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PETITIONER: M/S PAPPU SWEETS AND BISCUITS

       Vs.

RESPONDENT: COMMISSIONER OF TRADE TAX U.P.  LUCKNOW

DATE OF JUDGMENT:       06/10/1998

BENCH: S.P.  BHARUCHA, M.K.  MUKHERJEE, G.T.  NANAVATI

ACT:

HEADNOTE:

JUDGMENT: J U D G M E N T Nanavati, J The  question  that  arises  for  consideration in these two appeals is whether ’toffee’ is ’sweetmeat’ or a commodity of a like nature and therefore the appellant’s industrial units making toffees, though newly set up, were  not  entitled  to the  benefit  of  exemption  form payment of sales tax under notification dated 27.7.1991, issued by the State  of  Uttar Pradesh,  in  exercise of its powers under Section 4A of the Uttar Pradesh Sales Tax Act, 1948 (for short’ the Act’). Withe a view to step up economic growth by promoting development of certain industries in  the  State,  the  U.P. State  Government decided to grant exemption from payment of sales tax to new industrial units and to  units  undertaking expansion, diversification.    To  achieve  that  object, it issued a notification on 27.7.1991 under Section 4A  of  the Act.   For ready reference, we quote below the relevant part of that notification. Whereas the State Government is of the opinion  that for  promoting  the development of certain industries in the State it is necessary to grant exemption from  or  reduction in  rate  of  tax  to new units and also to units which have undertaken expansion, diversification or modernization: Now Therefore,  in  exercise  of  the  powers  under section  4-A  of the Uttar Pradesh Sales Tax Act, 1948 (U.P. Act No. XV of 1948), hereinafter referred to as the Act  the Governor is pleased to declare that :- 1(A)  in respect of any goods manufactured in a ’new unit’ other than the units of the type mentioned in Annexure II established  in  the  areas  mentioned  in  column  2  of Annexure  1, the ’date of starting production; whereof falls on or after first day of April, 1990 but not later than 31st day of March, 1995, on tax shall be payable, or, as the case may be, the tax shall be payable at the  reduced  rates,  as specified  in  column  4  of Annexure 1, by the manufacturer thereof on the turnover of sales of such goods, ........................ ........................ 1(B) in respect of any goods manufactured in a  unit other  than  the units of the type mentioned in Annexure II,

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which  ’has   undertaken   expansion,   diversification   or modernization. ............. (2)The period of such  facility  shall  be  reckoned from the first date of production (1)  ............ (2)  ............ The facility of exemption from or reduction  in  the rate  of tax shall be subject to the following conditions in addition to the conditions referred to in Section 4-A of the Act. (i)  ......         (ii)  that  the  new  unit is established on land or               building or both owned or taken on lease for a               period of not less than fifteen years by  such               nit  or  allotted to such unit by the State or               the  Central  Government  or  any   Government               Company or any Corporation owned or controlled               by the Central or the the State Government;         (iii) ......         (iv)  that  the said unit furnishes to the assessing               authority concerned an eligibility certificate               granted in this behalf by the General Manager,               District Industries Centre, Area Development         3.    ......         4.    ......         5.    ......         6.    ......  Annexure I  ...... ...... ......  Annexure II  ...... ...... ......  ...... ...... ...... List of Industries not entitled to the facility of exemption from or reduction in rate of tax.  ...... ...... ......  ...... ...... ...... 18.   Units  making  sweetmeat,  namkin,  reori,  gazak  and commodities of like nature and restaurants. M/s Pappu Sweet and Biscuits, appellant  in  CA  No. 9282   of  1995,  established  a  new  industrial  unit  for manufacturing ’toffees’ in Bareilly district,  by  investing substantial amount  of  capital.    It  commenced production within the specified period and thereafter  applied  to  the Joint  Director  of Industries, Bareilly, for an eligibility certificate.  The Joint Director rejected the application on the ground that toffee is ’sweetmeat’  and,  therefore,  the appellant’s  new  industrial  unit being an unit of the type mentioned in Annexure -  II  to  the  Notification  was  not entitled to the exemption.  Aggrieved by that rejection, the appellant  preferred  an  appeal  to the Trade Tax Tribunal, U.P.  It was dismissed as the tribunal agreed with the  view of the  Joint Director.  The appellant then filed a revision petition in the Allahabad  High  Court  but  that  was  also dismissed.  Hence,  CA  No.    9282  of  1995  by  it  after obtaining special leave. M/s.  Roase  Garden  Confectionery   Pvt.      Ltd., appellant in C.A.   No.  1692 of 1997 also established a new industrial  unit  for  manufacturing  toffees,   by   making substantial capital  investment.  It commenced production on 1.4.93.  On 17.8.93, it  applied  to  the  General  Manager, District Industries   Centre,   Fatehpur,   U.P.     for  an eligibility certificate.  The application  was  referred  to the  Joint  Director  who  refused to grant it on the ground that  toffee  is   ’sweetmeat’   and   units   manufacturing

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sweetmeats   are  specifically  excluded  by  the  exemption Notification.  The  appellant’s  appeal  to  the  Trade  Tax Tribunal and its revision application to the High Court were dismissed.   It, has therefore, filed appeal after obtaining special leave. As the  question  raised  in  both  the  appeals  is common,  they  are  heard  together  and disposed of by this common judgement. The  High  Court   while   interpreting   the   word ’sweetmeat’ in the entry at Sl.No.18 of the list of excluded industries   contained   in   the  notification,  took  into consideration: (1)  the  dictionary  meanings  of  the  words  ’sweetmeat’, ’confectionery’ and ’toffee’; (ii) how toffee is  understood in  commercial parlance; (iii) enlarged scope of Entry No.18 as indicated by the words ’commodities of like nature’; (iv) possibility of  discrimination  with  respect  to  items  of Indian origin like ’reori’; ’gazak’ and petha’, if toffee is not  held  to  be  a ’sweetmeat’; and (v) the fact that some manufacturers of toffees sell their  product  by  describing them as  ’sweets’.   The reasoning of the High Court and the observations made by it in this behalf are as under : "In order to find out whether toffee is a mithai  or sweetmeat  or  a commodity of the nature of sweetmeat, reori or gazak, as mentioned in item No.18 aforesaid, we  may  see what  the word ’Mithai’ or ’sweetmeat’ indicates ’Sweetmeat’ as mentioned in the Webster New Collegiate Dictionary, means "a food rich  in  sugar,  a  candy  or  crystallized  fruit. Toffee  according  to  the  same  dictionary, means candy of brittle but tender texture made by boiling sugar and  butter together.   Thus, a toffee is an article which is rich sugar and is a sweetmeat. Chambers  Dictionary  defines  ’toffee’  as  a  hard backed sweetmeat made by sugar and butter.   In  the  Oxford Dictionary  ’toffee’  is  stated to mean "all kinds of sweet made  from  sugar,  butter  etc."  A  person   manufacturing sweetmeat   including   things   like  toffee  is  called  a confectioner.  The word ’confect’  means  "to  put  together from varied material".  The term ’confection’ means "the act or  processing of confecting as a fancy dish or sweetmeat or fruit or nut preserved for even a medical  preparation  made with sugar  syrup  or  honey".    ’Confectionery’ then means "sweet edibles or the confectioner’s art or business." In consolidated Glossary of Technical Terms  Central Hindi  Directorate,  Ministry  of  Education,  Government of India (1962 Edition), ’confectionery’ is defined as MISTHAN, MITHAI. In the English Hindi Dictionary of Dr. Kamil Bulkey, the meaning of the word ’confectionery’ is given as Misthan, Misthan, Mithai. Thus, according to the dictionaries  Mithai is  synonymous  with  ’sweetmeat’ in English and that is why the  English  translation  of  the  aforesaid   notification correctly   uses  ’sweetmeat’  as  the  English  version  of ’Mithai’. There is no doubt that a toffee is a sweetmeat, as understood by the people where toffee originated. The  learned  counsel  contended  that the people in India or in U.P.  do not conceive  a  toffee  as  a  mithai. This may  be so in respect of some people.  The law of Sales Tax is of general application and is equally  applicable  to sweetmeat, mithai  of  nay  region  whatsoever.   Toffee and other things of that nature are of foreign  origin  and  are sweets  or  sweetmeat  according  to  those people and their nature cannot be changed  simply  because  their  origin  is different from what is usually conveyed by the word ’mithai’ in this  part of the country.  The word mithai’ is a generic word which does not mean only ’mithai’ sold  in  U.P.    and

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consumed by  the  people  here.    A  ’Mithai’ will remain a ’mithai’ whether its origin is English or Chinese or of  any other  foreign  country  and  it will remain, to be a mithai even if some people in this State do not understand it to be so.  The act is meant to cover commercial  transactions  and is  not  restricted  to the sense of any particular class of people residing in the State of Uttar Pradesh. Then, the notification does not  stop  at  the  word ’mithai’ or ’sweetmeat’ only.  It explains that the scope of the word is unlimited and is not restricted to ’mithais’ and ’sweetmeats’ of any particular region.  It mentions ’reort’, ’gazak’ and commodities of like nature to be included within item no.   18.   ’Reori’ is nothing but an Indian version of toffee with grains of Til embeded on its surface.   The  use of  the  words  ’reori’,  gazak’  and  ’commodities  of like nature’ expands the scope to unlimited extent and would take within the scope  of  the  aforesaid  entry  any  mithai  or sweetmeat  irrespective of its orgin, area of popularity and shelf life etc. A toffee is, undoubtedly, a mithai  or  a  sweetmeat and  a  commodity  of nature like sweetmeat, reori or gazak, Exemptions  are  discriminatory  in  nature  as  the   grant exemption to  some  and deny the same to others.  Therefore, they should be strictly interpreted and I find no reason why toffee, mithai or sweetmeat, of  foreign  origin  should  be excluded  from the scope of Entry at item No.18 while Indian things like reort, gazak, petha which  have  a  sufficiently longer shelf-life  should  be  denied  the same benefit.  It would be anomalous that a person  who  sets  up  a  Unit  to manufacture reori,  gazak,  petha etc.  Should be denied the exemption  while  another  dealer  manufacturing  sweets  of foreign  origin  like toffee should be granted exemption buy excluding the commodity form the scope of Entry No.18 in  an artificial or discriminatory manner. It  may  be  mentioned that several manufacturers of toffees and things like that sell their products  describing them as  sweets.    We  can  see  such  things sold as parry sweets’,  Daurala  sweets’   or   ’Cola   sweets’   at   any confectioner’s shop." Learned  counsel  for  the appellants challenged the judgment of the High Court on the ground  that  it  has  not correctly construed  Entry  No.18.  They also submitted that the High  Court  has  not  correctly  interpreted  the  word ’sweetmeat’  as  used  therein  and  that  instead  of being influenced  by  the  dictionary  meanings   of   the   words ’sweetmeat’ and ’toffee’ it should have decided the question whether  ’toffee’  is  sweetmeat’  by  considering how these commodities are understood by the people in the State. It is true  that  dictionary  meaning  of  the  word ’sweetmeat’  is  very  wide  and any food which is sweet and rich in sugar be described as  ’sweetmeat’.    Toffee  is  a confection  of  sugar  and other materials and being rich in sugar would be ’sweetmeat’ in its  wider  sense.    But  for deciding  whether  toffee  is ’sweetmeat’ as contemplated by the exemption Notification and the  context  in  which  that word is used in the notification. A close reading of the Notification  discloses  that the State intended to give benefit of exemption or reduction in  rate  to  these  new industrial units and existing units undertaking  expansion,  diversification  or   modernization which   were   to   male   substantial  capital  investment. Paragraph 2 of the Notification  prescribing  conditions  of having a licence or a letter of intent and of owning land or building  or  taking  them on lease for a period of not less than 15 years and  paragraph  3  prescribing  fixed  capital

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investment  consisting  of land, building, plant, machinery, equipment and apparatus are indicative  of  that  intention. The items mentioned therein viz, ’sweetmeat’, ’namkeen’, and ’gazak’  are usually prepared by shopkeepers and restaurants for selling them to their consumer - customers.    They  are not manufactured in factories having plants and machinery. The  notification  further discloses that the object of declaring exemption from payment  of  sales  tax  was  to increase industrial   activity.      Within   the  State  by encouraging setting up of new industrial units or expansion, devitrification or modernization by the existing  industrial units.   At the same time the State did not desire to extend that benefit to all  such  industries.    It  was  therefore specifically  stated  in  the  notification  that industries mentioned in Annexure  II  shall  not  be  entitled  to  the benefit  of  exemption  form  payment of tax or reduction in rate of tax.  Presumably, the State did not  desire  further growth  of  such  industries  by  suffering loss of revenue. What is however necessary to note is that Annexure II is  an exclusionary part  of  the exemption notification.  The High Court did not examine the issue from  this  angle  and  also failed  to  apposite  that exclusionary part of an exemption notification has to be  construed  rather  strictly.    Even though  the  word  used in exclusionary part of an exemption notification has a wide dictionary meaning  or  connotation, only  that meaning should be given to it which would achieve rather than frustrate the object of granting  exemption  and which does not lead to uncertainly or unintended results. A   correct  reading  of  the  notification  further discloses that the words ’commodities  of  like  nature’  in Entry  18 were meant to include commodities other than those specifically mentioned.  What they indicate  is  that  other commodities  of  like nature also were not to get benefit of the exemption.  To that extent they did widen the  scope  of the Entry but they cannot be construed to have the effect of enlarging the  meaning of the word ’sweetmeat’.  As that was not the purpose of including those words in the  Entry,  the High  Court  was  not justified in holding that they gave an unlimited and unrestricted meaning to the word  ’Mithai’  or ’sweetmeat’. The  High  Court  has also not correctly applied the popular parlance test.  As can be seen from the observations made by it that "There is  no  doubt  that  a  toffee  is  a sweetmeat,   as   understood  by  the  people  where  toffee originated" and that "Toffee and other things of that nature are of foreign origin and are sweets or sweetmeat  according to  those  people  and their nature cannot be changed simply because their origin in is different from  what  is  usually conveyed  by the word ’Mithai’ in this part of the country", the High Court preferred to decide the issue by relying upon how toffee is understood by the people of the country  where it  originated  rather  than  by considering how ’toffee’ is understood in India and more particularly in  the  State  of U.P.  As  held by this Court in Collector of Excise vs.  M/s Parle Exports (P) Ltd.  (1989) 1 SCC 345 "The words used  in the  provision,  imposing taxes or granting exemption should be understood in the same way for which they are  understood in  ordinary  parlance  in  the  area in which the law is in force or by the people who ordinarily deal with them.    "In that  case,  the  question that had arisen for consideration was whether non-alcoholic beverage bases are  food  products or  food preparation in terms of Central Excise Notification No.55/75 dated   1.3.75.      This   Court   observed   that non-alcoholic  beverages are not understood in India as food products or food preparations, though they might  have  been

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regarded as  such  in  foreign  countries.   The High Court, therefore, should have applied the test of popular  parlance by  finding  out how toffee is understood in the country and more particularly in the State of U.P.  No evidence was  led by  the  State  to  substantiate  its  case that ’toffee’ is considered as sweetmeat either by the dealers in toffees  or by the consumers.  On the other hand evidence was led by the appellant in C.A.   No.  1692 of 1997 indicating that toffee is not considered as sweetmeat, that they are  not  sold  in shops  selling  sweetmeats  but  are  sold  in shops selling confectioneries or  other  types  of  goods,  and  that  the consumers  do  not buy toffees as sweetmeat or treat them as such.  It was, however, contended by the learned counsel for the State that sometime before this  exemption  notification was issued by the State, the Allahabad High Court had in two cases held  that  toffee is a sweetmeat.  But it was so held in a different context and no evidence was led by the  State to   show  that  thereafter,  the  dealers  in  toffees  and consumers started treating them as sweetmeat.  In the  Hindi version  of the Notification for the word sweetmeat the word ’Mithai’ is  used.    The  word  ’Mithai’  has  a   definite connotation  and  in  can  be said with reasonable amount of certainty that people in the this country  do  not  consider toffee as  ’mithai’.   The High Court committed a have error in holding that as some manufacturers of toffees sell  their products by describing them as sweets it can be said that in commercial circles toffee is known as sweetmeat. The  learned counsel for the appellant also drew our attention  to  a  similar  exemption  notification  for  the subsequent period  issued  by the State of U.P.  wherein the relevant item is worded thus:    "Units  making  sweetmeats, namkin,  reori,  gazak  (but  excluding  such  confectionery manufacturing units as are registered  under  the  Factories Act,  1948) and restaurants." The llearned counsel submitted that subsequent legislation can be looked at in order to see what is the proper interpretation to be put upon the earlier legislation when the earlier  legislation  is  found  to  be obscure   or   ambiguous   or   capable  or  more  than  one interpretation.  In support of  his  contention,  he  relied upon the decisions of this Court in State of Bihar vs.  S.K. Roy (1966)  Supp.    SCR  259  and  Yogender  Nath Naskar v. Commissioner of Income Rax, Calcutta (1969) 3 SCR 742.    In Naskar’s  case  (supra), this Court quoted with approval the following observations made  in  Cape  Brandy  Syndicate  v. I.R.C.  (1921 2 K.B.403): "I think  it  is  clearly  established  in  Attorney General v.    Clarkson  that  subsequent  legislation may be looked at in order to see the proper construction to be  put upon an  earlier Act where that earlier Act is ambiguous.  I quit agree that subsequent legislation if it proceeded on an erroneous construction of previous legislation cannot  alter that  previous legislation; but if there be any ambiguity in the earlier legislation, then the subsequent legislation may fix the proper interpretation which is to be  put  upon  the earlier Act." For  the  aforesaid  reasons we are of the view that the High Court has not correctly interpreted  and  construed Entry No.18  of the notification.  Considering the object of the notification and the intention of the  State  Government in granting exemption from payment of sales tax and applying the  correct  principles of interpretation in such cases, we hold that the word ’sweetmeat’ and the words "commodities of like nature" as used in the Notification dated  27.7.91  did not  include  within  their  sweep  toffees  manufactured by industrial units as contemplated by the notification and the

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Joint Director of Industries,  the  Tribunal  and  the  High Court were   working   in  taking  a  contrary  view.    We, therefore, allow both these appeals, set aside the judgments and  orders  passed  by  the  High  court,  and  direct  the concerned authorities  and  the  State of U.P.  to grant the required eligibility certificate and to extend  the  benefit of  sales  tax exemption to the extent lawfully available to them under the notification.   In  view  of  the  facts  and circumstances  of  the  case  there  shall be no order as to costs.