☐The case involves a dispute between the Commercial Tax Officer of Rajasthan and M/S. Binani Cements Ltd. and Anr. over the grant of eligibility certificate for tax exemption under the ...
No Acts & Articles mentioned in this case
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.336 OF 2003
COMMERCIAL TAX OFFICER,
RAJASTHAN ..Appellant(s)
Versus
M/S. BINANI CEMENTS LTD. & ANR. ..Respondent(s)
J U D G M E N T
H.L. DATTU, J.
1.The Revenue is in appeal before us against the
impugned judgment and order passed by the High
Court of Rajasthan at Jodhpur in S.B. Sales Tax
Revision Petition No.582 of 1999, dated 02.07.2001
whereby and whereunder the High Court has dismissed
the revision petition filed by the Revenue and
upheld the case of the respondent-assessee.
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2.The respondent-assessee is a new industrial unit
manufacturing cement situated within Panchayat
Samiti, Pindwara, Rajasthan. It is an admitted fact
that it started its commercial production on
27.05.1997. It is also not disputed that the
respondent-assessee has fixed capital investment
(for short, “the FCI”) exceeding Rs.500/- Crores
and employs more than 250 employees.
3.The core issue arises out of the respondent-
assessee’s application for grant of eligibility
certificate for exemption from payment of Central
Sales Tax and Rajasthan Sales Tax to the State
Level Screening Committee, Jaipur under the “Sales
Tax New Incentive Scheme for Industries, 1989” (for
short “the Scheme”).
4.For convenience of discussion, we would first
notice the relevant scheme and certain provisions
and thereafter proceed towards analysis of the
facts in the instant case. The Scheme for
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exemption from payment of sales tax was notified
by the State of Rajasthan in exercise of its
powers under sub-section(2) of Section 4 of the
Rajasthan Sales Tax Act, 1954 (for short, “the
Act”). The scheme exempts certain industrial units
from payment of tax on the sale of goods
manufactured by them within the State. It
specifies and categorizes the districts, types of
units, the extent of exemption from tax (in
percentage), the maximum exemption available in
terms of percentage of fixed capital investment
(FCI) and the maximum time limit for availing such
exemption from tax. By introducing a deeming
clause, the scheme is deemed to have come into
operation with effect from 05.03.1987 and to
remain in force upto 31.03.1992. An amendment to
the aforesaid notification was brought in by
issuing notification – S. No.763: F.4(35) FD/
Gr.IV/87-38, dated 06.07.1989 and was made
operative/effective with effect from 05.03.1987
and to remain in force upto 31.03.1995. Yet
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another amendment was introduced by the State
Government by issuing notification No.763:
F.4(35)FD/Gr.IV/87-38 dated 06.07.1989. Once again
by introducing a deeming clause, the notification
was made operative with effect from 05.03.1987 and
to remain in force upto 31.03.1997. The State
Government has issued another subsequent
notification amending the earlier notification in
exercise of its power under Section 4(2) of the
Act in 763: F.4(35)FD/Gr.IV/87-38, dated
06.07.1989 which is deemed to have come into
operation with effect from 05.03.1987 and to
remain in force upto 31.03.1998. Clause 1 of the
scheme notification provides for its operation.
Clause 2 is the dictionary clause which provides
for meaning of the expressions like “New
Industrial Unit”, “Sick Industrial Unit”,
“Eligible Fixed Capital Investment” etc. For the
purpose of this case, we require to notice the
definitions of New Industrial Unit, Eligible Fixed
Capital Investment, Prestigious Unit and Very
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Prestigious Unit.
5.Clause 2(a) defines the meaning of the expression
‘New Industrial Unit’ to mean an industrial unit
which commences commercial production during the
operative period of the scheme. The definition
provides an exclusion of certain industries from
the purview of New Industrial Unit. They are
industrial units established by transferring or
shifting or dismantling an existing industry and
an industrial unit established on the site of an
existing unit manufacturing similar goods.
Explanation I and II appended to the notification
need not be noticed by us, since the same is not
necessary for the purpose of disposal of this
appeal.
6.It is neither in dispute nor could be disputed by
the revenue that the respondent is not a ‘New
Industrial Unit’.
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7.Clause 2(e) defines eligible fixed capital
investment (FCI) to mean investment made in land,
new buildings, new plant and machinery and
imported second hand machinery from outside the
country and installation expenditure capitalized
for plant and machinery and installation
capitalized for plant and machinery’s capitalized
interest during construction not exceeding 5% of
the total fixed capital investment; and technical
know-how fees or drawing fees paid in lump-sum to
foreign collaborators or foreign suppliers as
approved by Government of India or paid to
laboratories recognized by the State Government or
Central Government and Rail Sidings, rolling
stock, racks and railway engines, owned by the
unit.
8.Clause 2(i) defines ‘Prestigious Unit’. The same
is as under:-
“Prestigious Unit” means a “new
industrial unit” first established in
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any Panchayat Samiti of the State
during the period of this Scheme in
which investment in fixed capital
exceeds Rs.10/- cores with a minimum
permanent employment of 250 persons
or a “new industrial unit” having a
fixed capital investment exceeding
Rs.25.00 crores and with a minimum
permanent employment of 250 persons
or a new electronic industrial unit
having fixed capital investment
exceeding Rs.25/- crores’.
9.The definition is in three parts. The first part
speaks of a ‘New Industrial Unit’ first
established in any Panchayat Samiti of the State.
The establishment is of the unit during the period
of the Scheme. The investment in fixed capital
must exceed Rs.10/- crores and lastly the
industrial unit has minimum permanent employment
of 250 persons. In the second limb, the necessity
of establishing the ‘New Industrial Unit’ in
Panchayat Samiti is done away with. The unit
should have capital investment exceeding Rs.25/-
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crores and should have minimum permanent
employment of 250 persons. The third limb of this
definition applies only to Electronic Industrial
Unit having fixed capital investment exceeding
Rs.25/- crores.
10.Clause 2(ii) defines the expression “Very
Prestigious Unit” as under:
“Very Prestigious Unit” means a new
industrial unit established in any
Panchayat Samiti of the State during the
period of this Scheme in which
investment in fixed capital is Rs.100/-
crores or more. However, the
progressive investment of the amount of
project cost as appraised by the
financial institutions shall be
considered as investment made by a new
unit, and as soon as such investment
reaches or crosses the point of Rs.100/-
crores during the operative period of
the Scheme, the unit shall acquire the
status of a Very Prestigious Unit for
the purpose of claiming enhanced
proportionate benefits under this
Scheme”.
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11.The ‘Very Prestigious Unit’ means a new
industrial unit established in any Panchayat
Samiti in the State during the operative period of
the Scheme and the other important requirement is
the investment in such industrial unit must be
Rs.100/- crores or more. The second limb of the
definition clause provides for a new industrial
unit to acquire the status of Very Prestigious
Unit. The project cost as appraised by the
financial institution shall be considered as
investment made by a new unit. The progressive
investment of the amount of project cost as soon
as it reaches or crosses the point of Rs.100/-
crores during the operation of the Scheme, the
industrial unit shall acquire the status of a Very
Prestigious Unit in order to claim enhanced
proportionate benefits under the Scheme.
12.Clause 2(k) provides for constitution of
Screening Committee for the purpose of
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consideration and to grant Eligibility Certificate
under the New Incentive Scheme both for small and
medium and also large scale industrial units to
avail benefit under the New Incentive Scheme. The
note appended to this sub-clause speaks of Small
Scale Units, Medium Scale Units and Large Scale
Units. Small Scale Units means a unit of which
investment in plant and machinery does not exceed
Rs.60/- Lakhs, a Medium Scale Unit means a unit
of which the project cost does not exceed Rs. Five
Crores and Large Scale Unit means a unit of which
the project cost exceeds Rs. Five Crores.
13.Clause 3 of the notification speaks of
applicability of the Scheme. By this clause, the
State Government has made the Scheme applicable to
(a) new industrial units, (b) industrial units
going in for expansion or diversification and (c)
sick units.
14.Clause 4 of the Scheme provides for exemption
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from Payment of Sales Tax as per parameters
mentioned in Annexure ‘C’ to the said
notification. This clause also envisages that the
industrial unit which is granted an eligibility
certificate by the Screening Committee is alone
exempted to claim benefit of this notification.
15.Annexure ‘C’ provides for the quantum of sales
tax exemption under the Scheme. Para C therein is
relevant for the purpose of this case, therefore,
omitting what is not necessary is extracted
hereunder:-
ANNEXURE ‘C’
QUANTUM OF SALES TAX EXEMPTION UNDER THE NEW
INCENTIVE SCHEME
Item
No.
Type of Units Extent of
the
percentage
of exemption
from tax
Maximum
exemption
in terms of
percentage
of fixed
capital
Maximum
time limit
for
availing
exemption
from tax
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investment
(FCI)
1. New Units
(Other than
the units
mentioned at
items 1A to
1F)
75% of total
tax
liability
100% of FCI
in case of
medium and
large scale
units and
125% of FCI
in case of
small scale
units
Seven
years
1A.Leather based
New Unit
90% of total
tax
liability
100% of FCI
in case of
medium and
large scale
units and
125% of FCI
in case of
SSI units
Seven
years
1B.New Units in
Ceramic,
Glass,
Electronics
and
Telecommuni-
cations
industry
having a FCI
between Rs.5
crores and
Rs.25 crores
90% of total
tax
liability
for first
three years,
80% for next
three years
and 75% for
the
remaining
period.
100% of FCI Nine
years.
1C.New Units in
Ceramic,
Glass,
Electronics,
and
Telecommuni-
cations
industry
having a FCI
of Rs.25
crores or
more
100% of
total tax
liability
for the
first four
years, 90%
for the next
four years
and 75% for
the
remaining
period.
100% of FCI Eleven
years.
1D New labour 75% of total 145% of FCI Seven
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intensive
units as
defined in
the Capital
Investment
Subsidy
Scheme, 1990
tax
liability
in case of
SSI units
and 120% of
FCI in case
of medium
and large
scale
units.
years.
1E.New Cement
units except
in Tribal
Sub-Plan
area.
75%, 50% &
25% of total
tax
liability in
case of
small,
medium and
large scale
units
respectively
125% of FCI
in case of
small scale
units
subject to
an overall
limit of
Rs.1.00
crore and
100% of FCI
in case of
medium and
large scale
units.
Seven
years.
1F.Large scale
granite and
marble units.
25% of total
tax
liability
100% of FCI Seven
years.
2. Units (Other
than (a)
cement unit
except in
Tribal Sub-
Plan area and
(b) large
scale granite
and marble
units going
in for
expansion or
diversificati
on.
75% of total
tax
liability
100% of
additional
FCI
Seven
years
2A.Leather based
units going
in for
expansion or
diversificat-
75% of total
tax
liability
100% of
additional
FCI
Seven
years
Page 14 14
ion
3. Sick Units 50% of total
tax
liability
100% of FCI
in case of
medium and
large scale
units &
125% of FCI
in case of
small scale
units.
Seven
years
4. New Units
producing
pollution
control
equipments/
Pioneering
units/
Prestigious
units.
75% of total
tax
liability
100% of FCI Nine years
5. New Very
Prestigious
units (Other
than cement
units except
in Tribal
Sub-plan
Area)
90% of total
tax
liability
100% of FCI Eleven
years
6. 100% Export
Oriented
Prestigious/
Pioneering
units
100% of
total tax
liability
100% of FCI Nine years
7. 100% Export
Oriented Very
Prestigious
Units
100% of
total tax
liability
100% of FCI Eleven
years
16.As we have observed earlier, Annexure-C has five
columns. The second column speaks of type of
units, the third column speaks of the extent of
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percentage of exemption from tax, the fourth
column provides for the maximum exemption in terms
of percentage of FCI and the fifth and the last
column provides the maximum time limit for
availing exemption from tax. Prior to issuance of
notification dated 13.12.1996, Annexure ‘C’ was
primarily confined to ‘New Units’. After the
introduction of notification dated 13.12.1996, the
exclusion is made to the expression ‘New Units’ by
specifically including certain type of industrial
units by inserting items 1A to 1F. Item 1E
specifically talks of New Cement Units except in
Tribal Sub-Plan area. The extent of percentage of
exemption from tax under Item 1E depends on the
type of unit or the industry. If it is a small
scale unit, the extent of exemption is 75%, if it
is medium scale, the extent of exemption is 50%,
and if it is large scale unit, the extent of
percentage of exemption from tax is 25%. The
maximum time limit for availing exemption from tax
is restricted to seven years. Item 4 speaks of New
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Units producing pollution control equipments,
pioneering units and prestigious units. The
extent of the percentage of exemption from tax is
75% of total liability and the maximum time limit
for availing exemption from tax is 9 years from
the date of commercial production. Item 5 relates
to New Very Prestigious Units other than cement
units except in Tribal Sub-plan Area and the total
percentage of exemption from tax is 90% of total
tax liability and the maximum time limit for
availing exemption from tax is eleven years.
17.Reverting to state the facts, the respondent-
assessee had applied to the State Level Screening
Committee for claiming benefit of exemption at 75%
under the Scheme. The Committee rejected the claim
of the respondent-assessee and observed that since
the respondent-assessee is a large scale unit
covered under the specific provision of Item 1E of
Annexure ‘C’, it is entitled to 25% exemption, by
its order dated 15.01.1998.
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18.Being aggrieved by the said order, the
respondent-assessee filed appeal before Rajasthan
Tax Board, Ajmer (for short, ‘the Board’) in
respect of the calculation of eligible FCI as well
as the exemption under the Scheme. The Board while
remanding the matter to the State Level Screening
Committee held that the respondent-assessee is
entitled to 75% tax exemption by holding the
respondent-unit as Prestigious Unit under the
Scheme.
19.The revenue being aggrieved by the decision of
the Board, filed Tax Revision Petition before the
High Court under Section 86(2) of the Act. The
High Court dismissed the revision petition filed
by the revenue and upheld the decision of the
Board by holding that the respondent-unit is a
Prestigious Unit and therefore, entitled to 75%
tax exemption under the Scheme.
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20.Aggrieved by the order so passed by the High
Court, the Revenue is before us in this appeal.
21.We have heard learned counsel for the parties to
the lis and perused the documents on record as
well as the order(s) passed by the authorities and
the High Court, respectively.
22.Shri Rohington Nariman, learned senior counsel
appearing for the appellant submits that the case
pleaded by respondent-unit right from the
beginning of filing the application before the
State Level Screening Committee was that the new
unit had made an investment of more than Rs.500/-
crores by way of fixed capital assets and
therefore they should be placed under the category
of ‘Prestigious Unit’ and accordingly be granted
eligibility certificate to claim 75% of exemption
from tax for the maximum time limit provided under
the Scheme. In aid of this submission, the
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learned senior counsel would draw our attention to
the application and the accompanying affidavit
filed by the respondent-new unit before the State
Level Screening Committee. He would further
contend that the respondent-unit before all the
authorities below including the High Court had
adopted the stand that the fixed capital
investment excluding investment made before
05.03.1987 was more than Rs.532/- crores and
therefore the respondent-unit is a Prestigious
Unit entitled to an exemption of 75% of total tax
liability. It is further contended that the
respondent-new unit being New Cement Unit and
further being large scale unit though can avail
the benefit of the incentive scheme under 1E of
Annexure ‘C’ which provides for exemption upto 25%
of total liabilities, it cannot avail the benefit
of exemption at the rate of 75% under Item 4 as
Prestigious Unit. He would further submit that
benefit to cement industry is confined to the
extent envisaged under the Item 1E of Annexure-C
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as the said item is a specific provision relating
to cement industry and thus would prevail over
other provisions which are general in character in
terms of reference to new cement unit.
Alternatively, it is contended that the
respondent-unit being new cement unit, it may fall
under `New Very Prestigious Unit’, however Item 5
of Annexure `C’ speaks of the New Very Prestigious
Units other than cement units except those located
in Sub-Plan area, respondent-unit may not be
entitled to avail the benefit of the Scheme.
23.Per contra, learned counsel, Shri Sudhir Gupta
would justify the reasoning and the conclusion
reached by the High Court while rejecting the
revenue’s revision petition and thereby confirming
the view expressed by the Board. He would, inter
alia, submit that Item 1E is only an exception to
the general rule envisaged in Item 1 and not an
exception to the other Items in the Annexure-C,
i.e., Items 2 to 7 as it is not intended to govern
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the entire field of exemptions made available to
the cement industry so as to deny the benefits to
a unit even if it falls under another Item
envisaging better incentives. He would further
submit that since new cement unit is specifically
excluded from application of Item 1 (new units
generally), Item 2 (expanding/diversifying unit)
and Item 5 (very prestigious unit) but not Item
4 (prestigious units), Item 6 (export oriented
prestigious/pioneering unit) and Item 7 (export
oriented very prestigious units), it falls that
the intention behind such express exclusion is
such that but for the said exclusion, cement
industries would be included in the said entries.
He would strenuously submit that since the tax
exemption clauses are made with a beneficent
object, i.e., to encourage investment in specified
rural/semi-urban areas, their construction must be
liberal such as to confer the most beneficial
meaning to the provisions.
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24.The facts which are not in dispute are that the
respondent-assessee (hereinafter referred to as
‘the Company’) established a new cement unit
within Panchayat Samiti, Pindwara and commenced
commercial production some time in the year 1997.
It engaged itself in the manufacture of cement.
The total capital investment – (FCI) in the new
industrial unit claimed by the Company was Rupees
53252.87 Lakhs (Rs.532.52/- crores)
25.The Company had applied for grant of Eligibility
Certificate for exemption from payment of Central
Sales Tax and Rajasthan Sales Tax before the State
Level Screening Committee, Jaipur, under the
Scheme. However, the Screening Committee accepted
only Rs.5553.72 Lakhs (Rs.55.32 crores) as FCI
eligible for availing the benefits under the
Scheme. On the aforesaid basis the State Level
Screening Committee certified that the company is
entitled to avail exemption of tax to the extent
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of 25% of the tax liability by treating the same
to be a Large Scale Industry. In the appeal, the
Board took the view since the Company had invested
more than Rs.25 crores and has employed more than
250 workmen, it has the status of `New Prestigious
Unit’ and thus, falls within the definition of a
Prestigious Unit and should be governed by Item 4
of Annexure `C’ being entitled to avail 75% of
total tax liability. This view, as we have
already observed, is accepted by the High Court,
while dismissing the tax revision petition filed
by the revenue.
26.At the outset, we would observe that the High
Court has erred in reaching its conclusion by
holding that (a) the respondent-company would fall
into all the three categories of industries
referred to in the Scheme, that is to say it is a
new unit which is a ‘Large Scale Unit’, a
“Prestigious New Unit” and also a “Very
Prestigious Unit”; (b) the classification of a new
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unit, viz. small scale, medium scale and large
scale under item 1E on the basis of scale of
investment does not denude a new industrial unit
of any type of the special status of “Pioneer”,
“Prestigious” and “Very Prestigious” unit under
items 4 and 5 to also exclude operation of General
entry; and (c) the special entry would not exclude
the applicability of general entry in context of
the Scheme so as to exclude the operation of items
4, 6 and 7. Thereby implying that though there
exists an overlap between the general and special
provision, the general provision would also be
sustained and the two would co-exist.
27.Before we deal with the fact situation in the
present appeal, we reiterate the settled legal
position in law, that is, if in a Statutory Rule
or Statutory Notification, there are two
expressions used, one in General Terms and the
other in special words, under the rules of
interpretation, it has to be understood that the
Page 25 25
special words 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 specific provision, the later
must prevail.
28.We are mindful of the principle that the Court
should examine every word of a statute in its
context and must use context in its widest sense.
We are also in acquaintance with observations of
this Court in Reserve Bank of India v. Peerless
General Finance and Investment Co. Ltd., 1987 SCR
(2) 1 where Chinnappa Reddy, J. noting the
importance of the context in which every word is
used in the matter of interpretation of statutes
held thus:
“Interpretation must depend on the text and
the context. They are the basis of
interpretation. One may well say if the text
is the texture, context is what gives the
colour. Neither can be ignored. Both are
important. That interpretation is best which
makes the textual interpretation match the
contextual. A statute is best interpreted
Page 26 26
when we know why it was enacted. With this
knowledge, the statute must be read, first
as a whole and then section by section,
clause by clause, phrase by phrase and word
by word. If a statute is looked at, in the
context of its enactment, with the glasses
of the statute-maker, provided by such
context, its scheme, the sections, clauses,
phrases and words may take colour and appear
different than when the statute is looked at
without the glasses provided by the context.
With these glasses we must look at the Act
as a whole and discover what each section,
each clause, each phrase and each word is
meant and designed to say as to fit into the
scheme of the entire Act. No part of a
statute and no word of a statute can be
construed in isolation. Statutes have to be
construed so that every word has a place and
everything is in its place.”
29.It is well established that when a general law
and a special law dealing with some aspect dealt
with by the general law are in question, the rule
adopted and applied is one of harmonious
construction whereby the general law, to the
extent dealt with by the special law, is impliedly
repealed. This principle finds its origins in the
latin maxim of generalia specialibus non derogant ,
i.e., general law yields to special law should
Page 27 27
they operate in the same field on same subject.
(Vepa P. Sarathi, Interpretation of Statutes, 5
th
Ed., Eastern Book Company; N. S. Bindra’s
Interpretation of Statutes, 8
th
Ed., The Law Book
Company; Craies on Statute Law, S.G.G.Edkar, 7
th
Ed.,
Sweet & Maxwell; Justice G.P. Singh, Principles of
Statutory Interpretation, 13
th
Ed., LexisNexis;
Craies on Legislation, Daniel Greenberg, 9
th
Ed.,
Thomson Sweet & Maxwell, Maxwell on Interpretation of
Statutes, 12
th
Ed., Lexis Nexis)
30.Generally, the principle has found vast
application in cases of there being two statutes:
general or specific with the latter treating the
common subject matter more specifically or
minutely than the former . Corpus Juris Secundum,
82 C.J.S. Statutes § 482 states that when
construing a general and a specific statute
pertaining to the same topic, it is necessary to
consider the statutes as consistent with one
another and such statutes therefore should be
harmonized, if possible, with the objective of
giving effect to a consistent legislative policy.
On the other hand, where a general statute and a
specific statute relating to the same subject
Page 28 28
matter cannot be reconciled, the special or
specific statute ordinarily will control. The
provision more specifically directed to the matter
at issue prevails as an exception to or
qualification of the provision which is more
general in nature, provided that the specific or
special statute clearly includes the matter in
controversy.
(Edmond v. U.S., 520 U.S. 651 , Warden, Lewisburg
Penitentiary v. Marrero, 417 U.S. 653 )
31. The maxim generalia specialibus non derogant is
dealt with in Volume 44 (1) of the 4th ed. of
Halsbury's Laws of England at paragraph 1300 as
follows:
“The principle descends clearly
from decisions of the House of
Lords in Seward v. Owner of “The Vera
Cruz”, (1884) 10 App Cas 59 and the Privy
Council in Barker v Edger, [1898] AC 748
and has been affirmed and put into effect
on many occasions.... If Parliament has
considered all the circumstances of, and
made special provision for, a particular
case, the presumption is that a subsequent
enactment of a purely general character
would not have been intended to interfere
with that provision; and therefore, if
Page 29 29
such an enactment, although inconsistent
in substance, is capable of reasonable
and sensible application without extending
to the case in question, it is prima facie
to be construed as not so extending. The
special provision stands as an exceptional
proviso upon the general. If, however, it
appears from a consideration of the
general enactment in the light of
admissible circumstances that Parliament's
true intention was to establish thereby a
rule of universal application, then the
special provision must give way to the
general.”
32.The question in Seward v. Owner of the “Vera
Cruz”, (1884) 10 App Cas 59 was whether Section 7
of the Admiralty Court Act of 1861, which gave
jurisdiction to that Court over “any claim for
damage done by any ship” also gave jurisdiction
over claims for loss of life which would otherwise
come under the Fatal Accidents Act, 1846. It was
held that the general words of Section 7 of the
Admiralty Court Act did not exclude the
applicability of the Fatal Accidents Act and
therefore, the Admiralty Court had no jurisdiction
to entertain a claim for damages for loss of life.
Page 30 30
33.The adoption of the aforesaid rule in
application of principle of harmonious
construction has been explained by Kasliwal J.
while expressing his partial dissent to the
majority judgment in St. Stephen’s College v.
University of Delhi, (1992) 1 SCC 558 as follows:
“140. …The golden rule of interpretation
is that words should be read in the
ordinary, natural and grammatical meaning
and the principle of harmonious
construction merely applies the rule that
where there is a general provision of law
dealing with a subject, and a special
provision dealing with the same subject,
the special prevails over the general. If
it is not constructed in that way the
result would be that the special provision
would be wholly defeated. The House of
Lords observed in Warburton v. Loveland,
(1824-34) All ER Rep 589 as under:
“No rule of construction can require that
when the words of one part of statute
convey a clear meaning … it shall be
necessary to introduce another part of
statute which speaks with less
perspicuity, and of which the words may be
capable of such construction, as by
possibility to diminish the efficacy of
the first part.”
Page 31 31
(Anandji Haridas and Co. (P) Ltd. v. S.P.
Kasture, (1968) 1 SCR 661, Patna
Improvement Trust v. Lakshmi Devi, 1963
Supp (2) SCR 812, Ethiopian Airlines v.
Ganesh Narain Saboo, (2011) 8 SCC 539,
Usmanbhai Dawoodbhai Memon v. State of
Gujarat, (1988) 2 SCC 271, South India
Corpn. (P) Ltd. v. Secy., Board of
Revenue, Trivandrum, (1964) 4 SCR 280,
Maharashtra State Board of Secondary and
Higher Secondary Education v. Paritosh
Bhupeshkumar Sheth, (1984) 4 SCC 27 )
34. In J.K. Cotton Spinning & Weaving Mills Co.
Ltd. v. State of U.P., (1961) 3 SCR 185 , this
Court has clarified that not only does this rule
of construction resolve the conflicts between the
general provision in one statute and the special
provision in another, it also finds utility in
resolving a conflict between general and special
provisions in the same legislative instrument too
and observed that:
“9. …We reach the same result by applying
another well known rule of construction
that general provisions yield to special
provisions. The learned Attorney-General
seemed to suggest that while this rule of
construction is applicable to resolve the
conflict between the general provision in
one Act and the special provision in
Page 32 32
another Act, the rule cannot apply in
resolving a conflict between general and
special provisions in the same legislative
instrument. This suggestion does not find
support in either principle or authority.
The rule that general provisions should
yield to specific provisions is not an
arbitrary principle made by lawyers and
Judges but springs from the common
understanding of men and women that when
the same person gives two directions one
covering a large number of matters in
general and another to only some of them
his intention is that these latter
directions should prevail as regards these
while as regards all the rest the earlier
direction should have effect. In Pretty v.
Solly (quoted in Craies on Statute Law at
p.m. 206, 6th Edn.) Romilly, M.R.,
mentioned the rule thus:
“The rule is, that whenever there is a
particular enactment and a general
enactment in the same statute and the
latter, taken in its most comprehensive
sense, would overrule the former, the
particular enactment must be operative,
and the general enactment must be taken to
affect only the other parts of the statute
to which it may properly apply.”
The rule has been applied as between
different provisions of the same statute
in numerous cases some of which only need
be mentioned: De Winton v. Brecon,
Churchill v. Crease, United States v.
Chase and Carroll v. Greenwich Ins. Co.
10. Applying this rule of construction
that in cases of conflict between a
specific provision and a general provision
Page 33 33
the specific provision prevails over the
general provision and the general
provision applies only to such cases which
are not covered by the special provision,
we must hold that clause 5(a) has no
application in a case where the special
provisions of clause 23 are applicable.”
35.Lord Cooke of Thorndon pointed out, however,
in Effort Shipping Co Ltd. v. Linden Management ,
SA [1998] AC 605 that the maxim is not a technical
rule peculiar to English statutory interpretation,
rather it "represents simple common sense and
ordinary usage". Bennion, Statutory
Interpretation, 5th ed. (2008), p. 1155 states
that it is based, like other linguistic canons of
construction, "on the rules of logic, grammar,
syntax and punctuation, and the use of language as
a medium of communication generally. As Lord
Wilberforce observed in Associated Minerals
Consolidated Ltd v Wyong Shire Council [1975] AC
538, 554, that it is still a matter of legislative
intention, which the courts endeavour to extract
from all available indications.
Page 34 34
36.In Waverly Jute Mills Co. Ltd. v. Raymon & Co.
(India) (P) Ltd., (1963) 3 SCR 209 and Union of
India v. India Fisheries (P) Ltd., AIR 1966 SC 35
this Court has observed that when there is an
apparent conflict between two independent
provisions of law, the special provision must
prevail. In CCE v. Jayant Oil Mills (P) Ltd.,
(1989) 3 SCC 343 this Court has accepted the
aforesaid rule as “the basic rule of
construction” that is to say “a more specific item
should be preferred to one less so.” In Sarabjit
Rick Singh v. Union of India, (2008) 2 SCC 417
this Court has in fact followed the aforesaid
precedents thus:
“58. The Act is a special statute. It
shall, therefore, prevail over the
provisions of a general statute like the
Code of Criminal Procedure.”
37.This Court has noticed the application of the
said rule in construction of taxing statutes along
with the proposition that the provisions must be
Page 35 35
given the most beneficial interpretation in CIT v.
Shahzada Nand & Sons, (1966) 3 SCR 379:
“10. …The classic statement of Rowlatt,
J., in Cape Brandy Syndicate v. IRC,
(1921) 1 KB 64, 71 still holds the field.
It reads:
“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 a tax. Nothing is to
be read in, nothing is to be implied.
One can only look fairly at the
language used.”
To this may be added a rider: in a case of
reasonable doubt, the construction most
beneficial to the subject is to be
adopted. But even so, the fundamental rule
of construction is the same for all
statutes, whether fiscal or otherwise.
“The underlying principle is that the
meaning and intention of a statute must be
collected from the plain and unambiguous
expression used therein rather than from
any notions which may be entertained by
the court as to what is just or
expedient.” The expressed intention must
guide the court. Another rule of
construction which is relevant to the
present enquiry is expressed in the maxim,
generalia specialibus non derogant , which
means that when there is a conflict
between a general and a special provision,
the latter shall prevail. The said
principle has been stated in Craies on
Statute Law, 5th Edn., at p. 205, thus:
Page 36 36
“The rule is, that whenever there is a
particular enactment and a general
enactment in the same statute, and the
latter, taken in its most comprehensive
sense, would overrule the former, the
particular enactment must be operative,
and the general enactment must be taken
to affect only the other parts of the
statute to which it may properly
apply.”
…When the words of a section are clear,
but its scope is sought to be curtailed by
construction, the approach suggested by
Lord Coke in Heydon case, (1584) 3 Rep 7b,
yield better results:
“To arrive at the real meaning, it is
always necessary to get an exact
conception of the aim, scope, and
object of the whole Act: to consider,
according to Lord Coke: (1) What was
the law before the Act was passed; (2)
What was the mischief or defect for
which the law had not provided; (3)
What remedy Parliament has appointed;
and (4) The reason of the remedy.””
(emphasis supplied)
38.In LIC v. D.J. Bahadur, (1981) 1 SCC 315 this
Court was confronted with the question as to
whether the LIC Act is a special legislation or a
general legislation and while considering the rule
in discussion, this Court observed thus :
Page 37 37
“49. …the legal maxim generalia specialibus
non derogant is ordinarily attracted where
there is a conflict between a special and a
general statute and an argument of implied
repeal is raised. Craies states the law
correctly:
“The general rule, that prior statutes
are held to be repealed by implication
by subsequent statutes if the two are
repugnant, is said not to apply if the
prior enactment is special and the
subsequent enactment is general, the
rule of law being, as stated by Lord
Selbourne in Sewards v. Vera Cruz, ‘that
where there are general words in a later
Act capable of reasonable and sensible
application without extending them to
subjects specially dealt with by earlier
legislation, you are not to hold that
earlier and special legislation
indirectly repealed, altered, or
derogated from merely by force of such
general words, without any indication of
a particular intention to do so. There
is a well-known rule which has
application to this case, which is that
a subsequent general Act does not affect
a prior special Act by implication. That
this is the law cannot be doubted, and
the cases on the subject will be found
collected in the third edition of
Maxwell is generalia specialibus non
derogant — i.e. general provisions will
not abrogate special provisions.’ When
the legislature has given its attention
to a separate subject and made provision
for it, the presumption is that a
subsequent general enactment is not
intended to interfere with the special
provision unless it manifests that
Page 38 38
intention very clearly. Each enactment
must be construed in that respect
according to its own subject-matter and
its own terms.”
39.In Ashoka Marketing Ltd. v. Punjab National
Bank, (1990) 4 SCC 406 this Court has placed
reliance upon Bennion, Statutory Interpretation
(supra) and J.K. Cotton Spinning & Weaving Mills
case (supra), amongst others, and explaining the
rationale of this rule has reiterated the law as
under:
“52. In U.P. State Electricity Board v.
Hari Shanker Jain this Court has observed:
“In passing a special Act, Parliament
devotes its entire consideration to a
particular subject. When a general Act is
subsequently passed, it is logical to
presume that Parliament has not repealed
or modified the former special Act unless
it appears that the special Act again
received consideration from Parliament.”
53. In Life Insurance Corporation v. D.J.
Bahadur Krishna Iyer, J. has pointed out :
“In determining whether a statute is a
special or a general one, the focus must
Page 39 39
be on the principal subject matter plus
the particular perspective. For certain
purposes, an Act may be general and for
certain other purpose it may be special
and we cannot blur distinctions when
dealing with finer points of law.””
40.In U.P. SEB v. Hari Shankar Jain, (1978) 4 SCC
16, this Court has concluded that if Section 79(c)
of the Electricity Supply Act generally provides
for the making of regulations providing for the
conditions of service of the employees of the
Board, it can only be regarded as a general
provision which must yield to the special
provisions of the Industrial Employment (Standing
Orders) Act in respect of matters covered by the
latter Act, and observed that :
“9. The reason for the rule that a
general provision should yield to a
specific provision is this: In
passing a special Act, Parliament
devotes its entire consideration to
a particular subject. When a general
Act is subsequently passed, it is
logical to presume that Parliament
Page 40 40
has not repealed or modified the
former Special Act unless it appears
that the Special Act again received
consideration from Parliament. Vide
London and Blackwall Railway v.
Limehouse District Board of Works,
and Thorpe v. Adams.
41.In Gobind Sugar Mills Ltd. v. State of Bihar,
(1999) 7 SCC 76 this Court has observed that while
determining the question whether a statute is a
general or a special one, focus must be on the
principal subject-matter coupled with a particular
perspective with reference to the intendment of
the Act. With this basic principle in mind, the
provisions must be examined to find out whether it
is possible to construe harmoniously the two
provisions. If it is not possible then an effort
will have to be made to ascertain whether the
legislature had intended to accord a special
treatment vis-à-vis the general entries and a
further endeavour will have to be made to find out
Page 41 41
whether the specific provision excludes the
applicability of the general ones. Once we come to
the conclusion that intention of the legislation
is to exclude the general provision then the rule
“general provision should yield to special
provision” is squarely attracted.
42.Having noticed the aforesaid, it could be
concluded that the rule of statutory construction
that the specific governs the general is not an
absolute rule but is merely a strong indication of
statutory meaning that can be overcome by textual
indications that point in the other direction.
This rule is particularly applicable where the
legislature has enacted comprehensive scheme and
has deliberately targeted specific problems with
specific solutions. A subject specific provision
relating to a specific, defined and descriptable
subject is regarded as an exception to and would
prevail over a general provision relating to a
broad subject.
Page 42 42
43.In the instant case, the item 1E is subject
specific provision introduced by an amendment in
1996 to the Scheme. The said amendment removed “new
cement industries” from the non-eligible Annexure-
B and placed it into Annexure-C amongst the
eligible industries. It classified the cement
units for eligibility of tax exemption into three
categories: small, medium and large. The said
categories are comprehensive whereby small and
medium cement units have been prescribed to have
maximum FCIs of Rs.60/- lakhs and Rs.5/- crores,
respectively and large to be over the FCI of
Rs.5/- crores. The maximum ceiling for large
cement units has been purposefully left open and
thereby reflects that the intention clearly is to
provide for an all-inclusive provision for new
cement units so as to avoid any ambiguity in
determination of appropriate provision for
applicability to new cement units to seek
exemption.
Page 43 43
44.It leaves no doubt that what is specific has to
be seen in contradistinction with the other
items/entries. The provision more specific than
the other on the same subject would prevail. Here
it is subject specific item and therefore as
against items 1, 4, 6 and 7, which deal with units
of all industries and not only cement, item 1E
restricted to only cement units would be a
specific and special entry and thus would override
the general provision.
45.The proposition put forth by the respondent-
Company that the construction which is most
beneficial to the assessee must be applied and
adopted fails to impress upon us its application
in this case. Howsoever, it is true that the
canons of construction must be applied to extract
most beneficial re-conciliation of provisions. In
case of fiscal statute dealing with exemption, it
would require interpretation benefiting the
Page 44 44
assessee. But here the introduction of the subject
specific entry vide amendment into general scheme
of exemption speaks volumes in respect of
intention of the legislature to restrict the
benefit to cement industries as available only
under Item 1E, which categorically classified them
into three as per their FCI. The specific entries
being mutually exclusive have been placed so
systematically arranged and classified in the
Scheme. The construction of provisions must not be
divorced from the object of introduction of
subject specific provision while retaining other
generalized provision that now specifically
exclude the new cement industries, which could
otherwise fall into its ambit, lest such
interpretation would be not ab absurdo (i.e.,
interpretation avoiding absurd results).
46.Therefore, in our considered view the
respondent-Company would only be eligible for
grant of exemption under Item 1E as a large new
Page 45 45
cement unit in accordance with its FCI being above
Rs.5/- crores. In light of the aforesaid, we are
of the considered opinion that the judgment and
order passed by the High Court ought to be set
aside and the appeals of the Revenue requires to
be allowed.
47.In the result, the appeal is allowed and the
judgment and order passed by the High Court is set
aside. No order as to costs.
....................J.
[ H.L. DATTU ]
....................J.
[ S.A. BOBDE ]
NEW DELHI,
FEBRUARY 19, 2014.
Page 46 46
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