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PETITIONER: MEMBER-SECRETARY, ANDHRA PRADESH STATEBOARD FOR PREVENTION A

       Vs.

RESPONDENT: ANDHRA PRADESH RAYONS LTD. & ORS.

DATE OF JUDGMENT30/09/1988

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) KANIA, M.H. RANGNATHAN, S.

CITATION:  1989 AIR  611            1988 SCR  Supl. (3) 380  1989 SCC  (1)  44        JT 1988 (4)   154  1988 SCALE  (2)1811  CITATOR INFO :  R          1992 SC 224  (11,19)

ACT:     Water  (Prevention and Control of Pollution)  cess  Act, 1977: Section 3 and Schedule I--Cess--Levy and collection of Industry  manufacturing Rayon Grade pulp--Neither  chemical, textile nor paper industry. %     Statutory Interpretation: Taxing Statute--Interpretation of--No  room  for any intendment--No  equity  about  tax--No presumption  as  to tax--Whether any industry  falls  within realm  of taxation--To be judged by predominant purpose  and process--Not by any ancillary or Incidental process  carried on by the industry.

HEADNOTE:     The    respondent,   Andhra   Pradesh    Rayons    Ltd., manufacturing  Rayon  Grade Pulp, a base  material  for  the manufacture of synthetics or man-made fabrics, was  assessed by the petitioner under the provisions of Water  (Prevention and Control of Pollution) Cess Act, 1977 which provided  for levy  and  collection  of  Water  cess  from  the  specified industries  enumerated in Schedule I of the Act. On  appeal, the  Appellate   late  Committee  confirmed  the  order   of assessment   on   the  ground  that   the   respondent   was manufacturing Rayon Grade Pulp which came under the category of Textile industry.     The   respondent  filed  a  writ  in  the   High   Court challenging  the levy Inter alia on the ground that  it  was not  one  of the industries mentioned in the  Schedule.  The High Court upheld this contention.     Before this Court, it was sought to be canvessed by  the petitioner that Rayon Grade Pulp was covered either by  Item No. 7 of the Schedule, which was chemical industry, or  item No.  10 which was textile industry, or item No.11 which  was paper industry. Dismissing the petition, it was,                                                    PG NO 380                                                    PG NO 381     HELD:  (I)  The  Act  being fiscal  in  nature  must  be

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strictly construed. The question as to what is covered  must be  found  out from the language according  to  its  natural meaning, fairly and squarely read. [385F; 386B]     (2)  In a taxing Act one has to look merely at  what  is clearly said. There is no room for any intendment. There  is no  equity about a tax, there is no presumption as  to  tax. Nothing is to be read in, nothing is to be implied. [385H]     (3) Whether a particular industry is an industry covered in  Schedule  I  has  to be judged  normally  by  what  that industry  produces  mainly,  its  predominant  purpose   and process,  and  not by any ancillary  or  incidental  process carried on by it. [386D]     (4)  Chemical  process would be involved  to  a  certain extent,  more  or less in all industries,  but  an  industry would  be  known as a chemical industry if  it  carries  out predominantly   chemical  activities  and  is  involved   in chemical endeavours. [386E]     (5)  Taxing consideration may stem  from  administrative experience  and  other  factors of  life  and  not  artistic visualisation  or  neat  logic and so  the  literal,  though pedestrian, interpretation must prevail. [386C]     (6) One of the well recognised canons of construction is that  the  legislature  speaks its mind by  use  of  correct expression and unless there is any ambiguity in the language of   the   provision  the   Court  should   accept   literal construction if it does not lead to an absurdity. [387E]     (7)  There  is  no absurdity  in  the  literal  meaning. Broadly  and literally it can be said that the  Rayon  Grade Pulp  is neither chemical industry nor textile industry  nor paper industry. [387G;386H]     In  Re Micklethwait., [1885] II EX 452. 456;  Tenant  v. Smith,  [1892] AC 150; St. Aubyan v. AG., [1951] 2 All  E.R. 473;  Cape Brandy Syndicate v. IRC., [1921] 1 KB 64  at  71; Gursahai  Saigal v. C.I.T. Punjab, [1963] 3 SCR 893;  C.I.T. Madras v. MR. P. Firm, Muar, [1965] 1 SCR 815; Controller of Estate Duty, Gujarat v. Kantilal Trikamlal, [1977] 1 SCR  9; IRC v. Duke of Westminster, [1936] AC 1 at 24; AV  Fernandez v. The State of Kerala, [1957] SCR 837; Martand Dairy & Farm v. Union of India, [1975] Supp. SCR 265; Lt Col. Prithi  Pal Singh Bedi v. Union of India, [1983] 1 SCR 393, referred to.                                                    PG NO 382     M/s.  Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. Mavoor  v. The  Appellate Committee for Water Cess, Trivandrum,  A.I.R. 1983 Kerala 110. overruled.

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Special Leave Petition (C) No. 8566 of 1988.     From  the  Judgment  and Order dated  9.10.1987  of  the Andhra Pradesh High Court in W.P. No. 306 of 1983.     R. Mohan for the Petitioner.     The Judgment of the Court was delivered by     SABYASACHI  MUKHARJI, J. This petition is for  leave  to appeal  under  Article  136 of  the  Constitution  from  the judgment and order of the High Court of Andhra Pradesh dated 9th  October, 1987. The question that was urged  before  the High Court and the question which is sought to be raised  in this petition is whether the respondent Pradesh Rayons  Ltd. which is manufacturing Rayon Grade Pulp, a base material for manufacturing  of  synthetics  or  manmade  fabrics  is   an industry as mentioned in Schedule I of the Water (Prevention and  Control of Pollution) cess Act, 1977 for  the  purposes of  levy of Water Cess under the Act. The water  (Prevention

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and  Control  Of  Pollution) Act, 1974  was  passed  by  the Parliament  to  "provide for the prevention and  control  of water   pollution  and  the  maintaining  or  restoring   of wholesomeness  of water, for the establishment, with a  view to  carrying out the purposes aforesaid, of Boards  for  the prevention and control of water pollution, for conferring on and  assigning to such Boards powers and functions  relating thereto  and  for  matters  connected  therewith".  For  the aforesaid  purposes, the Act contemplated creation of  State Boards at State level and the Central Board at the  national level.  Thereafter,  the Water (Prevention  and  Control  of Pollution)  Cess Act, 1977 being Act 36 of 1977  was  passed (hereinafter called ’the Act’). The preamble to the said Act states  that the said Act was "to provide for the  levy  and collection  of a cess on water consumed by persons  carrying on certain industries and by local authorities, with a  view to augment the resources of the Central Board and the  State                                                    PG NO 383 Boards  for  the prevention and control of  water  pollution constituted  under  the  Water (Prevention  and  Control  of Pollution)  Act, 1974". Therefore, the said Act  was  passed only for the purpose of providing for levy and collection of cess  on  water  consumed by  persons  carrying  on  certain industries  with  a  view to augment the  resources  of  the Central Board and the State Boards. Section 2(c)  stipulates A  ‘specified  industry’  means any  industry  specified  in Schedule T. Section 3 provides as follows:     "3.  Levy  and collection of cess.--(1) There  shall  be levied  and collected a cess for the purposes of  the  Water (Preven-tion  and  Control  of  Pollution)  Act,  1974   and utilisation thereunder.     (2) The cess under sub-section ( I) shall be payable by-     (a) every person carrying on any specified industry; and     (b) every local authority,     and  shall  be  calculated on the  basis  of  the  water consumed by such person or local authority, as the case  may be,  for  any  of the purposes specified in  column  (1)  of Schedule II, at such rate, not exceeding the rate  specified in  the  corresponding entry in column (2) thereof,  as  the Central  Government  may, by notification  in  the  Official Gazette, from time to time, specify."     Therefore, this section provides for levy and collection of  cess  from the specified industries. Specified  industry is one which is mentioned in Schedule I which is as follows:     "1. Ferrous metallurgical industry.     2. Non-ferrous metallurgical industry.     3. Mining industry.     4. Ore processing industry.     5. Petroleum industry.     6. Petro-chemical industry.     7. Chemical industry.     8. Ceramic industry.                                                    PG NO 384     9. Cement industry.     10. Textile industry     11. Paper industry.     12. Fertilizer industry.     13. Coal (including coke) industry.     14. Power (thermal and diesel) generating industry.     15. Processing of animal or vegetable products industry."     Therefore, the short question, is, whether the  industry run  by the respondent herein for manufacturing Rayon  Grade Pulp, a base material for manufacture of synthetics or  man- made fabrics is one of the industries mentioned in  Schedule I hereinbefore.

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   In  this case, the respondent company was registered  as company  in  1975.  The  supply of  energy  to  the  company commenced  on August 22, 1981 and the production began  from September 1, 1981. The company manufactures rayon grade pulp of  26250  tonnes per annum. The Company was served  with  a notice on 12th August, 1981 to furnish the quantum of  water consumed for assessment under the Act. Based on the  returns filed  by the respondent as required under section S of  the Act,  assessment  of water cess was made by an  order  dated 31st  December  1981.  Aggrieved  by  the  said  order   the respondent  filed an appeal before the  Appellate  Committee constituted  under the Act. The Appellate committee  by  its order dated 30th November, 1982 conformed the orders of  the assessment  passed by the petitioner. Before  the  Appellate Committee  various  contentions were urged and only  one  of such  contention  survives now and is  agitated  before  us, namely, that the Rayon Industry is nOt included in  Schedule I of the said Act. The Appellate Committee by its order said as follows:     "We  are unable to agree with the arguments advanced  by the learned counsel. The appellant industry is manufacturing Rayon  Grade Pulp which comes under the category of  textile industry as it involves the production of Rayon Grade  Pulp. a  base  material for manufacture of synthetic  of  man-made fibres.’’                                                    PG NO 385     From  the  aforesaid,  it  appears  that  the  Appellate Committee  was  of the view that the respondent  herein  was manufacturing  Rayon  Grade  Pulp  which  comes  under   the category  of  Textile mentioned in Schedule I  of  the  Act. Textile  industry is item No. 10 in the aforesaid  Schedule. Aggrieved  by the decision of the Appellate  Committee,  the respondent  herein  filed  writ  petition  challenging   the constitutional  validity of the Act as well as the  levy  of cess  on  water  on the ground that it was not  one  of  the industries mentioned in the Schedule. The High Court by  its order  dated  9th  October,  1987  rejected  the  contention relating  to  the  constitutional validity  but  upheld  the contention  that  the  respondent’s  industry  was  not   an industry  which is mentioned in Schedule I and as  such  was not  liable  to  pay  cess.  It  is  the  propriety  or  the correctness of that decision which is sought to be canvassed before  us  by this petition. It must,  therefore,  be  made clear  that  we are not concerned with  the  correctness  or otherwise  of  the  decision of the  High  Court  about  the constitutional validity of the Act in question. That is  not at  issue  before us since the  petitioner,  Andhra  Pradesh State  Board for Prevention and Control of  Water  Pollution has  not  challenged  that finding.  The  only  question  is whether  the respondent is an industry as mentioned  in  the aforesaid schedule. The High Court in the impugned  judgment has held that Rayon Grade Pulp is not covered by any of  the items specified in the said Schedule. We are of the  opinion that the High Court was right. Before us it was sought to be canvassed  that Rayon Grade Pulp is covered either  by  Item No. 7 which is chemical industry or 13y item No. 10 which is textile industry or item No. I1 which is paper industry.  We are unable to accept the contention.     It  has to be borne in mind that this Act with which  we are concerned is an Act imposing liability for cess. The Act is  fiscal in nature. The Act must, therefore,  be  strictly construed  in  order  to find out  whether  a  liability  is fastened on a particular industry. The subject is not to  be taxed  without clear words for that purpose; and  also  that every  Act  of  Parliament must be  read  according  to  its

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natural  construction of words. See the observations  in  Re Micklethwait,   [1885]  11  EX  452,  456.  Also   see   the observations  in  Tenant v. Smith, [1892] AC  150  and  Lord Halsbury’s   observations   at  page  154.  See   also   the observations  of Lord Simonds in St. Aubyn v. AG,  [1951]  2 All E.R. 473 at 485. Justice Rowlatt of England said a  long time  ago,  that in a taxing ACt one has to look  merely  at what  is clearly said. There is no room for any  intendment. There  is no equity about a tax. There is no presumption  at to tax. Nothing is to be read in, nothing is to be  implied. One  has  to  look  fairly at the  language  used.  See  the observations  in Cape Brandy Syndicate v. IRC, [1921]J 1  KB                                                    PG NO 386 64  at 71. This Court has also reiterated the same  view  in Gursahai Saigal v. C.I.T. Punjab, [1963] 3 SCR 893; S.L.  T. Madras  v.  V.  MR. P. Firm, Muar, [1965]  I  SCR  815.  and Controller  of  Estate Duty Gujarat v.  Kantilal  Trikamlal, [1977] 1 SCR 9.     The  question  as to what is covered must be  found  out from  the language according to its natural  meaning  fairly and  squarely read. See the observations in IRC v.  Duke  of Westminster,  [1936]  AC I at 24, and of this Court in  A  V Fernandez  v. The State of Kerala, [1957] SCR  837.  Justice Krishna Iyer of this Court in Martand Dairy & Farm v.  Union of  India,  [1975] Suppl. SCR 265 has observed  that  taxing consideration  may stem from administrative  experience  and other factors of life and not artistic visualisation or neat logic and so the literal, though pedestrian,  interpretation must prevail.     In this case where the question is whether a  particular industry is an industry as covered in Schedule I of the Act, it has to be judged normally by what that industry  produces mainly.  Every industry carries out multifarious  activities to  reach  its goal through  various  multifarious  methods. Whether  a  particular industry falls within  the  realm  of taxation,  must  be judged by the  predominant  purpose  and process  and  not  by any ancillary  or  incidental  process carried on by a particular industry in running its business.     Chemical process would be involved to a certain  extent, more  or  less in all industries, but an industry  would  be known as a chemical industry if it carries out predominantly chemical activities and is involved in chemical endeavours.     We fail to see that Rayon Grade Pulp could be considered even  remotely connected as such with chemical  industry  or textile  industry  or paper industry. In  all  preparations, there is certain chemical process but that does not make all industries  chemical industries. The  expression  "chemical" means,   according  to  Collins  English   Dictionary.   any substance  used  in or resulting from a  reaction  involving changes  to  atoms or molecules or used  in  chemistry.  The Concise  Oxford  Dictionary, 8th Edition  page  170  defines "chemical’’  as made by or relating to,  chemistry.  Broadly and literally, in our opinion, it can be said that the Rayon Grade Pulp is neither chemical industry nor textile industry nor  paper  industry. We find it difficult on  a  broad  and literal construction to bring the industry of the respondent into  any of these categories. In other words, to  find  out the  intention of the legislation, if possible it should  be                                                    PG NO 387 found  out  from  the language used in case  of  doubt.  The purpose  of legislation should be sought for to clarify  the ambiguity  only,  if  any. The  fairest  and  most  rational method,  says  Blackstone,  to interpret  the  will  of  the legislator  is by exploring his intentions at the time  when the  law was made, by signs the most natural  and  probable.

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And  these  signs  are either the words,  the  context,  the subject  matter, the effects and consequence, or the  spirit and  reason  of  the law. See Commentaries on  the  Laws  of England  by  Blackstone (facsimile of 1st edition  of  1765, University of Chicago Press, 1979 Vol. 1 p. 59.). The  words are  generally  to be understood ‘in their  usual  and  most known  signification’, although terms of art ‘must be  taken according  to the acceptation of the learning in  each  art, trade  and science. If words happen still to be dubious,  we may establish their meaning from the context, which includes the  preamble  to  the statute and laws  made  by  the  same legislator  on  the  same subject. Words are  always  to  be understood  as  having regard to the subject matter  of  the legislation. See Cross Statutory Interpretation, 2nd Edition page 21.     This  Court  in Lt Col. Prithi Pal Singh  Bedi  etc.  v. Union  of India & Ors., [1983] I S.C.R. 393 at page  404  of the   report  reiterated  that  the  dominant   purpose   in construing  a statute is to ascertain the intention  of  the Parliament.   One   of  the  well   recognised   canons   of construction is that the legislature speaks its mind by  use of  correct expression and unless there is any ambiguity  in the language of the provision the Court should adopt literal construction if it does not lead to an absurdity. Therefore, the  first  question  to be posed is whether  there  is  any ambiguity  in the language used. If there is none, it  would mean  the language used, speaks the mind of  Parliament  and there  is  no need to look somewhere else  to  discover  the intention  or meaning. If the literal construction leads  to an absurdity, external aids to construction can be  resorted to. To ascertain the literal meaning it is equally necessary first  to ascertain the juxtaposition in which the  rule  is placed,  the purpose for which it is enacted and the  object which it is required to subserve and the authority by  which the rule is framed.     Bearing  the aforesaid principle in mind, we  find  that there is no absurdity in the literal meaning. The purpose of the Act is to realise money from those whose activities lead to  pollution  and  who  must  bear  the  expenses  of   the maintenance  and running of the State Board. It is a  fiscal provision  and  must,  therefore,  not  only  be   literally construed  but also be strictly construed. Having regard  to the literal expression used and bearing in mind the  purpose for  the  legislation, we arrive at a  result  that  certain                                                    PG NO 388 industries  have to pay the expenses of the maintenance  and functioning  of the State Boards. Considering the  principle broadly and from commonsense point of view, we find  nothing to warrant the conclusion that Rayon Grade Pulp is  included in  either of the industries as canvassed on behalf  of  the petitioner  here  and  as  held by the  High  Court  in  the judgment under appeal.     In  this case, we must also note that neither the  water Pollution  Board nor any authorities under the Act  nor  the High  Court proceeded on any evidence how these  expressions are  used  in the particular industry or understood  in  the trade   generally.   In  other  words,   no   principle   of understanding  in  "common  parlance"  is  involved  in  the instance case.     In  that view of the matter, we are of the opinion  that the  contention  sought  for  by the  petitioner  is  of  no substance.     Our  attention, however, was drawn to the decision of  a learned  single  Judge of the High Court of Kerala  in  M/s. Gwalior  Rayon  Silk  Mfg. (Wvg.) Co. Ltd.,  Mavoor  v.  The

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Appellate  Committee for Water Cess, Trivandrum and  others, A.I.R.  1983 Kerala 110. There, the learned single Judge  of the  Kerala  High  Court held  that  industry  manufacturing rayon-grade  pulp is chemical industry. The High  Court  has observed  that the product of the Pulp Division of  a  rayon silk  manufacturing company is rayon-grade  pulp,  extracted from  bamboo  or wood. The High Court noted  that  the  pulp produced  in  the Pulp Division of the company  is  the  raw material  for  the  Staple Fibre Division.  The  High  Court further  observed  that the pulp in question is  a  chemical used as chemical raw material, in the form known as chemical cellulose,  for preparation of fibres. The High Court  noted that  for  the  scientist cellulose  is  a  carbohydrate  an organic compound, a saccharide and for the layman also it is a  chemical  like salt and sugar. Manufacture of  pulp  from wood  or bamboo involves consumption of large quantities  of water  which  get  polluted in the  process;  and  "chemical industry’’ in the context in which it is used in Schedule  I of the Act, can therefore, include an industry manufacturing rayon-grade pulp. We are unable, with respect, to accept the circuitous process of reasoning of the Kerala High Court. As mentioned  hereinbefore,  looked  at  from  this  circuitous method  every industry would be chemical industry. It  could not  have  been  the intention  to  include  all  industries because every industry has to go to certain chemical process more  or less and, therefore, it could not be so  construed. Such expression should, therefore, be construed  reasonably, strictly  and  from a commonsense point of  view.  The  High                                                    PG NO 389 Court  of  Kerala  has  set out in  the  said  judgment  the company’s case in that case which also produced Rayon  Grade Pulp  and  the  manufacturing  process  consisted  only   of isolating cellulose present in bamboo and wood by removal of "lignin" and other contents, and that the resultant  product is  not  chemical  cellulose. It explained  the  process  as under:     "The  actual process of manufacture of Rayon grade  pulp is by feeding the raw materials on the conveyors leading  to the  chippers, where they are chipped into small  pieces  in uniform sizes. The raw materials are washed by a  continuous stream  of  water  before they are  fed  into  chippers  for removal  of their adhering mud and dirt. The chips are  then conveyed  into Digesters, where they are subjected  to  acid pre-hydrolysis,  using dilute sulphuric acid  solution.  The spent  liquor is then drained out, and the chips  washed  to remove the acid. The chips are again cooked using a solution containing  cooking chemicals at high temperature  of  above 160C.  After  the  chips are thus  cooked  the  pressure  is released, and the material is collected in a blow tank, from where  the  chipped  pulp is sent to  "Knotter  Screen"  for removal  of  uncooked  particles. The pulp is  washed  in  a series  of washers in a counter-current manner.  The  washed pulp  is  bleached in a multi-staged  Bleaching  Plant,  and converted  into  sheets in a continuous  machine.  The  pulp sheets  so  obtained are sent to other factories  for  their conversion into Staple Fibre."     The  said High Court also relied on a passage  from  the "Book of Popular Science" Grolier, 1969, Vol. 7, p. 55 which reads as follows:     "Just what is a chemical, after all? Presumably it is  a pure  chemical substance (an element or compound) and not  a mixture.  Thus sulphuric acid is a chemical ..  But  common salt and sugar, with which all of us are familiar, are  also pure chemical substances .... The truly chemical industries, which  manufacture chemicals, are seldom well  known to  the

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public. This is because we, as consumers, do not  ordinarily make  use of chemicals in their pure form. Instead they  are converted into products that reach the consumer only after a number of operations ...."                                    (Emphasis supplied)                                                    PG NO 390     As  mentioned  hereinbefore, the  expression  should  be understood not in technical sense but from broad commonsense point  of view to find out what it truly means by those  who deal  with them. Bearing the aforesaid perspective in  mind, we  are  unable to agree with the view of  the  Kerala  High Court   expressed  in  the  aforesaid  judgment.   In   that conspectus  of  the Kerala High Court  everything  would  be included in the process of chemical.     In  the  aforesaid  view of the matter  we  are  of  the opinion  that  the  High  Court of  Andhra  Pradesh  in  the impugned judgment was right and the High Court of Kerala  in the judgment referred to hereinbefore was not right.     In the aforesaid view of the matter this petition  fails and is accordingly dismissed. R.S.S.                                Petition dismissed