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PETITIONER: RAINBOW STEELS LTD. AND ANR.

       Vs.

RESPONDENT: COMMISSIONER OF SALES TAX, UTTAR PRADESH AND ANR.

DATE OF JUDGMENT30/01/1981

BENCH: TULZAPURKAR, V.D. BENCH: TULZAPURKAR, V.D. PATHAK, R.S.

CITATION:  1981 AIR 2101            1981 SCR  (2) 727  1981 SCC  (2) 141        1981 SCALE  (1)229  CITATOR INFO :  RF         1991 SC 754  (12)

ACT:      Uttar Pradesh Sales Tax Act 1948 S. 3A-State Government notifying "Sale  of old discarded, unserviceable or obsolete machinery" as  liable to  tax-Sale of thermal power plant in running condition-Whether exigible to tax.      Interpretation  of  Statutes-Principle  of  noscitur  a sociis-When can be invoked.

HEADNOTE:      In exercise  of the  power under section 3A of the U.P. Sales  Tax   Act,  1948   the  State  Government,  issued  a notification dated  May 30,  1975 which  provided  that  the turnover in  respect of  "old, discarded,  unserviceable  or obsolete machinery, stores or vehicles etc." shall be liable to tax at the point of sale at the rate of five per cent.      A Thermal  Power  Plant  together  with  its  associate auxiliaries, components  and accessories  belonging  to  the State Electricity  Board was  sold in a working condition to the Appellant  No. 1,  who paid  sales tax on the sale under protest. The  power plant was used by Appellant No. 1 and as the power  position in  the State  improved, Appellant No. 1 discontinued the  generation  of  electricity  through  this power plant and negotiated its sale to Appellant No. 2.      Since there  was  difference  of  opinion  between  the parties as  to the payment of sales tax on the machinery the question was  referred for clarification to the Commissioner of Sales  Tax under  section 35 of the Act. The Commissioner was of  the view  that  the  four  words,  "old,  discarded, unserviceable or  obsolete" had  been used disjunctively and each adjective  had its own meaning and sense and that since the power  plant had  been used before its sale it was "old" machinery and  the sale  was liable  to tax  under the  said Entry.      The order of the Commissioner was confirmed by the High Court.      In  the   appeal  to  this  Court,  on  behalf  of  the Appellants  it  was  submitted  invoking  the  principle  of noscitur a  sociis that  the expression  ‘old’ which is more general should be restricted to a sense analogous to that of the   less    general   expressions,    namely   "discarded,

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unserviceable or  obsolete" and read in this manner the sale of the  power plant  could not  be regarded as sale of "old" machinery falling within the Entry.      On behalf  of the Respondents it was contended that the four adjectives  occurring  in  the  Entry  have  been  used disjunctively and  each  must  be  given  its  own  separate meaning, and  that the  principle of noscitur a sociis would not apply to the construction of the expression ‘old’. 728      Allowing the appeal, ^      HELD :  1. The  thermal  power  plant  was  in  perfect running condition  and was  sold as  such. It would not fall within Entry No. 15 of the Notification. [733D]      2. The  four adjectives  "old, discarded, unserviceable or obsolete"  which are susceptible to analogous meaning are clubbed together  while qualifying  machinery in  the Entry. The first  adjective ‘old’  is clearly more general than the other three and as such all the four would take their colour from each  other, the  meaning of the more general adjective ‘old’ being  restricted to  a sense analogous to that of the less general  namely "discarded, unserviceable or obsolete". All the  four adjectives  which qualify the word "machinery" have been  used disjunctively. The adjective ‘old’ by itself is vague,  imprecise ambiguous for there is no indication as to how  much old  the machinery should be before it could be described as ‘old machinery’-one day old, one month old, one year old,  five years  old or even ten years old (the degree of oldness being a relative concept). [732F-733A]      3. In  the absence of any indication that the adjective ‘old’ has  been deliberately  used in a wider sense when the expression  ‘old’   is  by   itself  vague,   imprecise  and ambiguous, being  too general,  the principle  of noscitur a sociis will have to be applied i.e. all the associated words will take colour from each other. [733B]      4. (i)  The principle  of noscitur  sociis  is  clearly applicable to  the  construction  of  the  expression  ‘old’ occurring in  Entry No. 15, and that expression will have be given a  restricted meaning-a sense analogous to that of the less general words clubbed with it. [732A]      (ii) If  the wider  words used  are in themselves vague imprecise or ambiguous and there is no indication that these have been deliberately used to infuse wider meaning then the rule of noscitur a sociis can be invoked. [732E]      State of  Bombay & Ors. v. The Hospital Mazdoor Sabha & Ors. [1960]  2 S.C.R. 866 and The Corporation of the City of Nagpur v. Its Employees [1960] 2 S.C.R. 942 referred to.      Lelang v. Cooper [1965] 1 Q.B. 232 distinguished.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION : Civil Appeal No. 337 of 1981.      Appeal by  Special Leave  from the  Judgment and  Order dated 18-4-1979  of the Allahabad High Court (Lucknow Bench) in F.A.F.O. No. 39/77.      V. M. Tarkunde and B. R. Sabharwal for the Appellant.      S. Markandey for the Respondent.      The Judgment of the Court was delivered by      TULZAPURKAR, J. This appeal by special leave raises the question whether on true construction of Entry No. 15 of the Notification No. 729 ST-4949/X-10(2)-74 dated  May 30,  1975 issued under S.3A of

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U.P. Sales  Tax Act  1948, the  negotiated sale of a Thermal Power Plant  by appellant  No.  1  to  appellant  No.  2  is exigible to sales tax thereunder?      The short  facts giving  rise to  the question  may  be stated :  A Thermal  Power Plant  at Rampur comprising seven boilers,  five   turbines  together   with   its   associate auxiliaries components  and accessories  originally belonged to the  U.P.  State  Electricity  Board.  The  Board,  after selling it  in working  condition to  appellant No. 1 on May 29, 1974  for Rs.  41.31 lakhs called upon the latter to pay sales tax  thereon which  was paid  under protest. Appellant No. 1  used it  for generating electricity from May 29, 1974 to September 30, 1975. As the power position improved in the State of U.P. appellant No. 1 discontinued the generation of electricity  through   this  power   plant  and  finding  it expedient  to  realise  its  investment  negotiated  a  sale thereof in  perfect working  condition to  appellant No.  2. Appellant No.  1 desired  to charge  sales tax  on the  said negotiated sale but appellant No. 2 informed appellant No. 1 that it had obtained considered opinion that no sales tax on such a transaction was leviable inasmuch as the sale was not of "old,  discarded, unserviceable  or obsolete  machinery," falling within  Entry No.  15 of  the concerned Notification dated May  30, 1975.  Both the appellants thereupon referred the question  for clarification to the Commissioner of Sales Tax U.P., Lucknow under Section 35 of the U.P. Sales Tax Act 1948. It  was  contended  on  their  behalf  that  the  word (adjective) "old"  occurring in  the Entry would take colour from the  other words  (adjectives) that  follow it  and the cumulative effect  of all  the words  taken together  showed that those  words were  either synonymous or near synonymous suggesting that  the machinery  in order  to fall within the Entry should  become non  functional or  non usable and that since the  power plant  in question  had not become "old" in that sense and was in perfect working condition it would not fall within  the Entry and the sale thereof by appellant No. 1  to   appellant  No.  2  was  not  exigible  to  tax.  The Commissioner by  his order dated February 19, 1977 negatived the contention  holding that  the four words "old, discarded unserviceable or  obsolete" had  been used disjunctively and each adjective  had its own meaning and sense and that since the power  plant had  been used before its sale by appellant No. 1  to appellant  No. 2 it was old machinery and the sale thereof was liable to tax under the said Entry.      Feeling  aggrieved   by  that   order  the   appellants preferred an  appeal  to  the  Allahabad  High  Court  being F.A.F.O. No.  39 of  1977 and  a learned single judge of the Lucknow Bench on April 18, 1979 dis- 730 missed the appeal and confirmed the Commissioner’s view that since the  concerned  power  plant  had  been  purchased  by appellant No. 1 long ago and had been put to use it was "old machinery" within  the meaning  of the Entry, observing that "the degree  of oldness  has to  be  greater  than  recently manufactured machinery  used only  for the  some time".  The Commissioner’s view  as  confirmed  by  the  High  Court  is challenged by the appellants before us in this appeal.      Section 3A of the U.P. Sales Tax Act, 1948 empowers the State Government to specify the rates of taxes and the point at which  the tax can be imposed, subject to a maximum of 12 per cent, on the turn over in respect of the goods specified in the First Schedule to the Act and clause (b) empowers the State Government  to amend  the entries  in the Schedule. In exercise of  the aforesaid power the State Government issued the Notification  No. ST-II-4949/X-10(2)-74  dated  May  30,

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1975 which  provided that  with effect from June 1, 1975 the turn over  in respect of the goods specified in column II of the Schedule  to this Notification shall be liable to tax at the point  of sale and at the rate specified respectively in columns III and IV thereof :                           Schedule      ‘M’ Stands for sale by manufacturer in Uttar Pradesh.      ‘I’ stands for sale by the importer in Uttar Pradesh. ------------------------------------------------------------   Sl. Description of goods        Point at which Rate of tax   No.                             tax shall be                                   levied. ------------------------------------------------------------   I            II                     III             IV ------------------------------------------------------------  15.  Old, discarded, unservice-  Sale to consu-    5 per       able or obsolete machinery, mer               cent       stores or vehicles includ-       ing waste products except       cinder, coal ash and such       items as are included in       any other notification       issued under the Act. ------------------------------------------------------------ The question  is whether  the negotiated sale of the Thermal Power Plant  at Rampur by appellant No. 1 to appellant No. 2 falls within  the aforesaid Entry so as to attract sales tax at 5  per cent  on the sale price charged by appellant No. 1 to appellant  No. 2 ? In other words the question is whether it is  a sale  of "old  machinery" within the meaning of the Entry and  what is  the true  meaning of the expression "old machinery". It is undisputed that the Thermal Power Plant in question when it was sold by U.P. State Electricity Board to appellant No.  1 on  May 29,  1974 was  in  perfect  running condition and  the sales  tax on  that transaction  was paid under protest. It is 731 further undisputed  that appellant  No. 1  used  that  power plant for  generating electricity  for about a year and four months and  because the power position improved in the State of U.P.  the appellant  No. 1 negotiated the sale thereof to appellant No. 2 with the view to realise back its investment and the  power  plant  had  been  kept  in  perfect  running condition  with   periodical  checks  by  the  Inspector  of Factories as  also by the Inspector of Boilers and when sold it was in perfect working and running condition. Question is whether  such   power  plant   could  be  regarded  as  "old machinery" within the meaning of Entry 15.      Counsel for  the appellants contended that it could not be regarded as old machinery in the sense that it had become non-functional or  non-usable which  meaning should be given to the  expression ‘old’  occurring in  the Entry.  In other words, he  sought to  invoke the  principle  of  noscitur  a sociis  for  construing  expression  ‘old’  because  of  its association with  the  other  expressions  like  "discarded, unserviceable or obsolete" occurring in the Entry. According to the  counsel the  expression ‘old’  which is more general should be  restricted to  a sense  analogous to  that of the less general  expressions, namely, "discarded, unserviceable or obsolete"  and read  in this manner the sale of the power plant in  question could  not be  regarded as  sale  of  old machinery falling  within  the  Entry.  On  the  other  hand counsel for  the respondents supported the view taken by the Commissioner of Sales Tax as well as by the High Court, for, according to  him the  principle of  noscitur a sociis would

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not apply  to  the  construction  of  the  expression  ‘old’ occurring in  the Entry.  He urged  that the four adjectives have been  used disjunctively and each must be given its own separate meaning  and pointed  out that  in  two  decisions, namely, State of Bombay & Ors. v. The Hospital Mazdoor Sabha & Ors.  and The  Corporation of  the City  of Nagpur  v. Its Employees this  Court refused  to apply  the said  principle while construing  the  definition  of  ‘industry’  given  in s.2(j) of  Industrial Disputes  Act, 1947  and in s.2(14) of the C.P.  and Berar Industrial Disputes Settlement Act, 1947 respectively, and  that in  Letang v. Cooper Diplock, L. J., has observed thus : "The maxim noscitur a sociis is always a treacherous one  unless you  know the  societas to which the socii belong."  According to him further the ejusdem generis principle would  be clearly  inapplicable inasmuch as it was not a  case where  some general words follow any particular, generic or specific words. 732      Having given  our anxious  consideration to  the  rival contentions urged before us, we are clearly of the view that the principle  of noscitur a sociis is clearly applicable to the construction  of the expression ‘old’ occurring in Entry No.  15,  and  that  expression  will  have  to  be  give  a restricted meaning-a  sense analogous  to that  of the  less general words clubbed with it. The principle is explained in Maxwell on  the Interpretation  of Statutes  (12th Edn.)  at page 289 thus :      "Where two  or more  words  which  are  susceptible  of      analogous meaning  are  coupled  together,  noscitur  a      sociis, they   are  understood  to  be  used  in  their      cognate sense. They take, as it were, their colour from      each other,  the meaning  of  the  more  general  being      restricted to  a sense  analogous to  that of  the less      general." Moreover, even  in the  two decisions relied upon by counsel for the  respondents where  this Court  refused to apply the principle  of   noscitur  a   sociis  while  construing  the definition of  ‘industry’ in  the two  concerned  enactments because the Legislature had deliberately used wider words in order to  make the  scope of  defined  word  correspondingly wider, the  Court has  observed that  "it is  only when  the intention of the Legislature in associating wider words with words of  narrower significance  is doubtful or is otherwise not clear  that the  present rule  of  construction  can  be usefully applied."  In other  words if  the wider words used are in themselves vague, imprecise or ambiguous and there is no indication  that these  have been  deliberately  used  to infuse wider  meaning then  this rule of construction can be invoked.      Dealing with  the Entry in question, in the first place it cannot  be disputed  that the  four adjectives  which are susceptible to  analogous meaning are clubbed together while qualifying ‘machinery’  in the Entry. Secondly, it cannot be disputed that  the first  adjective ‘old’  is  clearly  more general than  the other three and as such all the four would take their  colour from  each other, the meaning of the more general  adjective   ‘old’  being   restricted  to  a  sense analogous to  that of  the less general, namely, "discarded, unserviceable or obsolete". Thirdly, it is true that all the four adjectives which qualify the word ‘machinery’ have been used disjunctively  but it is precisely for that reason that the adjective  ‘old’ becomes vague, imprecise and ambiguous, being  too   general.  The  adjective  ‘old’  by  itself  is certainly vague,  imprecise and  ambiguous, for  there is no indication as to how much old the machinery should be before

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it could be described as 733 old machinery.  A machinery  could be one day old, one month old, one  year old,  five years  old or  even ten years old, (the degree  of oldness  being a relative concept) and which one is  intended to  be included  in the  Entry has not been made clear  at all.  And, lastly,  there is  nothing in  the Entry  to   indicate  that  the  adjective  ‘old’  has  been deliberately used  in a  wider sense.  In the absence of any indication to  that effect  and when the expression ‘old’ is by  itself   vague,  imprecise,  and  ambiguous,  being  too general, the  principle of noscitur a sociis will have to be applied i.e.  all the associated words will take colour from each other,  the meaning of the more general, adjective viz. ‘old’ being  restricted to  a sense  analogous to  the  less general adjectives  "discarded, unserviceable  or obsolete". In other  words in  order to fall within the expression ‘old machinery’ occurring in the Entry, the machinery must be old machinery in  the sense  that it has become nonfunctional or non-usable. In our view, therefore, on true construction the sale of the Thermal Power Plant which at the time of sale by appellant No.  1 to  appellant No.  2 was in perfect running condition and  which was  sold as such would not fall within the aforesaid  Entry No.  15 of  the concerned  Notification dated May 30, 1975.      The English  decision of  the Court of Appeal in Letang v. Cooper (supra) relied upon by counsel for the respondents is clearly  distinguishable inasmuch  as  it  dealt  with  a statute which referred to "negligence, nuisance or breach of duty (whether  the duty exists by virtue of a contract or of provision made by or under a statute or independently of any contract or  any such  provision)," and  when it  was argued that because  the cause  of  action  in  both  nuisance  and negligence included  the infliction  of actual  damage as an essential  element,   "breach  of   duty"  should   also  be understood as  confined to  causes of action in which actual damage  was  likewise  essential  the  said  contention  was rejected by Diplock, L.J., by observing thus :           "It is  clear,  however,  that  ‘breach  of  duty’      cannot be  restricted to those giving rise to causes of      action in  which the  infliction of actual damage is an      essential  element,   for  the   words  in  parentheses      expressly extend  to a duty which exists by virtue of a      contract and  the infliction of actual damage is not an      essential  element   in  an   action  for   breach   of      contractual duty." In other  words, it  was a  case  of  a  statute  where  the parenthetical portion  occurring therein expressly indicated the contrary intention-contrary to the contention urged and, therefore, the  principle  of  noscitur  a  sociis  was  not applied. 734      In the result the appeal is allowed and the view of the lower authorities  is set  aside and the sale in question is declared to be not exigible to tax under Entry No. 15 of the concerned  Notification   dated  May   30,  1975.   In   the circumstance, there will be no order as to costs. N.V.K.                                      Appeal allowed. 735