- (1.) A very interesting question as to the principles of interpretation of legislation by incorporation or reference arises for consideration in these appeals arising out of certain assessments to sales tax in Kerala. Section 9 of the Kerala General Sales Tax Act 1963 which came into force on 1-4-1963 granted exemption from sales tax on goods specified in the third Schedule to the said Act. These included the following : 5. Sugar as defined in item of the First Schedule to the Central Excises and Salt Act, 1944; 6. Tobacco as defined in item 4 of the First Schedule to the Central Excises and Salt Act, 1944 and 7. Cotton fabrics, silk fabrics, woollen fabrics and rayon or artificial silk fabrics as defined in item Nos. 19, 20, 21 and 22 respectively of the First Schedule to the Central Excises and Salt Act, 1944. The question before us is whether, in respect of the assessment years 1971-72 and 1972-73, with which we are concerned, the exemption given to 'cotton fabrics' under item 7 above should be restricted to 'cotton fabrics' as defined in the Central Excises and Salt Act, 1944 ('the 1944 Act') as it stood on 1-4-1963 or whether it would also cover goods falling under the said definition after its amendment in 1969.
(2.) Though we are concerned only with the interpretation of the Kerala General Sales Tax Act, 1963, it is necessary to refer back to the earlier history of some Central as well as State legislations : (i) We start with the 1944 Act. By this Act, excise duty was levied on the manufacture or production of various types of goods enumerated in the First Schedule to the Act. Item 19 (originally item 12) of the First Schedule, as it stood on 1-4-1963, defined 'cotton fabrics' thus : "Cotton fabrics- 'Cotton Fabrics' mean all varieties of fabrics manufactured either wholly or partly from cotton and include dhoties, sarees, chaddars, bed sheets, bed-spreads, counter-panes and table cloths, but do not include any such fabric x x x x x Item 19 was amended by the Finance Act, 1969. After amendment, it reads thus: "19. Cotton Fabrics 'Cotton fabrics' means all varieties of fabrics manufactured either wholly or partly from cotton and includes dhoties, sarees, chaddars, bed sheets, bed spreads, counter panes, table cloths, embroidery in the piece, in strips or in motifs and fabrics impregnated or coated with preparations of cellulose derivatives or of other artificial plastic materials but does not include x x x x x x" (Underlining ours) The question set out earlier assumes importance because the respondents assessees deal in "P.V.C. Cloth", an item of goods which is clearly covered by the amended definition but, perhaps, not by the original one. (ii) In 1957, there were certain legislations of Parliament affecting the levy of sales tax and excise duty. The first of these was the Central Sales Tax Act, 1956 (C.S.T. Act) passed in pursuance of Article 286 (3) of the Constitution of India which reads thus : "Any law of a State shall, in so far as it imposes or authorises the imposition of, a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-state trade or commerce, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify." The C.S.T. Act received the assent of the President on 24-12-56. S. 14 of the Act declared certain goods to be goods of special importance in inter-state trade or commerce. (hereinafter referred to as 'declared goods'.) These included, as on 1-4-1963, the following: "(ii-a) cotton fabrics, as defined in Item No. 19, of the first Schedule to the Central Excises and Salt Act, 1944; xx xx xx xx xx (vii) rayon or artificial silk fabrics, as defined in Item No. 22 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), (viii) sugar, as defined in Item No. 1 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) (ix) tobacco, as defined in Item No. 4 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) (x) woollen fabrics, as defined in Item No. 21 of the First Schedule to the Central Excises and Salt Act, 1944. (xi) silk fabrics as defined in Item No. 20 of the first Schedule to the Central Excises and Salt Act, 1944." The definitions of the above goods were thus related to their definitions under the 1944 Act. S. 15 of the Act imposed certain restrictions and conditions in regard to tax on sale or purchase of declared goods within a State. It may be mentioned that this section, as originally enacted in 1956, had been amended w.e.f. 6-6-1957, by Act 16 of 1957 and, again, by Act 31 of 1958, w.e.f. 1-10-1958. (iii) About the same time as the C.S.T. Act, Parliament also enacted the Additional Duties of Excise (Goods of Special Importance) Act, 1957 ('the 1957 Act'). The statement of objects and reasons of this Act reads as follows : The object of this legislation is to impose additional duties of excise in replacement of the sales tax levied by the Union and the States on sugar, tobacco and mill made textiles and to distribute the net proceeds of these taxes, except the proceeds attributable to Union Territories, to the States. The distribution of the proceeds of the additional duties broadly followed the pattern recommended by the Second Finance Commission. Provision has been made that the States which levy a tax on the sale or purchase of these commodities after Ist April, 1958 do not participate in the distribution of the net proceeds. Provision is made in the Act for including these goods in the category of goods declared to be of special importance in inter-state trade or commerce so that, following the imposition of uniform duties of excise on them, the rates of sales tax, if levied by the State are subject from 1st April, 1958 to the restrictions in S. 15 of the Central Sales Tax Act, 1956." S. 3 of this Act originally levied an additional excise duty on sugar, tobacco, cotton fabrics, rayon or artificial silk and woollen fabrics and S. 2(c) defined the above goods as having the meanings respectively assigned to them in items Nos. 8, 9, 12, 12A and 12B (subsequently changed as items 1, 4, 19, 21 and 22 respectively) of the First Schedule to the 1944 Act. It may be mentioned here that the Finance Act, 1961 had amended S. 14 of the C.S.T. Act by including, as item (xi) : "silk fabrics as defined in item 20 of the First Schedule of the 1944 Act". It also simultaneously amended the 1957 Act by adding a reference to 'silk fabrics' in S. 3(l), in the definition clause S. 2(c) as well as in the Schedule. However, in 1968, when the Central Sales Tax Act was amended again by deleting the reference to 'silk fabrics', there was no corresponding amendment in the 1957 Act. The Finance (No. 2) Act, 1977, substituted the word "man made fabrics" for the words "rayon or artificial silk fabrics" w.e.f. 8-8-1977 and included a definition of the new expression in item 22 of the Schedule to the 1944 Act and the 1957 Act. S. 7 of the Act, as originally enacted, declared that the goods declared to be of special importance would, from 1-4-1968, be subject to the restrictions and conditions specified in S. 15 of the Central Sales Tax Act. This section was omitted, w.e.f. 1-10-1958, by Act 31 of 1958 which also amended S. 15 of the Central Sales Tax Act. (iv) The levy of sales tax in Kerala was formerly governed by the General Sales Tax Act (Act XI of 1125) Malayalam Era 1125 corresponds to 1950 of the Gregorian Calendar. This Act was amended by the General Sales Tax (Amendment) Ordinance, (No. 8 of 1957) w. e. f. 14-12-57, the Ordinance being replaced by the General Sales Tax (Amendment) Act VII of 1958 with retrospective effect from the same date. This amendment Act inserted S. 5A in the 1125 Act which exempted certain goods from the levy of sales tax. Sub-section (1) of this section read thus : "5A. Exemption of the tax on the sale of mill-made textiles (other than pure silk), tobacco and sugar :- (1) The sale by any dealer of - (i) mill-made textile, other than pure silk, (ii) tobacco, and (iii) sugar; other than stock of such goods in his possession, custody or control immediately before the 14th day of December, 1957,shall, as from that date, be exempt from taxation under S. 3, sub-s. (1)." This Act was replaced by the Kerala General Sales Tax Act, 1963 ('the 1963 Act'), as already mentioned w. e. f. 1-4-63. (v) We have already referred to S. 9 and item 7 of the Third Schedule to the 1963 Act. The Kerala General Sales Tax (Second Amendment) Act, (Act 16 of 1967) amended item 7 of 1963 Act to read as follows w.e. f. 1-9-1967 : "7. Cotton fabrics, woollen fabrics, and rayon or artificial silk fabrics as defined in items Nos. 19, 21 and 22 respectively of the First Schedule to the Central Excises and Salt Act, 1944." In other words, the exemption granted to 'silk fabrics' was taken away. A mention may also be made that by reason of a later amendment, 'silk fabrics' was included as one of the items on which single point tax was leviable under the 1963 Act. This item, in the First Schedule to the Act as it stood on 1-4-1980, read : "101 'Silk fabrics', that is to say, all varieties of fabrics manufactured either wholly or partly from silk including embroidery in piece, in strips or in mofits, but not including such fabrics on which duty of excise is leviable under sub-section (1) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act (Central Act 58 of 1957)". (vi) Reference may also be made to one more enactment, though it has no direct bearing on the issue before us. This is the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (Central Act 40 of 1978). This Act charged an additional duty of excise in respect of various goods specified in the Schedule to the Act over and above the duty chargeable on them under the 1944 Act. These goods included "cotton fabrics" "silk fabrics", "woollen fabrics", "man-made fabrics" and "wool tops" as defined in items 19, 20, 21, 22 and 43 of the First Schedule to the 1944 Act.
(3.) These are the relevant statutory provisions. On these, the question to be considered is : What is the effect of the mention of the definition of "cotton fabrics" given in the 1944 Act in the Schedule to the 1963 Act Does it attract only the said definition as on 1-4-1963 or also the subsequent amendments thereto To appreciate the contentions urged, it is necessary to make a brief reference to the principles of interpretation of an enactment which for purposes of convenience, refers to or incorporates a provision of another. These have been discussed in various earlier decisions viz. Secy. of State v. Hindustan Co-operative Insurance Society Ltd., (1931) 58 Ind App 259: (AIR 1931 PC 149), Collector of Customs v. Nathella Sampathu Chetty, (1962) 3 SCR 786: (AIR 1962 SC 316), Ram Sarup v. State (1963) 3 SCR 858: (AIR 1963 SC 553), Ram Kirpal v. State, (1970) 3 SCR 233 : (AIR 1970 SC 951), New Central Jute Mills Co. Ltd v. Assistant Collector, (1971) 2 SCR 92: (AIR 1971 SC 454), State of Madhya Pradesh v. Narasimhan, (1976) 1 SCR 6 : (AIR 1975 SC 1835), Bajya v. Smt. Gopikabai, (1978) 3 SCR 561 : (AIR 1978 SC 793), Mahindra and Mahindra Ltd. v. Union of India (1979) 2 SCR 1038 : (AIR 1979 SC 798) and Western Coal Fields v. Special Area Development Authority, (1982) 2 SCR 1 : (AIR 1982 SC 697). It is unnecessary to make a detailed reference to these decisions. It is sufficient to say that they draw a distinction between referential legislation which merely contains a 'reference to, or citation of', a provision of another statute and a piece of referential legislation which incorporates within itself a provision of another statute. In the former case, the provision of the second statute, along with all its amendments and variations from time to time, should be read into the first statute. In the latter case, the position will be as outlined in Narasimhan (1976) 1 SCR 6: (AIR 1975 SC 1835) where, after referring to Secretary of State v. Hindustan Cooperative Insurance Society Ltd., (1931) 58 Ind App 259 : (AIR 1931 PC 149), this Court summed up the position thus (at p. 1841 of AIR) : "On a consideration of these authorities, therefore, it seems that the following proposition emerges : Where a subsequent Act incorporates provisions of a previous Act then the borrowed provisions become an integral and independent part of the subsequent Act and are totally unaffected by any repeal or amendment in the previous Act. This principle, however, will not apply in the following cases : (a) where the subsequent Act and the previous Act are supplemental to each other; (b) where the two Acts are in pari materia; (c) where the amendment in the previous Act, if not imported into the subsequent Act also, would render the subsequent Act wholly unworkable and ineffectual; and (d) where the amendment of the previous Act, either expressly or by necessary intendment, applies the said provisions to the subsequent Act." Applying the above principles to the facts of the present case, the High Court in its judgment on a reference made to it under the 1963 Act (and reported in 41 STC 1) : (1978 Tax LR NOC 76) (Ker) observed: "In the light of the principles thus formulated, it seems unnecessary for us to labour the point whether we are confronted in these cases with a "reference" or "citation" on the one hand, or an "incorporation" on the other, of the definition of 'cotton fabrics' in item 19 of the Schedule 1 of the Central Excises and Salt Act, into the provisions of Section 9 read with item No. 7 of the III Schedule of the General Sales Tax Act, 1963. If the definition was merely by way of 'reference or 'citation', the referred or cited provision grows and shrinks with the changes in the parent statute. Even in the case of an incorporated definition while the general principle is that the incorporated definition remains static and is unaffected by the developments or fluctuations of the parental source from which it was incorporated, two of the well-recognised exceptions formulated by the Supreme Court in State of M.P. v. M. V. Narasimhan, AIR 1975 SC 1835 seem to apply here, that is, exceptions (a) and (c) ......The concept of 'cotton fabrics' in the Central Excises and Salt Act seems to be integrally linked with the provisions of the General Sales Tax Act and we do not think that we would be justified in regarding the latter Act as unaffected by the growing concept of the term 'cotton fabrics' in the Central Excises and Salt Act. We feel too, that unless the extended definition of the Central Excises and Salt Act is imported into the Sales Tax Act, the latter Act would become unworkable and ineffectual.";