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CASE NO.:

Appeal (civil) 1120 of 2006

PETITIONER:

State of Karnataka & Others

RESPONDENT:

Balaji Computers & Others

DATE OF JUDGMENT: 07/12/2006

BENCH:

ASHOK BHAN & DALVEER BHANDARI

JUDGMENT:

J U D G M E N T

WITH

CIVIL APPEAL NO. 1835 OF 2006.

The Assistant Commissioner of Commercial

Taxes & Others ... Appellants

Versus

M/s Intent Compu System & Another ... Respondents

Dalveer Bhandari, J.

These appeals are directed against the judgments of

the Division Bench of the High Court of Karnataka at

Bangalore dated 1.9.2005 passed in Writ Appeal No.

1931 of 2005 and dated 24.10.2005 passed in Writ

Appeal No.2383 of 2005.

The controversy in both these appeals is identical,

therefore, both the appeals are disposed of by common

order. For the sake of convenience, we are referring to

the facts of Civil Appeal No.1120 of 2006.

The respondents are registered as dealers under the

provisions of the Karnataka Sales Tax Act, 1957

(hereinafter referred to as "the KST Act").

Under Section 6-B of the KST Act, turnover tax is

imposed. Section 6-B reads as under:-

"Section 6-B. Levy of Turnover Tax \026 (1)

Every registered dealer and every dealer who is

liable to get himself registered under sub-

sections (1) and (2) of Section 10 whose total

turnover in a year is not less than the

turnovers specified in the said sub-sections

whether or not the whole or any portion of

such turnover is liable to tax under any

provisions of this Act, shall be liable to pay

tax.

xxx xxx xxx"

Under Section 8-A of the KST Act, the State

Government has given exemption of the tax. Section 8-A

reads as under:-

"Section 8-A. Power of State Government

to notify exemptions and reductions of tax

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\026 (1) The State Government may, by

notification, make an exemption, or reduction

in rate, in respect of any tax payable under

this Act.

x x x"

In pursuance to Section 8-A, the Government of

Karnataka issued notification dated 31.3.2001. The said

Notification reads as under:-

"Sl.No.834

NOTIFICATION

No.FD 97 CSL 2001(7), No.660, dated

31.03.2001

Karnataka Gazette, Extraordinary, dated

31.03.2001

In exercise of the powers conferred by

Section 8-A of the Karnataka Sales Tax Act,

1957 (Karnataka Act 25 of 1957), the

Government of Karnataka hereby exempts

with effect from the First day of April, 2001,

the turnover tax payable by a dealer under

Section 6-B of the said Act on the turnovers

relating to the following goods, namely :

[Exemption has been given to 32 items. Items

8 and 9 relate to computers. We are

reproducing both these items. We are in fact

concerned with item 9 only]

8. Computer software; works contract of

programming and providing of computer

software; and leasing of computer

software.

9. Computers, computer peripherals,

computer consumables and computer

cleaning kits falling under Serial Number

20 of Part 'C' of Second Schedule."

The items indicated at Serial No. 20 of Part 'C' of the

Second Schedule of the KST Act read as under:

"From 01.04.1989 to 31.03.1996

20. Computers, micro-computers, computer

peripherals and parts and accessories

thereof.

From 01.04.1996 to 31.03.1998, Entry reads

thus:-

20. (i) Computers, micro-computers,

micro processors, computer peripherals

and parts and accessories thereof;

(ii) Computer stationery

From 01.04.1998, the entry reads thus:-

20 (i) Computers of all kinds namely \026

main frame, mini, personal, micro

computers and the like and their parts

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(ii) Peripherals, that is to say \026

(a) All kinds of printers and their

parts, namely \026

Dot matrix, ink jet, laser, line, Line

matrix and the like

(b) Terminals, scanners, multi Media

kits, plotters, modem and their

parts."

It would be relevant to mention that the

Commissioner of Commercial Taxes, Karnataka issued a

clarification dated 15.12.2004 clarifying that parts of

computer and parts of computer peripherals were not

liable to payment of turnover tax by virtue of exemption

notifications issued under Section 8-A of the KST Act.

This clarification issued under Section 3-A(2) of the KST

Act was withdrawn by the Commissioner of Commercial

Taxes, Karnataka on 23.12.2004 which reads as under:

"PROCEEDINGS OF THE COMMISSIONER OF

COMMERCIAL TAXES (KARNATAKA),

BANGALORE UNDER SECTION 3A(2) OF

KARNATAKA SALES TAX ACT, 1957

Sub: KST Act, 1957 \026 Clarification under

Section 3A(2) \026 regarding RST on "computer

parts".

Ref. : 1) Application dated 26.11.2004 of the

Vice President, Association for

Information Technology, 15/13

Floor, Dickenson Road, Bangalore

2) This office Proceedings vide

No.CLR.CR.157/04-05, dated

15.12.2004.

In the application cited above, the respondents

association has sought clarification on

turnover tax applicable to computer parts.

The matter was examined with reference to

Section 3-A(2) of the Karnataka Sales Tax Act,

1957 which empowers the Commissioner of

Commercial Taxes to clarify with regard to rate

of tax payable under the Act, if he considers it

necessary or expedient so to do for the

purpose of maintaining uniformity in the work

of assessments and collection of revenue. It

was considered that the clarification as sought

by the petitioner association was within the

scope of the aforesaid provision and

accordingly a clarification was issued.

However, the matter has now come up for

reconsideration in view of the interpretation of

the Government Notification No. FD 54 CSL

2002(4) dated 30.03.2002 as given to it by the

Accountant General. There is now, therefore a

need to re-examine in greater detail the matter

with regard to applicability of the said

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notification to computer parts.

Hence, the following :

CLARIFICATION NO. CLR.CR.157/04-05,

DATED 23.12.2004

For the reasons as detailed out in the

Preamble, the clarification issued on

15.12.2004 and referred to at (2) above is

hereby withdrawn.

Sd/-

(Ashok Kumar Sharma)

Commissioner of Commercial Taxes

Copy to:

The Vice President, Association for Information

Technology, 15/13 Floor, Dickenson Road,

Bangalore."

The Commissioner of Commercial Taxes, Karnataka

exercising the powers under Section 3-A of the KST Act

issued another circular No.15/2004-05 dated 31.12.2004

directing the Assessing Authorities, Revisional

Authorities, Joint Commissioners, Inspecting Authorities,

Audit Authorities etc., to levy turnover tax on parts of

computer and parts of computer peripherals. The

Assessing Authorities exercising the powers under

Section 12-A of KST Act issued proposition notices to the

dealers proposing to levy turnover tax on parts of

computer and parts of computer peripherals for the

relevant assessment years concerned.

The respondents challenged the notices issued by

the authorities in pursuance of the said notification

dated 31.12.2004 under Section 12-A of the KST Act in

Writ Petition numbers 5158-5161/2005 as arbitrary and

opposed to Article 14 of the Constitution of India and

sought for issuance of a declaration that the Circular

No.15/04-05 dated 31.12.2004 issued by the

Commissioner of Commercial Taxes in the State of

Karnataka as being contrary to law, arbitrary, ultra virus

the Notifications dated 18.7.2000, 31.3.2001 and

30.3.2002 and also sought for a direction that turnover

tax are exempted on the sales of parts of computer and

parts of computer peripherals as per the said

Government notifications issued under Section 8-A of the

KST Act.

The respondents filed Writ Petition numbers 5158-

5161 of 2005 before the learned Single Judge of the

Karnataka High Court who vide order dated 10.2.2005

dismissed the writ petition as not maintainable since the

dealers had not exhausted the alternate remedy available

to them under the Statute before filing writ petitions

under Article 226 of the Constitution.

The respondents aggrieved by the order of the

learned Single Judge filed a Writ Appeal No. 1931 of 2005

before the Division Bench of the Karnataka High Court.

In the meantime, during the pendency of the writ appeal,

re-assessment orders were passed by the Assessing

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Authority confirming the levy of turnover tax on parts of

computer and parts of computer peripherals. The

Division Bench in the impugned judgment has held that

parts of computer and parts of computer peripherals are

to be treated as computers and computer peripherals

falling under Entry-20 of part 'C" of the Second Schedule

of the Karnataka Sales Tax Act by legal fiction and are

exempted from levy of turnover tax payable under Section

6-B of the KST Act. The Division Bench quashed the

circular instructions issued by the Commissioner of

Commercial Taxes of Karnataka dated 31.12.2004.

The Division Bench adjudicated several questions of

law in the impugned judgment, but we are confining our

judgment to the main controversy in the case regarding

liability of the respondents to pay the turnover tax on

parts of computer and computer peripherals.

The respondents-assessees submitted before the

Division Bench that parts of computer and computer

peripherals were exempted from payment of turnover tax

by a dealer under Section 6-B of the KST Act. The High

Court did not accede to the submission of the appellants

that the respondents were not exempted from payment of

turnover tax for several reasons.

(1) The definition of 'computer' and

'Peripherals' within its fold, by means of a legal

fiction, embraces parts of Computer and

Computer peripherals.

(2) Part 'C' of the Second Schedule of the Act

sets out various items of goods in respect of

which single point tax is leviable on the first or

earliest of successive dealers in the State

under Section 5(3)(a) of the Act. The Schedule

has been further bifurcated into several parts.

Under Sl. No. 20 of Part 'C' of the Second

Schedule of the Act, computers, peripherals,

computer cleaning kits, computer software are

the items provided in respect of which tax is

leviable under Section 5(3) of the Act. In other

words, the Legislature intended to levy sales

tax under Section 5(3) of the Act in respect of

various types of computers, computer

peripherals, computer consumables, computer

cleaning kits and computer software.

Section 6-B of the Act provides for levy of turnover

tax on every registered dealer and every dealer who is

liable to get himself registered under Sections (1) and (2)

of Section 10. Sl. No. 20(i) refers to various types of

computers in respect of which tax is leviable. After the

words 'Computers of all kinds', the word 'namely' is used

setting out the various types of computers like main

frame, mini, personal, micro computers and the like. The

words 'and the like' are indicative of the fact that various

types of computers, similar to main frame, mini, personal

and micro computers have been exempted from payment

of tax under Section 8A of the KST Act. Immediately after

the description of various types of computers, the words

'and the like' and the words 'and their parts' are referred

to. The question was whether the words 'and their parts'

following the words 'and the like' were to be read

conjunctively as contended by the respondents or

disjunctively as contended by the appellants and should

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they be excluded from the definition of computer? It is

not proper to read the words 'and their parts'

disjunctively. The legislative intention becomes clear

when these words are read conjunctively. On proper

construction of the Statute, it would be reasonable to

take the view, by legal fiction that the legislature,

for the purposes of levy of tax under the KST

Act wanted parts of computer also to be treated as

computers. Similarly, when the appellants in exercise of

its powers under Section 8-A of the KST Act exempted

computers from payment of tax, the parts of computer

are also exempt from payment of tax.

The computers are produced by assembling various

parts or configuration. Therefore, for the purpose of levy

of turnover tax, if the legislature, by means of legal fiction

or definition, intended to treat the parts of computer as

computers, in that context the words 'and their parts'

occurring immediately after specific reference to 'main

frame, mini, personal micro computers and the like'

should be understood that the parts of computers were

also treated as computers by legislative intendment.

For proper construction, we deem it necessary to

explain how the word 'namely' has been described in

various dictionaries.

In Black's Law Dictionary, Fifth Edition, the word

'namely' has been stated as "a difference, in grammatical

sense, in strictness exists between the words namely and

including. Namely imports interpretation, i.e., indicates

what is included in the previous term; but including

imports addition, i.e., indicates something not included".

In Webster's Encyclopedic Unabridged Dictionary of

the English Language, the word 'namely' has been stated

as 'that is to say, explicitly, specifically to wit; on item of

legislation, namely, certain bail."

In Chambers 21st Century Dictionary the word

'namely' has been stated as "used to introduce an

expansion or explanation of what has just been

mentioned".

In World Book Dictionary, the word 'namely' has

been stated as 'that is to say to wit'. Therefore, the word

'namely', ordinarily imports of what is comprised in the

preceding clause; and it ordinarily serves of equating

what follows with the clause described before.

This Court in State of Bombay v. Bombay

Education Society reported in AIR 1954 SC 561, had an

occasion to examine the meaning of the words 'that is to

say' which have been described as 'explanatory or

illustrative words and not words either of amplification or

limitation'.

In this case, while considering what is the meaning

that is required to be given to the word 'namely' employed

in the circular issued by the State of Bombay directing

that no primary or secondary school shall from the date

of the order, admit to a class where English is used as a

medium of instruction any pupil other than a pupil

belonging to a section of citizens the language of which is

English wherein it is explained by stating 'namely' Anglo-

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Indians and citizens of non-Asiatic descent has observed

that ordinarily the word 'namely' imports enumeration of

what is comprised in the preceding clause and it

ordinarily serves the purpose of equating what follows

with the clause described before. Further, the word

'namely' has also been explained in the said decision and

also in the Oxford English Dictionary as 'that is to say'.

In this connection, it is useful to refer to the observation

made by the Court in paragraph 12 of the judgment

which reads as under:

"12. Re(1): As already indicated Barnes High

School is a recognized Anglo-Indian School

which has all along been imparting education

through the medium of English. It receives aid

out of State funds. The daughter of Major

Pinto and the son of Dr. Gujar are citizens of

India and they claim admission to Barnes High

School in exercise of the fundamental right

said to have been guaranteed to them by

Article 29(2) of the Constitution. The School

has declined to admit either of them in view of

the circular order of the State of Bombay. The

provisions of the circular order, issued by the

State of Bombay on the 6th January, 1954,

have already been summarized above."

The operative portion of the order, set forth in Clause 5

thereof, clearly forbids all primary or secondary schools,

where English is used as a medium of instruction to

admit to any class any pupil other than a pupil belonging

to a section of citizens, the language of which is English

namely Anglo-Indians and citizens of Non-Asiatic

descent. The learned Attorney General contended that

this clause did not limit admission only to Anglo-Indians

and citizens of non-Asiatic descent, but permitted

admission of pupils belonging to any other section of

citizens the language of which is English.

The learned counsel for the respondents pointed out

that one of the meanings of the word 'namely', as given in

the Oxford English Dictionary, Volume VII P.16 is 'that is

to say' and he then referred to the decision of the Federal

Court in Bhola Prasad v. Emperor reported in AIR 1942

FC 17, where it was stated that the words 'that is to say'

were explanatory or illustrative words and not words

either of amplification or limitation. It should, however,

be remembered that those observations were made in

connection with one of the Legislative heads namely

Entry No. 31 of the Provincial Legislative List. The

fundamental proposition enunciated in the case of The

Queen v. Burah reported in (1878) 3 AC 889 (B) was that

the Indian Legislatures within their own sphere had

plenary powers of legislation as large and of the same

nature as those of Parliament itself.

In that view of the matter, every Entry in the

legislative list had to be given the widest connotation and

it was in that context that the words 'that is to say' relied

upon by the learned Attorney General were interpreted in

that way by the Federal Court. To do otherwise would

have been to cut down the generality of the legislative

head itself. The same reason cannot apply to the

construction of the Government Order in the present

case for the consideration that applied in the case before

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the Federal Court had no application. Ordinarily, the

word 'namely' imports enumeration of what is comprised

in the preceding clause. In other words, it ordinarily

serves the purpose of equating what follows with clause

described before.

In Stroud's Judicial Dictionary (4th Edition, Volume

5), it is observed that the words 'that is to say' are

employed and to make clear and fix the meaning of what

is to be explained or defined; and such words are not

used, as a rule, to amplify a meaning while removing a

possible doubt for which purpose the word 'includes' is

generally employed.

In Stroud's Judicial Dictionary (4th Edition, Volume

5, at page 2753), it is observed:

"THAT IS TO SAY \026 (1) "That is to say" is the

commencement of an ancillary clause which

explains the meaning of the principal clause.

It has the following properties: (1) it must not

be contrary to the principal clause; (2) it must

neither increase nor diminish it; (3) but where

the principal clause is general in terms it may

restrict it."

The quotation, given above, from Stroud's Judicial

Dictionary shows that, ordinarily, the expression 'That is

to say' is employed to make clear and fix the meaning of

what is to be explained or defined. Such words are not

used, as a rule, to amplify a meaning while removing a

possible doubt for which purpose the word 'includes' is

generally employed.

In view of the ratio of various judgments and on

plain construction of the Statute, it is clear that parts of

computer, by legal fiction, need to be treated as

computers under Sl. No. 20(i) of Part 'C' of the Second

Schedule of the Act. When parts of computer and

computer peripherals are treated as computers and

computer peripherals, there cannot be any doubt that

parts of computer and computer peripherals are not to be

treated as computer and computer peripherals, whether

in the light of the language employed in the exemption

Notifications referred to in the preceding paragraphs of

the judgment are parts of computer and computer

peripherals are also exempted from levy of turnover tax.

The reading of exemption Notifications, in that

context, makes it clear that it intended to give exemption

to all the items of computers and their parts. This is

clear from the fact that the Notifications grant exemption

to computers, computer peripherals, computer

consumables and computer cleaning kits falling under Sl.

No. 20 of Part 'C' of the Second Schedule of the Act.

The same is the language employed in the Notifications.

The exemption notifications intended to exempt all the

items referred to in Sl. No. 20 of Part 'C' of the Second

Schedule and the intention was not to grant exemption

for all items referred to in Sl. No. 20 of Part 'C' of the

Second Schedule of the Act. The Court observed that if

the Government intended to exclude parts of computer

and computer peripherals, the same would have been

made clear by stating computers and computer

peripherals falling under Sl. No. 20 of Part 'C' of the

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Second Schedule. The construction of the Statute and

the intention of the framers of the Legislature also lead to

a clear conclusion that parts of the computer and

computers peripherals are also exempted from the levy of

turnover tax.

In Krishi Utpadan Mandi Samiti, Kanpur v.

Ganga Dal Mill and Co. [(1984) 4 SCC 516], the

question that came up for consideration before this Court

was whether legume, whole grain, when notified as a

'specified agricultural produce' within the meaning of the

expression of Section 2(t) of the U. P. Krishi Utpadan

Mandi Adhiniyam Act, 1964 would also comprehend its

split folds of parts, commercially called 'dal' so as to

enable the Market Committee to levy market fee under

Section 17 of the Mandi Adhiniyuam Act on the

transaction of sale of 'dal' of legumes specified in the

schedule to the Mandi Adhimiyam Act. The Court, on

consideration of the definition of 'agriculture produce',

took the view that it would mean not only those items of

produce of agriculture as specified in the schedule, but

will also include the admixture of two or more of such

items as also any such items in its processed form.

In Prestige Engineering (India) Ltd v. Collector of

Central Excise, Meerut [(1994) 6 SCC 465], the question

that came up for consideration before this Court was, as

to what is the true meaning and purport of Notification

issued by the Central Government under Rule 8(1) of the

Central Excise Rules, 1944 which exempted the goods

falling under Item 68 of the First Schedule to the Central

Excises and Salt Act, 1944 manufactured in a factory as

a job work from exemption of duty of excise leviable

thereon as is in excess of the duty calculated on the basis

of the amount charged for the job work. While

considering the said question, after referring to the

cleavage of opinion expressed by various High Courts and

various benches of Customs, Excise and Gold Appellate

Tribunal, this Court held that once an expression is

defined in the Act, that expression wherever it occurs in

the Act, Rules or Notifications issued thereunder, should

be understood in the same sense.

In the case of Steel Authority of India Ltd. v.

Collector of Central Excise, Bolpur, West Bengal

reported in (1997) 10 SCC 335, this Court took the view,

while considering the question as to what is the meaning

that is required to be given to the exemption notification

issued under Rule 8(1) of the Central Excise Rules, 1944

by the Central Government exempting levy of excise duty

in respect of "tar", falling under Item 11(5) of the First

Schedule to the Central Excises and Salt Act, 1944, that

the meaning of "tar" has to be gathered from the tariff

description given in Clause 5 of Tariff Item No. 11 and,

therefore, "tar" will include everything which has been

included in the extended definition. It is useful to refer to

the observations made at paragraph 4 of the judgment,

which read as under:

"4. The Exemption Notification exempts "tar"

falling under Item 11 of the First Schedule to

the Central Excises and Salt Act, 1944. The

meaning of "tar" has to be gathered from the

Tariff description given in clause (2) of Tariff

Item 11. An inclusive definition has been

given to "tar" which includes "partially

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distilled tars and blends of pitch will creosote

oils or with other coal tar distillation

products". Therefore, "tar" will include

everything which has been included in the

extended definition. Having regard to the

wording of the notification and wording of the

Tariff Item 11, we have no doubt that the

product of the assessee (PCM) qualifies for

the benefit of the exemption notification."

The principle enunciated by this Court in the

decisions referred to above, it is clear that the language

employed in the exemption Notifications and items in

respect of which exemption had been given, had to be

understood in the context in which exemption

Notifications came to be issued. In case there is any

doubt that if the language employed in exemption

Notification admits of two views and is not clear and

ambiguous, the Division Bench in the impugned

judgment aptly observed, the view which is beneficial to

the assessee, will have to be taken.

In the case of Poulose & Mathen v. Collector of

Central Excise reported in (1997) 3 SCC 50, wherein

this Court has taken the view that where two opinions

are possible, the assessee should be given the benefit of

doubt, and that opinion which is in his favour should be

given effect to. It is useful to refer to the observation

made at paragraph 15 of the judgment, which reads as

under:

"One aspect deserves to be noticed in

this context. The earlier Tariff Advice No. 83

of 1981 on the basis of which Trade Notice

No. 220 1981 was issued by the Collector of

Central Excise and Customs is binding on

the department. It should be given effect to.

There is no material on record to show that

this has been rescinded or departed from,

and even so, to what extent. Even assuming

that the later Tariff Advice No. 6 of 1985 has

taken a different view - about which there is

no positive material \026 the facts point out that

the concerned department itself was having

considerable doubts about the matter. The

position was not free from the doubt. It was

far from clear. In such a case, where two

opinions are possible, the assessee should be

given the benefit of doubt and that opinion

which is in its favour should be given effect

to."

In the instant case, computer, computer

peripherals, computer consumables, computer cleaning

kits and computer software are exempted from levy of

turnover tax. Under these circumstances, even

assuming for the sake of argument that the exemption

Notifications and circulars do not clearly specify as to

whether they are exempted from turnover tax, it is not

possible to take the view in the background in which

exemption Notifications came to be issued that the State

would have picked up only computer parts and parts of

computer peripherals for levy of tax. Obviously, the

intention of the State in granting exemption is to promote

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Information Technology industry in the State by

attracting a large number of investors into the State and

setting up of Information Technology industries and

provide job opportunities to a large number of youth as

aptly observed in the impugned judgment. When that

being the object of exemption Notifications issued under

Section 8-A of the Act and various items referred to in Sl.

No. 20 of Part 'C' of the Second Schedule have been

granted exemption even if it is assumed that the things

are not made clear in the exemption Notifications, it is

fair and reasonable to place the construction which is

beneficial to the assessee by exempting levy of tax on

parts of computer and computer peripherals.

In the instant case, all the Assessing Authorities

except one have taken the view ever since the year 1997-

98 that parts of computer and computer peripherals are

exempted from levy of tax. Further, the revisional

authorities have also not exercised the suo moto power

conferred on them under Sections 21 and 22-A(2) of the

Act thereby impliedly approving the decisions of the

Assessing Authorities. All these indicate that the

Assessing/Revisional Authorities and the Commissioner,

till the objection was raised by the Deputy Accountant

General, have understood that the Notification exempted

parts of computer and computer peripherals from levy of

turnover tax under Section 6-B of the Act. The

Commissioner also, in the Circular Annexure-H, filed in

the High Court, has clarified that parts of computer and

computer peripherals are exempted from levy of turnover

tax under Section 6-B of the Act. The contemporaneous

interpretation placed by the Assessing Authorities and

also the clarification issued by the Commissioner

supports the view taken by the Court that parts of

computer and computer peripherals are exempted from

levy of turnover tax.

This Court in the case of K. P. Varghese v. Income

Tax Officer, Ernakulam reported in (1981) 4 SCC 173,

while considering the binding nature on the circulars

issued by the Central Board of Direct Taxes on the

department, has also observed that the Rule of

construction by reference to contemporanea expositio is

a well established rule for interpreting a statute by

reference to exposition it has received from contemporary

authorities, though it must give way where a language of

the statute is plain and unambiguous. It is useful to

refer to the observation made by the Court, which reads

as under:

"These two circulars of the Central

Board of Direct Taxes are, as we shall

presently point out, binding on the Tax

Department in administering or executing

the provision enacted in sub-section (2), but

quite apart from their binding character, they

are clearly in the nature of contemporanea

expositio furnishing legitimate aid in the

construction of sub-section (2). The rule of

construction by reference to contemporanea

expositio is a well established rule for

interpreting a statute by reference to the

exposition it has received from contemporary

authority, though it must give way where the

language of the statute is plain and

unambiguous. This rule has been succinctly

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and felicitously expressed in Crawford on

Statutory Construction (1940 Edn.) where it

is stated in paragraph 219 that

"administrative construction

(i.e. contemporaneous construction

placed by administrative or

executive officers charged with

executing a statute) generally

should be clearly wrong before it is

overturned; such a construction,

commonly referred to as practical

construction, although non-

controlling, is nevertheless entitled

to considerable weight; it is highly

persuasive."

The validity of this rule was also

recognized in Baleshwar Bagarti v.

Bhagirathi Dass ILR 35 Cal. 701 where

Mookerjee, J. stated the rule in these terms:

It is a well-settled principle of

interpretation that courts in

construing a statute will give much

weight to the interpretation put

upon it, at the time of its enactment

and since, by those whose duty it

has been to construe, execute and

apply it.

and this statement of the rule was quoted

with approval by this Court in Deshbandhu

Guptu & Co. v. Delhi Stock Exchange

Association Ltd. [(1979) 4 SCC 565]. It is

clear from these two circulars that the

Central Board of Direct Taxes, which is the

highest authority entrusted with the

execution of the provisions of the Act,

understood sub-section (2) as limited to

cases where the consideration for the

transfer has been understated by the

assessee and this must be regarded as a

strong circumstance supporting the

construction which we are placing on that

sub-section."

Further, in the case of Bangalore Wood Industries

v. Asst. Commissioner of Commercial Taxes

(Assessment), Hassan & Another reported in (1994) 92

STC 603 (Kar), the Division Bench of the High Court,

after referring to the observations made by this Court in

the case of K. P. Varghese (supra), has observed that

'the understanding of law at the earliest point of time of

its enactment cannot be ignored." What applies to the

statute, the Division Bench was of the view, must be

applied to the contents of the circular also.

It may be relevant to mention that all the assessing

authorities in the State excepting one, from the years

1997-98 had taken the view that till the issuance of

Circular dated 31st December, 2004, parts of computer

and computer peripherals were exempted from levy of

turnover tax under Section 6-B of the Act.

The appeals of the appellants are devoid of any

merit because of the following reasons:

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1. In the impugned judgment, the Division

Bench of the High Court was justified in

observing that the parts of computer by

employing legal fiction need to be treated

as computer under Sr. No.20(i) of the Part

'C' of the Second Schedule of the Act;

2. The computer itself is produced by

assembling various parts or

configuration. When the legislature

intended to exempt the computer then by

employing the legal fiction it would be

appropriate to hold that parts of

computer and its peripheral are also

exempted from payment of tax;

3. The language employed in the exemption

notifications and items in respect of

which exemption was granted had to be

understood in the context in which

exemption notifications were issued;

4. The Rule of Construction by reference to

contemporanea expositio is a well

established rule for interpreting a statute

by reference to the exposition it has

received from contemporary authorities.

When language of the statute is plain and

unambiguous, the method of

contemporanea expositio need not be

employed;

5. It is well settled that even if it is assumed

that the things are not made clear and

explicit in the exemption notifications, it

is proper and reasonable to place the

construction which is beneficial to the

assessee by exempting levy of tax on

parts of computer and computer

peripherals;

6. It is our duty and obligation to properly

comprehend legislative intention while

constructing the Statute. In the instant

case, computer, computer peripherals,

computer consumables, computer

cleaning kit and computer software are

exempted from the levy of tax. To reach

the conclusion that the State intended

only computer parts and computer

peripherals for levy of tax would not be

proper in this background; and

7. Plain construction of the statute leads to

a clear conclusion that the legislature

intended to exempt computer and parts

of computer and computer peripherals

from levy of turnover tax.

We have carefully considered the rival submissions

and decided cases. In our considered view, no

interference is called for in the well reasoned impugned

judgment of the High Court. Consequently, the appeals

filed by the State are dismissed being devoid of any merit.

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In the facts and circumstances of the case, we direct

the parties to bear their own respective costs.