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PETITIONER: MAHALAKSHMI OIL MILLS ETC. ETC.

       Vs.

RESPONDENT: STATE OF ANDHRA PRADESH & ORS.

DATE OF JUDGMENT14/09/1988

BENCH: RANGNATHAN, S. BENCH: RANGNATHAN, S. MUKHARJI, SABYASACHI (J)

CITATION:  1989 AIR  335            1988 SCR  Supl. (2)1088  1989 SCC  (1) 164        JT 1988 (4)   161  1988 SCALE  (2)838

ACT:     Andhra  Pradesh General Sales Tax Act, 1957:  Section  8 and  Fourth  Schedule  Entry  7--‘Tobacco  or  any  form  of tobacco’--Whether includes ‘tobacco seeds’--Whether exempted from tax.

HEADNOTE:     The  appellant-assessee  had claimed before  the  Andhra Pradesh  High Court that tobacco seed oil and  tobacco  seed cake,  being  forms of tobacco, were entitled  to  exemption under  section 8, read with entry 7 of the Fourth  Schedule, of  the  Andhra Pradesh General Sales Tax Act,  1957,  which confers exemption from sales tax in respect of certain goods including  ‘tobacco’. The petitioners in the writ  petitions have claimed the same relief directly in this Court.     The High Court held that "tobacco seed" was not  tobacco and  that only leaf, stalks and stems of the  tobacco  plant could  he  said to be "tobacco" within the  meaning  of  its definition.     Before  this  Court  it  is  urged  on   behalf  of  the Assessees  that:  (i) the word ‘tobacco’,  in  its  ordinary connotation.  takes in the tobacco plant and every  part  of it,  including  the seed (ii) the  definition  of  ‘tobacco’ makes  it  clear  that it takes in every  form  of  tobacco, manufactured or unmanufactured; and (iii) tobacco seeds, not only  when  they are in their raw unmanufactured  state  but also  when. on manufacture, they manifest themselves in  the form  of  tobacco seed oil or tobacco seed  cake  will  fall within  the definition. On the other hand, on behalf of  the state it is submitted that the definition, which covers both what  the expression means as well as what it  includes,  is exhaustive, and tobacco seed does not come within either the first part or the second part of the definition.     Dismissing the appeals and the petitions, it was,     HELD: (1) The definition consists of two separate  parts which  specify  what the expression means and also  what  it includes.  The  joint use of the words  "mean  and  include" makes the definition exhaustive. [lO94C]                                                   PG NO 1089     Dilworth  v.  Commissioner  of  Stamps,  [1899]  AC   99 referred to.

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   (2) Tobacco seed does not come within the first part  of the  definition,  for  the  expression  "tobacco  cured   or uncured, manufactured or unmanfactured" has to be read as  a whole  and will not take in tobacco seed. It will  not  come under  the  second  part because  it  specifically  mentions leaves, stalks and stems but leaves out seeds. [1094A-B]     (3) The definition, when it says that tobacco means  any form   of  tobacco,  lays  emphasis  that  the  item   under consideration should be tobacco in form. [1096A]     (4)  Tobacco seed, once it is separated from the  plant, is an item entirely different from tobacco and does not fall within  the  expression ‘tobacco or any  form  of  tobacco’. [1096C]     (5)  Since  tobacco  seed  does  not  fall  within   the definition, the oil and cake produced by the crushing of the seeds will not also be covered by the definition or eligible for the consequent exemption. [1094B]     (6)  The  effect of accepting the assessee’s  claim  for exemption  would be to automatically catapult them into  the levy  of excise and additional excise duties, but  the  fact that  tobacco  oil and cake have not been considered  to  be excisable  commodities  for  the past several  years  is  as indication  as  to how the  legislature  and  administration understood  and applied these provisions all along.  [1096H; 1097B]     C.I.T.  v.  Taj Mahal Hotel, [1971] 82  I.T.R.  44  S.C. Amara Purushotham Mamidi Obaiah v. State of A.P., [1962]  29 S.T.C. 654; and 1977 40 S.T.C. referred to.

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal Nos. 259  to 261 (NT)/77 etc.     From the Judgment and Order dated 21.10.76 and  24.12.76 of the Andhra Pradesh High Court in W.P. Nos. 439 and 287 of 1975 and 4144 of 1976 and W. P. No.8905 of 1987     A.S.  Nambiar, B. Parthasarthi and B. Kanta Rao for  the Appellants.     P.A.  Choudhary,  T.V.S.N. Chari, Badridas  and  Ms.  V. Grover for the Respondents.                                                   PG NO 1090     The Judgment of the Court was delivered by     RANGANATHAN,  J.  A common question is involved  in  all these  matters  which are, therefore, being disposed  of  by this  common judgment. The question is whether tobacco  seed oil  and tobacco seed cake are entitled to  exemption  under the Andhra Pradesh General Sales Tax Act, 1957  (hereinafter referred  to  as  the ‘Act’). The  question  arises  in  the following circumstances.     2. Section 8 of the Act confers an exemption from  sales tax in respect of certain goods. It provides that: ‘Subject  to  such  restrictions and conditions  as  may  be prescribed including conditions as to licence fees, a dealer who  deals  in the goods specified in  the  fourth  schedule shall  be exempt from tax under this Act in respect of  such goods.’ Entry  7  in the Fourth Schedule was ‘tobacco  and  all  its products.’     3.  The Andhra Pradesh High Court in  Amara  Purushotham Mamidi Obaiah & Co. v. State of A.P., [1962] 29 STC 654, was called  upon to consider whether tobacco seed, tobacco  seed oil  and tobacco seed cake were exempt from sales-tax  under the above provision. The Bench held that tobacco seeds could be  said to be tobacco only so long as they remain  attached

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to the plant. They, however, ceased to be tobacco the moment they  are  removed from the plant. Thereafter, they  may  be considered to be a product of tobacco. But they constitute a separate  and  a distinct class of  goods  with  independent properties  and potentialities not the same as those of  the parent  plant.  Products manufactured out  of  tobacco  seed could  not be said to be products of tobacco. The Court,  in this context, referred to the analogy of cotton seeds, which have  been considered to be distinct from cotton. The  above Bench  decision was rendered in spite of the wide  words  of the  exemption,  which  covered  not  only  tobacco  in  its comprehensive sense but also all products of tobacco.     4. The Act was amended by Amendment Act 9 of 1970. There was  a  slight  amendment, which is  not  material  for  our present  purpose, in section 8 which substituted  the  words "licences and licence fees" in place of words "licence fees" alone  which had been mentioned in the  section  previously. Tobacco  continued  to  be  the  item  in  entry  7  of  the Fourth  Schedule  but  this  entry  now  referred  only   to "tobacco". The words "and all its products", which had  been used earlier, were omitted. An explanation was added to  the                                                   PG NO 1091 Fourth Schedule to the following effect: "Explanation--Expressions in items 5, 6 and 7 have the  same meanings  assigned  to them in Additional Duties  of  Excise (Goods of Special Importance) Act of 1957 (Central Act 58 of 1957.)"     5. The new explanation to Schedule IV makes it necessary for us to consider the provisions of Central Act 58 of 1957. This is an Act which provides for the levy and collection of additional  duties  of excise in respect of  certain  goods, over and above the duties of excise levied and collected  in respect of such goods under the Central Excise and Salt Act, 1944  (hereinafter  referred  to as  the  ‘1944  Act’).  The statement of objects and reasons of Act 58 of 1957 has  been referred  to  before  us  and  its  short  contents  may  be extracted here: "The  object of the bill is to impose additional  duties  of excise in replacement of the sales taxes levied by the Union and  States on sugar, tobacco and millmade textiles  and  to distribute  the  net  proceeds of these  taxes,  except  the proceeds  attributable to Union Territories, to the  States. The  distribution  of  proceeds  of  the  additional  duties broadly  follows  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 the 1st April, 1958 do not participate  in the  distribution  of the net proceeds.  Provision  is  also being  made in the Bill for including these three  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 any State are  subject  from  1st April, 1958 to the restrictions in section 15 of the Central Sales Tax Act, 1956." In short, the object of the Act was to substitute additional duties of excise in place of sales tax so far as these goods were concerned. Since the State Legislature were at liberty, if  they  wished, to levy taxes on the sale or  purchase  of these  commodities,  the Act provided  that  the  additional excise duties will be distributed only among such States  as did  not  levy  a  tax on the  sale  or  purchase  of  these commodities. Also, by including these goods in the  category of goods declared to be of special importance in inter-State                                                   PG NO 1092

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trade  or  commerce, the legislation  ensured that,  if  any State levied sales tax in respect of these commodities, such levy  was  subject  to the  restrictions  contained  in  the Central Sales Tax Act, 1956.     6.  Apparently,  the  intention  of  the  Andhra   State Legislature   when the Amendment Act of 1970 was  introduced was  to exempt certain goods from the purview of  sales  tax because  they  also came within the purview of the  levy  of additional  duties of excise under Act 58 of 1957.  This  is the reason why the Explanation to the entries in the  Fourth Schedule  to  the Act incorporated the definition  of  these goods as contained in Act 58 of 1957.     7. Turning then to Act 58 of 1957, section 2(c) of  that Act  provided  that  the  words  and  expressions   "sugar", "tobacco",   "cotton  fabrics"  and  "woollen   fabrics"--to mention only four of the items referred to in the definition section--shall  have the same meanings respectively as  have been  assigned to them in Item Nos. 1, 4, 19 and 21  of  the First Schedule to the 1944 Act.     8. The above definition takes us to the 1944 Act.  There the  definition of the word ‘tobacco’ is contained  in  item No. 4 of the First Schedule. The definition reads: "Tobacco means any form of tobacco, whether cured or uncured and  whether  manufactured  or not and  includes  the  leaf, stalks and stems of the tobacco plant, but does not  include any  part  of a tobacco plant while still  attached  to  the earth." The  Schedule  thereafter  proceeds to  set  out  two  broad categories, namely, unmanufactured tobacco and  manufactured tobacco. The former is divided into eight sub-categories  in respect  of  each  of which a separate  duty  of  excise  is prescribed. Three of the entries mentioned are:     (3) if flue-cured and not otherwise specified.     (6)   if  other  than  flue-cured  and   not   otherwise specified.     (8) Stalks The  second category of manufactured tobacco  is  classified into  various  items like cigars and  cheroots,  cigarettes,                                                   PG NO 1093 biris, smoking mixtures for pipes and cigarettes and chewing tobacco of various kinds, snuff and hookah tobacco.     9.  The  question whether tobacco seed oil  and  tobacco cake  fall  within  entry 7 of Schedule IV to  the  Act,  as amended,  came up for consideration before a Division  Bench of  the  same High Court (1977--40 S.T.C. 572).  This  Bench agreed  with the conclusion of the earlier  Division  Bench, though  not with its line of reasoning. It was of  the  view that  the  definition clause, properly  interpreted  in  the light  of the decision of the House of Lords in Dilworth  v. Commissioners  of Stamps, [1899] A.C. 99 and C.I. T. v.  Taj Mahal  Hotel,  [1971]  82  ITR  44  (S.C.),  justified   the inference  that  "tobacco seed" was not "tobacco"  and  that only  leaf, stalks and stems of the tobacco plant  could  be said to be "tobacco" within the meaning of the definition in item 4 of the Schedule to the 1944 Act. The Bench concluded: "Under   these  circumstances,  it  is  obvious   that   the definition  of  the word "tobacco" according to  item  4  of Schedule I to the Central Excises and Salt Act of 1944  does not bring "tobacco seed" within its purview, and  therefore, tobacco  seed  is not exempted from the levy  of  sales  tax under  the  A.P. General Sales Tax Act, since  tobacco  seed does  not fall within the meaning of the word  "tobacco"  as defined in the Fourth Schedule to the A.P. General Sales Tax Act. It  is clear in view of this conclusion of ours  that  since

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tobacco  seed  is not "tobacco" for  purposes  of  exemption under section 8 of the Act,  much less can tobacco seed  oil or tobacco seed oil-cake or tobacco seed cake can be said to be tobacco for the purposes of this exemption." The   Bench,   therefore,  denied  the  exemption   to   the appellants/petitioners    before   us   and   hence    these petitions/appeals.     10.  Before  us, it is urged on behalf of  the  asessees that the word "tobacco", in its ordinary connotation,  takes in  the  tobacco plant and every part of it,  including  the seed.  The  definition also make it clear that it  takes  in every form of tobacco, manufactured or unmanufactured.  Thus tobacco  seeds,  not  only  when  they  are  in  their   raw unmanufactured  state  but also when, on  manufacture,  they manifest  themselves  in  the form of tobacco  seed  oil  or tobacco  seed cake will fall within the definition.  On  the other hand. on behalf of the State it is submitted that  the                                                   PG NO 1094 definition,  which covers both what the expression means  as well  as what it includes, is exhaustive. Tobacco seed  does not  come within the first part of the definition,  for  the expression  "tobacco,  cured  or  uncured,  manufactured  or unmanufactured" has to be read as a whole and will not  take in  tobacco  seed. It will not come under  the  second  part because  it specifically mentions leaves, stalks  and  stems but leaves out seeds. Since tobacco seeds do not fall within the definition, the oil and cake produced by the crushing of the  seeds  will not also be covered by  the  definition  or eligible for the consequent exemption.     11.  We are inclined to accept the contention  urged  on behalf of the State that the definition under  consideration which consists of two separate parts which specify what  the expression  means  and also what it  includes  is  obviously meant to be exhaustive. As Lord Watson observed in  Dilworth v. Commissioner of Stamps, [1899] AC 99 the joint use of the words "mean and include" can have this effect. He said, in a passage  quoted with approval in earlier decisions  of  this Court: Sect. 2 is, beyond all question, an interpretation  clauses, and  must have been intended by the Legislature to be  taken into account in construing the expression "charitable device or  bequest," as it occurs in s. 3. It is not said in  terms that  "charitable  bequest" shall mean one or other  of  the things  which  are enumerated, but that it  shall  "include" them.   The  word  "include"  is  very  generally  used   in interpretation  clauses in order to enlarge the  meaning  of words  or phrases occurring in the body of the statute;  and when it is so used these words or phrases must be  construed as  comprehending,  not  only such things  as  they  signify according  to  their natural import, but also  those  things which  the  interpretation clause declares that  they  shall include.  But the word "include" is susceptible  of  another construction, which may become imperative, if the context of the  Act  is  sufficient  to show that  it  was  not  merely employed   for  the  purpose  of  adding  to   the   natural significance of the words or expressions defined. It may  be equivalent  to  "mean and include" and in that case  it  may afford  an exhaustive explanation of the meaning which,  for the  purposes  of the Act, must invariably  be  attached  to these words or expressions."                                          (Underlining ours)                                                   PG NO 1095     13.  Looking, therefore, at the terms of the  definition more  closely, it is quite clear that tobacco seeds  do  not fall within the second or inclusive part of the  definition.

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This  part of the definition is important.  It  specifically excludes  from the definition any part of the tobacco  plant so  long  as  it is still attached to the  earth.  It  makes mention only of parts of the plant after it is severed  from the  earth.  It  is common knowledge that when  a  plant  is severed from the earth, its parts will comprise of not  only the  leaves,  stalks and stems but also the seeds.  Yet  the inclusive part of the definition enumerates only the leaves, stalks and stems and, deliberately one should think,  avoids mention of seeds.     14.  Can  then  the words ‘tobacco’  and  ‘any  form  of tobacco’  in  the first part of the definition  be  given  a wider  meaning  and  read  as  including  the  seeds   also, particularly  as it talks of tobacco in any form,  cured  or uncured,  manufactured  or unmanufactured? We do  not  think they can be for several reasons. In the first place, tobacco seeds  hardly  answer  to  the  description  of  either  the expression   ‘manufactured   tobacco’  or   the   expression ‘unmanufactured tobacco’ in their ordinary connotation;  and the expression ‘cured or uncured’ cannot also be  associated with tobacco seeds. The expression used in the first part of the definition, though very wide, is, therefore,  singularly inappropriate  to take within its purview tobacco  seeds  as well.  Secondly, the definition occurs in a statute  levying excise duty which is concerned not with the parts of a plant grown on the field but with the use to which those parts are put or can be put after severance. The legislature could not but  have been aware that if the leaves, stalk and  stem  of the tobacco plant are used for manufacturing cured  tobacco, biris,  cigarettes  and  so on, the seed  is  also  used  to produce  oil  and cake. It takes care to mention  the  first three items which are used in the manufacture of some  forms of  tobacco  consumption  which  are  also  enumerated   but refrains  from referring to seeds which it would  have  done had  it been intended to include the oil and cake  also  for purposes  of  the  levy. The  categories  of  unmanufactured tobacco  enumerated  in the entry in  the  Schedule  include ‘stalks’ but not ‘seeds’. This also indicates that seeds are not intended to be included. In other words, the omission of the  word  ‘seeds’ from the second part  of  the  definition casts its shadow on the first part as well. Indeed it rather looks as if the second part of the definition is intended to restrict  rather  than expand the scope of the  first  part. Thirdly,  it  is  to  be noticed  that  the  first  part  of definition  is somewhat restrictively worded. It could  have said,  for  instance, that ‘tobacco’ means any part  of  the tobacco  plant and includes its leaves, and stems after  the plant  is  severed  from the earth. What  it  does  say  is,                                                   PG NO 1096 however,  different.  The present definition, when  it  says that  tobacco means any form of tobacco lays  emphasis  that the  item under consideration should be tobacco inform.  The leaves,  stalks  and stems, even after  drying,  curing  and other  processes and even ‘manufacture’ retain the  form  of tobacco,  as  understood  in  common  parlance.  But  it  is otherwise with the seeds. They are not tobacco in form. They do not have the properties of tobacco. They are not used  to exploit the narcotic qualities of tobacco. Apart from  their use  for seeding purposes, the seeds are only used  for  the manufacture  of  oil and cake. We are told that the  oil  is used  as an ingredient in the manufacture of scents and  the cake as manure. Having regard to all this, we agree with the High  Court that tobacco seed once it is separated from  the plant,  is an item entirely different from tobacco and  does not  fall  within  the expression ‘tobacco or  any  form  of

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tobacco’.     15. We would like to add that, even if by stretching the language  somewhat, tobacco seeds can be brought within  the first  part  of  the definition, the oil  and  cake  we  are concerned  with  here cannot. This again, we  say,  for  two reasons.  In the first place, as discussed earlier,  tobacco seed  oil  or cake can hardly be said to be a  form  of  the tobacco  seed.  It is true that one can say that it  is  the contents  of  the seed that have manifested  themselves,  on being  crushed,  into two forms--the oil and the  cake.  But this is not enough. The definition requires that the item in question  should  be  a form of the tobacco  seeds  that  is manufactured.  While,  as already pointed out,  the  leaves, stalks  and stems even after manufacture retain the form  of tobacco,  the  complete  metamorphosis of the  seed  on  its manufacture  renders it impossible to describe the  oil  and cake  as a form of the tobacco seed. Secondly, in our  view, we  should  take note of the circumstance that  earlier  the item  in  Schedule IV covered not only tobacco but  all  its products. Never-theless. it was held not to include the  oil and  cake.  The  legislature has  subsequently  amended  the provision  by  deleting the reference to  "all  products  of tobacco".   In  this  context  of  an  abridgement  of   the definition, it will not be correct, in our view, to construe the item so as to bring tobacco seed oil and cake within the scope of the exemption.     16. Sri Choudhary points out that, if the contention  of the assessees were accepted, they would be only jumping,  as it  were, from the frying pan into the fire. Since the  item of  exemption under the Act is worded identically  with  the item of the levy under the 1944 and 1957 Acts, the effect of accepting  the  assessees’ claim for exemption would  be  to automatically  catapult  them into the levy  of  excise  and additional excise duties as well as into the rigours of  the restrictions   and   regulations  prescribed   under   those                                                   PG NO 1097 enactments. True, the consideration that if the oil and cake fall under item 7, such consequences as have been  mentioned will  follow cannot really guide or deter us  in  construing the definition. However the fact that the oil and cake  have not been considered to be excisable commodities for the past several years is an indication as to how the legislature and the   administration  have  understood  and  applied   these provisions all along.     17. Certain other judicial decisions were cited by  both parties  but  we  are  not  discussing  them.  They  neither directly deal with the point before us nor do they deal with definitions or situations which furnish a useful analogy for comparison.     18. For the reasons discussed above, we affirm the  view taken  by  the  High Court and  dismiss  these  appeals  and petitions. We, however, make no orders as to costs. R. S. S.                                  Appeals dismissed.