedule I creates a tax liability on ‘sago and starch of

any kind’. However, Section 8 read with Schedule III creates an

exemption in favour of maize starch, Exemption Entry No. 8 will,

therefore, override Taxation Entry No. 61.

c) The decisions of the High Court in State of Tamil Nadu vs. Lakshmi

Starch13 and State of Tamil Nadu vs. TVL. Indras Agencies (P)

Ltd.14 were also placed to support the contention that Exemption

Entry No. 8 derives its origin from the Exemption Notification, the

validity of which was upheld in the aforesaid former judgment and

maize starch was accordingly exempted from tax. Exemption Entry No.

8, therefore, is nothing but a re-enactment of the language of the

Exemption Notification in the form of a statutory provision and reflects

the intention of the Legislature to exempt maize starch from tax.

d) As regards the omission of the word ‘like’, it was contended that the

amendment having retained the language of the Exemption

Notification, the omission of the word ‘like’ would, therefore, not make

any difference to the scope of the entry in the light of the consistent

practice to exempt maize starch from taxation under Exemption Entry

No. 8.

12 (2011) 15 SCC 762 13 (1990) SCC OnLine Mad 777 14 T.C.(R) 902/1999 8

e) It was also contended that the High Court made an erroneous

assessment in both the writ petition and the review application by

considering Entry No. 44 of Part B of Schedule III for the assessment

year 1998-1999 which, as per the Court, excludes maize. However, the

aforesaid entry was introduced only in 2002 vide an amendment15,

wherein the reference to maize was explicitly removed. Prior to that

amendment, Exemption Entry No. 8 which included maize was

applicable.

f) It is settled law that the power under Section 28-A of the Act cannot be

exercised contrary to the statutory scheme of the Act, more

particularly when the issue of classification has been settled by a court

of law. This is evident from the State’s consistent practice to treat

maize starch as exempt from tax, as confirmed by way of a series of

circulars issued over time categorically exempting maize starch from

tax liability. Having regard to the clarifications issued in favour of

exemption, the Circular dated 8th October, 1998 requiring the recovery

of taxes retrospectively is a mere change of opinion without cogent

reason and, therefore, is liable to be quashed.

g) In any event, the aforesaid Circular cannot have a retrospective effect

and will take effect only from the date of issue, i.e., on and from 8 th

October, 1998.

5. Finally, submitting that for the assessment year 1998-1999 the appellant

is entitled to exemption from tax on maize starch in accordance with

15 The TNGST (Fourth Amendment) Act, 2002 9 Exemption Entry No. 8, Mr. Mani prayed that the orders under challenge be

set aside by declaring the appellant’s entitlement to exemption;

consequently, the appeals be allowed.

6. Mr. C. Kranthi Kumar, learned counsel appearing for the respondents while

supporting the impugned judgment, contended as follows:

a) Firstly, in the Assessment Year 1998-1999, maize starch will fall under

Taxation Entry No. 61, categorized as ‘sago and starch of any kind’,

and will be subject to a 4% tax rate. The term ‘starch of any kind’,

encompasses all types of starch, including maize starch. The decision

in Associated Cement Company Ltd. vs. Commissioner of

Customs16 was relied on to support the contention that the words

‘any kind’ ought to be interpreted in an inclusive manner to include all

kinds of goods within its ambit.

b) Secondly, the Exemption Notification gained statutory support starting

only from 1st April, 1994, through an amendment that introduced

Exemption Entry No. 8 exempting products of millets. However,

Taxation Entry ‘sago and starch of any kind’ had already existed since

1993 and hence, was the applicable entry.

c) Thirdly, Exemption Entry No. 8 modified the exempting provision as

provided under the Notification and omitted the word ‘like’ which

restricted the benefit of the exemption only to the items specified

therein. The decisions of this Court in Union of India vs. Tulsiram 16 (2001) 4 SCC 593 10 Patel17 and B. Shankara Rao Badami vs. the State of Mysore 18

were placed in support of the maxim expressum facit cessare tacitum.

The contention put forth is that when specific matters are expressly

mentioned, anything not mentioned should be deemed to have been

excluded.

d) Fourthly, Exemption Entry No. 8 envisages maize which is a raw

product and not maize starch which is a processed product. This

proposition is further emphasized by the mention of items like ‘flour’

and ‘bran of cholam’ in the exempting entry which are processed

products.

e) Finally, the legislative intent is clearly discernible from the 2002

amendment, wherein Exemption Entry No. 8 was repositioned as Entry

No. 44, and the specific reference to 'maize' was eliminated, thereby

denying exemption to all the maize products.

7. Mr. Kumar, thus, submitted that the appeals being devoid of any merit are

liable to be dismissed. He prayed for an order to that effect.

STATUTORY SCHEME UNDER THE ACT

8. The entries under Schedule I are taxed under Section 3(2) of the Act while

the entries under Schedule III are exempted under Section 8 thereof.

17 (1985) 3 SCC 398 18 (1969) 1 SCC 1 11

9. Exemption Notification dated 14th March, 1970 held the field in excess of

two decades. While the Exemption Notification was in force, the Act was

amended by Act No.24 of 1993. The existing Schedule I was replaced with

a new Schedule, and ‘sago and starch of any kind’ came to be inserted at

Entry 53 of Part C of Schedule I with tax rate of 5%.

10. Act No. 32 of 1994, i.e., the Tamil Nadu General Sales Tax (Amendment)

Act, 1994, further amended the Act. Entry 8 in Part B of Schedule III

included the item which was hitherto covered by the Exemption

Notification and, thus, the same ceased to be operative with such

amendment.

11. By Act No. 37 of 1996, the rate of tax was reduced from 5% to 4% in

respect of ‘sago and starch of any kind’.

12. Considering that the statutory scheme as regards the classification of

'maize' underwent several changes over time, we deem it appropriate to

provide a comprehensive overview of the applicable taxing and exempting

entries at relevant time periods. To facilitate clarity, the following table

enumerates the applicability of these entries:

TAXING ENTRIES

From To Entry No. Description Rate of Tax 12.03.1993 16.07.1996 53 of Part C of sago and starch of 5% Schedule I any kind 17.07.1996 26.03.2002 61 of Part B of sago and starch of 4% Schedule I any kind 27.03.2002 ------------ 22(vi) of Part B of sago and starch of 4% Schedule I any kind

12 EXEMPTING ENTRIES

From To Entry No. Description

14.03.1970 31.03.1994 Notification products of millets (like rice, flour, No 89/1970 brokens and bran of cholam, cumbu, ragi, thinai, varagu, samai, kudiraivali, milo and maize) 01.04.1994 26.03.2002 8 of Part B of products of millets (rice, flour, Schedule III brokens and bran of cholam, cumbu, ragi, thinai, varagu, samai, kudiraivali, milo and maize) 27.03.2002 ------------ 44 of Part B products of millets (rice, flour, of Schedule brokens and bran of cholam, III cumbu, ragi, thinai, varagu, samai, kudiraivali, and milo)

ANALYSIS AND FINDINGS

13. We have considered the submissions advanced by learned counsel for the

parties and have also perused the materials on record.

13

14. While we are not ad idem with all the reasons assigned by the High Court

in the impugned judgment, we see no reason to differ with the ultimate

conclusion reached by it. We would, therefore, proceed to assign our own

reasons for agreeing with the High Court that the appellant is not entitled

to any relief.

15. The Exemption Notification was erroneously held by the High Court not to

have statutory backing. Recital thereof shows the source of power.

Exercise of power was in terms of Section 17 of the Act, which appears to

be the repository of the State Government’s power to exempt payment of

tax. However, nothing really turns on it in view of the several Amendment

Acts by which the Schedules were amended from time to time. Decision on

C.A. No.5731 of 2009 has to be rendered not based on the Exemption

Notification but on the terms of the Act read with the Schedules thereto as

it stood on 17th July, 1996, when Act No.37 of 1996, i.e., the Tamil Nadu

General Sales Tax (Second Amendment) Act, 1996 came into force. Indeed,

the Act was amended further with effect from 27 th March, 2002 by Act

No.18 of 2002, i.e., the Tamil Nadu General Sales Tax (Fourth Amendment)

Act, 2002, but the same being a post-millennium event is admittedly

beyond the period under consideration, i.e., 1998-99; hence, we need not

be too concerned with the latter amendment.

16. It would appear from the conspectus of the statutory provisions as

delineated above that there were two entries in the field at or about the

period of the relevant assessment year, i.e., “sago and starch of any kind”

in Schedule I, referred by us as Taxation Entry No.61, and “products of

14 millets (rice, flour, brokens and brans of cholam, cumbu, ragi, thinai,

varagu, samai, kudiraivali, milo and maize)” in Schedule III which we are

referring to as Exemption Entry No.8.

17. When Act No.32 of 1994 amended Schedule III of the Act, Exemption Entry

No.8 did not include the word ‘like’ which was hitherto there in the

Exemption Notification [No. 88 of 1970 dated 14 th March, 1970]. According

to English grammar, the word “like” can be used as a verb, as a noun as

well as a preposition depending upon its setting. It had been used in the

Exemption Notification as a ‘noun”. Once it becomes clear from Exemption

Entry No.8, as introduced by Act No.32 of 1994, that (i) it does not include

the noun “like” as the first word within brackets and (ii) that maize is only

included along with rice, flour, etc. (and not maize starch), it is only those

items within the brackets which, for the purposes of exemption, qualify as

products of millets. It is, therefore, those products of millets specifically

indicated, which are entitled to exemption under Section 8 of the Act read

with Schedule III as per Exemption Entry No.8.

18. Can maize starch be considered a millet product, as in Exemption Entry

No.8, for the present purpose? We do not think so. Maize is the raw

product, whereas maize starch is a processed product. While we are bound

to hold that maize is entitled to exemption in terms of Exemption Entry

No.8 as it stood prior to the relevant assessment year, maize starch being

a product of maize derived through mechanical process, it cannot be read

as “like maize”, the “like” having been excluded by Act No. 32 of 1994.

Maize starch being a kind of starch, it is covered by Taxation Entry No. 61

15 as introduced by Act No.37 of 1996 which is to the effect “… starch of any

kind”. The dictionary meaning of the word “any” is “one or same or all”. In

Black’s Law Dictionary, it is explained that the word ‘any’ has diverse

meaning and may be employed to indicate ‘all’ or ‘every’ as well as ‘same’

or ‘one’ and its meaning in a given statute depends upon the context and

subject matter of the statute. Had the legislature intended to exclude any

starch, including maize starch, a specific provision excluding it would have

been made.

19. The decision in Associated Cement Company Ltd. (supra) has taken

the view that the words ‘any other kind of moveable property’ in clause (e)

of Section 2(22) of the Customs Act defining ‘goods’ would include all

tangible movable articles as goods for the purposes thereof.

20. We may also in this connection refer to the decision in M/s. Associated

Indem Mechanical (P) Limited vs. West Bengal Small Industries

Development Corporation19 where, while construing ‘any premises’

contained in the provisions of the West Bengal Premises Tenancy Act,

1956, it has been held by this Court that ‘any’ is a word of very wide

meaning and prima facie the use of it excludes limitation.

21. We hold that ‘any kind’ in the context the same has been used in the

taxation entry clearly indicates that it has been used in a wide sense

extending from one to all and admits of no exception.

22. That in Taxation Entry No.61 ‘starch of any kind’ is preceded by ‘sago’

does not, in our opinion, make any material difference. Sago is a starch 19 (2007) 3 SCC 607 16 extracted from the pith, or spongy core tissue of various tropical palm

stems. Therefore, what is taxable under Taxation Entry No.61 is ‘sago’,

which itself is a starch, as well as starch of any kind which would obviously

include maize starch.

23. Trite to say, the Legislature may not have intended two entries for the self-

same commodity, one under the exempted category and the other under

the taxable entry. Therefore, maize starch has to be either covered by

Taxation Entry No.61 or Exemption Entry No.8. For the purpose of

ascertaining which of the two is the applicable entry, we need not labour

much having regard to the language in which the two entries are

expressed. Taxation Entry No.61 provides a more specific description and

maize starch undoubtedly being a ‘kind of starch’ would, therefore, be

comprehended in it. This is more so because what is covered by

Exemption Entry No.8 is maize, which is a product of millet. The position

would have been otherwise if Exemption Entry No.8 or any other entry in

Schedule III carried the description of product of maize instead of ‘product

of millet’.

24. Law is well settled that if in any statutory rule or statutory notification two

expressions are used - one in general words and the other in special terms

- under the rules of interpretation, it has to be understood that the special

terms were not meant to be included in the general expression;

alternatively, it can be said that where a statute contains both a general

provision as well as a specific provision, the latter must prevail.

17

25. What emerges from the above discussion is that Taxation Entry No.61 is

relatable to ‘starch’ of any kind whereas Exemption Entry No.8 relates to

products of ‘millet’.

26. Looking at the specific (Taxation Entry No.61) in contradistinction with the

general (Exemption Entry No.8), there can be no manner of doubt that

maize starch would be covered by the taxation entry and not by the

exemption entry.

27. The contention advanced on behalf of the appellant that clarification

provided by the Commissioner could not have been made applicable with

retrospective effect is, in our considered opinion, without substance. The

clarification vide Circular dated 8th October, 1998 was issued in exercise of

power conferred by the statute (i.e., Section 28-A of the Act). Whenever a

clarification pursuant to an application made by a registered dealer as to

the applicable rate of tax is issued under sub-section (1), or the

Commissioner on his own clarifies any point concerning the rate of tax

under the Act, or the procedure relating to assessment and collection of

tax as provided for under the Act is issued under sub-section (2), the

object is to make the rate of tax explicit what is otherwise implicit. The

contention as raised, if accepted, would defeat the object of issuing the

clarification unless it were construed to have retrospective effect. What

the clarification provided by the Commissioner does is to clear the

meaning of the two entries which was already implicit but had given rise

to a confusion. A clarification of this nature, therefore, is bound to be

retrospective.

18

28. Also, having regard to the nature of clarification issued, we hold that

Circular dated 8th October, 1998 does not run counter to the provisions of

the Act.

29. We have considered the decisions cited by Mr. Mani in Lakshmi Starch

Limited (supra) and TVL. Indras Agencies (P) Limited (supra). For the

reasons that we have assigned above, we hold that the said decisions do

not aid the petitioner.

CONCLUSIONS

30. The impugned judgment is upheld albeit for reasons not assigned by the

High Court. Finding no merit in the appeals, we dismiss the same. Parties

shall, however, bear their own costs.

……………………………………J (S. RAVINDRA BHAT)

……………………………………J (DIPANKAR DATTA) New Delhi;

July 04, 2023.

19