- (1.) THIS is writ application under Art. 226 of the Constitution of India.
(2.) THE petitioner-firm is a retail pan-bidi dealer and carries on its business at Pali Bazar, Beawar. Under the Ajmer Sales Tax Act, 1955, 'betel-leaf' was a non-taxable commodity. THE Rajasthan Sales Tax Act, 1954, which will hereinafter be referred as the 'act' was extended to the erstwhile State of Ajmer after its merger with the State of Rajasthan on 6th June, 1957. THEreafter, the Assistant Sales Tax Officer, Beawar, issued a notice to the petitioner asking it to get itself registered under the Act. THE petitioner accordingly obtained a registration certificate on 1st November, 1957. By a notification No. F. 5 (51), E&t/58 dated 1st April, 1958, issued by the Government of Rajasthan, the sale of betel-leaves was exempted from sales-tax on the condition that the dealer claiming exemption would obtain valid certificate of exemption for which a fixed annual fee of Rs. 10/- was prescribed. Accordingly, the petitioner obtained the exemption certificate on 22nd August, 1958. THE Assistant Sales Tax Officer, Beawar, issued to the petitioner notice No. 3276 dated 24th June, 1959 requiring it to produce its account books in connection with the assessment of the sales-tax under sec. 10 of the Act. He assessed the petitioner to sales-tax by his assessment order dated 3rd July, 1959. The petitioner has produced a copy of the assessment order dated 3rd July, 1959, and it appears from its perusal that it was urged on its behalf that it was not liable to pay any tax on the sale of betel-leaves. Its contention was not accepted by the Assistant Sales Tax Officer and it was held by him that the exemption allowed for betel-leaves did not extend to what he called a processed Pan which, in Hindi, was termed as 'laga huwa pan'. It was observed by him as follows: - "in the case of preparing pan ready for eating there is a series of actions. Not only this, continuous operation or treatment and a chemical process of applying Chuna, Katha and Supari to the betel-leaf, one after the other in an orderly and methodical way is present there. In the circumstances I am of the view that the assessee is a processor and his sales of eatable or ready pan are sales of processed pan and hence attract sales-tax. " It was also urged on behalf of the petitioner that even if the application of Chuna and Katha be treated as processing of the betel-leaves, it was not liable to pay tax on the so-called processed pan, because all the commodities used, namely, Chuna, Katha and Supari were tax-paid and they should not be taxed again. This contention was also repelled by observing that "as soon as Chuna, Katha and Supari are applied to betel-leaves, their individual identity is lost". According to the said officer, the processed pan was a commodity in itself different from its constituents and being a separate commodity, it attracted levy of sales-tax. Aggrieved by the said order, the petitioner filed an appeal which was heard by the Deputy Commissioner, Sales Tax ( Appeals ), Jaipur. The appellate authority approved the view taken by the Assistant Sales Tax Officer and dismissed the appeal on 18th May, 1960. The petitioner then filed the present writ application in this Court on 10th October, 1960. It was urged by him that the respondents had committed an error in making a distinction between 'betel-leaves' and what they termed as 'processed pan' and declaring that the latter was a distinct commodity and liable to sales-tax. It was pointed out that no manufacturing or chemical process was used in the preparation of pan and it was neither correct nor proper to use those high sounding terms, simply because Chuna, Katha and Supari or some masalas which are already tax-paid were added to a betel-leaf before it was offered for chewing. It was contended that the respondents had placed a wrong interpretation on the term 'betel-leaves' appearing in the said notification and that they had imposed illegal tax on the petitioner. Hence, it was prayed that a writ of certiorari or any other writ or direction may be issued and the said orders be quashed. It was also proved that the respondents may be directed to refund the tax which was paid by the petitioner on account of the wrong interpretation of the said notification. The writ application is contested on behalf of the respondents and it is urged that the view which they had taken was quite correct and no exception could be taken to it. It would-appear from the said narration of facts that the main question invoved in the present case is the inter-pretation of the term 'betel-leaves' appearing in the notification dated 1st April, 1958, which runs as follows: - "government of Rajasthan Notification No. F. 5 (51) E&t/58 Jaipur, April 1, 1958. In exercise of the powers conferred by subsec. (2) of sec. 4 of the Rajasthan Sales Tax Act, 1954 (Rajasthan Act No. XXIX of 1954), the Government of Rajasthan, being of the opinion that it is necessary in the public interest so to do, does hereby exempt the sale of betel-leaves from tax, on the condition that the dealer clai ming exemption holds a valid certificate of exemption for which a fixed annual fee of Rs. 10/ is hereby prescribed. By Order of the Governor Sd/- G. S. Purohit Secretary to the Govt. " It is urged on behalf of the petitioner that the Government wanted to give relief to the dealers and consumers of betel-leaves, that betel-leaves are generally not sold in retail in their raw form without the application of Katha, Chuna and Supari and the Assistant Sales Tax Officer should not have interpreted the term 'betel-leaves' in such a narrow sense as to defeat the very purpose of granting exemption to their sale. It is contended that in case of any doubt or ambiguity the taxing Statute must be construed liberally and in favour of the assessee. In support of his contention, learned counsel has referred to the following cases : Upper India Chamber of Commerce Gawnpore vs. Commissioner of Income-tax, C. P. & U. P. Lucknow (l), The Commissioner of Agricultural Income-tax, West Bengal Vs. Raja Jagdish Chandra Deo Dhabal Dab, Chilkigarh, District Midnapore (2), and Commissioner of Income-tax, Madras Vs. K. E. Sumdara Mudaliar (3 ). It is further contended that '"betel-leaves'' were held to be equivalent to pan in Kokilram Vs. Province of Bihar (4), Messrs. Dharmadas Paul Vs. Commissioner of Commercial,tax, West Bengal (5) and Bhairondan Tolaram Vs. State of Rajasthan (6) It has been vehemently argued that both the respondents had themselves. conceded that Chuna, Katha and Supari are masalas which are generally added to a green betel-leaf in order to make it flavoury and eatable, that they were already tax-paid, that the betel-leaves were expressly exempted from the tax by the said notification that no particular manufacturing process was necessary for making them eatable and that both the respondents had committed a serious error in holding that the so-called processed pan was a commodity different from the betel-leaves. In reply, it is urged by the respondents' learned counsel that it has been held by this Court in Indersingh Vs. Sales Tax Officer, Jodhpur (7) that an exemption clause must be interpreted strictly and that the respondents had, therefore, committed no error in holding that the term 'betel-leaves' appearing in the said notification was confined to only those betel-leaves to which nothing was added and that the processed pan was a different commodity from the betel-leaves. He has relied on the following cases : State of Travancore-Cochin Vs. Shanmugha Vilas Cashewnut Factory, Quilon (8), Messrs. Anwarkhan Mahboob Co. , Vs. The State of Bombay (9), Messrs. Chhotabhai Jethabhai Patel and Co. Vs. State of Uttar Pradesh (lo), Kapildeoram Baijnath Prosad Vs. J. K. Das (11), Yamsani Sudarsanam Vs. The State of Andhra Pradesh (12) and Commissioner of Sales Tax, Maharashtra State, Bombay Vs. Fairdeal Corporation Ltd. (13 ). Before proceeding to interpret the term 'betel-leaves' appearing in the said notification, it may be observed that in Indersingh Vs. Sales Tax Officer, Jodhpur (7), the assessee claimed exemption of sales-tax on Durries. The Sales Tax Officer disallowed it holding that Durries were not included in the category of 'handloom cloth'. The question, which arose for determination before the Court was, whether a Durri was included in the term 'handloom cloth'. It was held that it would not be proper to give the term 'cloth' such a wide meaning as to bring a Durri within its ambit. It is obvious that the facts of the said case were very different from those of the present one. It was held that Durri was used as a carpet and not as a cloth and simply because it was also prepared on a handloom, it could not be included within the ambit of the term 'handloom cloth'. It is obvious that in the said case, the petitioner wanted to extend the scope of the term "handloom cloth" to a grossly unreasonable extent and so his arguments did not find favour with the learned Judges and it was held that the Durri was outside the scope of the term handloom cloth. Learned Deputy Government Advocate has laid stress upon the following observations made in Kapildeoram Baijnath Prosad Vs. J. K. Das (11) and to which pointed reference was made by the learned Judges in the above case: "all exemptions from taxation must be strictly construed and must not be extended beyond the express requirements of the language used. The taxation laws are not in the nature of penal laws; they are substantially remedial in their character and are intended to prevent fraud, suppress public wrong and promote the public good. They should, therefore, be construed in such a way as to accomplish those objects. " The learned Deputy Government Advocate seems to be of the view that this observation is in conflict with the views expressed in the cases relied upon by learned counsel for the petitioner and it is prayed that we should not depart from the view which has been adopted by another Bench in the said case. Before expressing our views, it would be proper to refer to the following cases relied upon by the petitioner's learned counsel: In Upper India Chamber of Commerce, Cawnpore Vs. Commissioner of Income-tax, Lucknow (1), Verma J. , to whom the case was referred on account of difference of opinion between Iqbal Ahmad C. J. , and Braund J. , concurred with the view of Iqbal Ahmad C. J. , who had observed as follows: "in the present case, we are concerned with the interpretation of an exemption clause in a taxing statute and that clause must be, as far as possible, liberally construed and in favour of the assessee, provided no violence is done to the language used. " In the Commissioner of Agricultural Income-tax, West Bengal Vs. Raja Jagdish Chandra Deo Dhabal Dab (2), it was observed that "where an exemption is conferred by a statute by an exemption clause, that clause has to be interpreted liberally and in favour of the assessee but must always be without any violence to the language used. "
(3.) IN the Commissioner of INcome-tax, Madras Vs. K. E. Sundara Mudaliar (3), the learned Judges after referring to number of English cases, observed that "exemption from tax granted by the statute should be given full scope and amplitude and should not be whittled down by importing limitations not inserted by the Legislature. It may be observed that, in our opinion, there is no essential difference between the view expressed by this Court in Inder Singh Vs. The Sales Tax Officer, Jodhpur (7) and the view taken in the last three cases, referred above, and relied upon by learned counsel for the petitioners. It is interesting to point out that in Kapildeoram Baijnath Prosad Vs. J. K. Das (ll) on which reliance was placed by this Court in Indersingh Vs. The Sales Tax Officer, Jodhpur (7), the question before the Court was whether chira and muri were included in "cereals" and it was held that they were included. It is common knowledge that chira and muri are prepared from rice after it is put to certain processes and yet the learned Judges held that they were not excluded from the ambit of the term "cereals". Thus, although the learned Judges made the said observation, they were not reasonably harsh in its application. In Indersingh vs. The Sales Tax Officer, Jodhpur (7), the learned Judges had to refer to the said observation because the petitioner wanted to stretch the scope of exemption clause to unreasonable length. In our opinion, every observation, which is made by the Court, should be understood in the context of the facts and circumstances of that particular case. In Indersingh vs. The Sales Tax Officer (7), the tax-payer wanted to stretch the scope of the term 'handloom cloth' to an unreasonable length and, therefore, the Court made its remarks from that angle of vision and observed that exemption clause "'must not be extended beyond the express requirements of the language used. " On the other hand, in the three cases relied upon by the petitioner's learned counsel, the taxing authorities had placed a very narrow interpretation on the exemption clause and hence the Court made its observation from the other angle and remarked that it should be interpreted liberally in favour of the assessee but without doing any violence to the language used. The real import of all the observations made in the said cases is that the exemption clause appearing in taxation laws should be reasonably interpreted. The interpretation should neither be so liberal that it may promote fraud and open flood-gates for the tax-payers to evade the tax by subtle and dishonest devices, nor should it be so narrow and un-reasonable that the remedy provided by the Legislature becomes only nominal and the very object which it is sought to accomplish is defeated. It should be given its full and reasonable scope and amplitude so long as no violence is done to the language used and the exemption should not be whittled down by importing limitations not inserted or contemplated by the Legislature. We have now to see in this light as to what should be the reasonable interpretation of the term 'betel-leaves' appearing in the said notification. It may be observed that although a number of cases have been cited on either side, none of them has a direct bearing on the controversy which has been raised in this case. In Bhairondan vs. State of Rajasthan (6) relied upon by learned counsel for the petitioner, the question involved was whether the betel-leaves came within the ambit of eatable vegetables and it was held that the word 'vegetables' was used in the Schedule in its narrowed sense meaning only those classes of vegetables which were grown in kitchen gardens to supplement the food and, therefore the term "betel-leaves" fell outside the admit of the term "vegetables". ;