Legal Notes by Arvind Datar: Same Word, Same Section, Different Meaning-II

Previously, I pointed out how a word can have a different meaning even if used in the same section. Thus, the word “acquire” in sections 14(1) and 14(2) of the Hindu Succession Act, 1956 was held to have a different meaning by the Calcutta and Patna High Courts.

My friend and colleague, Ajay Agarwal, has drawn my attention to a decision of the Supreme Court in Printers (Mysore) Limited v. CTO, where the word “goods” was used thrice in one clause and the court held that the same word had different meanings even in that clause. This case has an interesting background and is an important decision that illustrates how one word can have different meanings depending on the context in which it is used.

The Central Sales Tax Act, 1956 levied sales tax on inter-state sales and a provision for purchasing goods at a concessional rate from registered dealers on furnishing of a C-Form (This Act is now replaced by the Integrated Goods and Services Tax Act, 2017).

By an amendment in 1958, the definition of “goods” in section 2(d) of that Act excluded newspapers. The amended definition reads as follows:

“goods’ includes all materials, articles, commodities and all other kind of movable property, but does not include newspapers, actionable claims, stocks, shares and securities;”

Under Section 8(3)(b), a concessional rate of duty was available if the goods were specified in the certificate of registration of a registered dealer and were intended for use either for resale or to manufacture other goods.  Section 8(3)(b) read as follows:

“8(3)

(a)……………

(b).    are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central government in this behalf, for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power.”

The Sales Tax Authorities in Madras, Kerala and Karnataka had urged that once newspapers were excluded from the definition of goods, they would not be entitled for a concessional rate of tax. It was pointed out that section 8(3)(b) referred to “goods” which were purchased as raw-material or inputs and these were then used for the manufacture of goods for sale i.e. final product. If the final product, such as newspaper, was not within the definition of goods under section 2(d), the concessional duty would not be permissible. The Karnataka High Court, on a literal interpretation, accepted this contention and denied the concessional rate while the Madras and Kerala High Courts kept in mind the spirit of the legislation and the importance of newspapers in the context of freedom of speech and expression under Article 19(1)(a) and held that the expression “goods” would not exclude newspapers from its purview. Thus, the interesting question that arose was whether the word “goods”, which was used thrice in one clause could have a different meaning.

The Supreme Court observed that if a literal interpretation was adopted, the decision of the Karnataka High Court was indeed right. But the court observed that freedom of the press was a cherished right. Although newspapers were not immune from taxation or from general laws relating to industrial relations, an interpretation that promoted the freedom of speech should be adopted. It could never have been the intention of the Parliament to deny newspapers the concessional rate of tax on the purchase of newsprint. The court pointed out that even before the amendment, States could not levy sales tax on intra-state sale of newspapers under Entry 54 of List II  of Schedule VII and Parliament was also barred from imposing tax on inter-state sale of newspapers under Entry 92A of List-1 of Schedule VII.

In this background, the Supreme Court construed the word “goods” in section 8(3)(b) and pointed out it was used thrice in reference three categories of goods:

(i)  goods which are specified in the certificate of registration and are intended for re-sale;

(ii)  goods which are specified in the certificate of registration and are intended for further use in the manufacture or processing of goods;

(iii) goods which are specified of the certificate of registration but are intended to be used in mining or in the generation of power.

It went on to hold that the word “goods” used twice in the first half of the clause would definitely mean the goods as defined in section 2(d) but the word “goods” used in the latter half, and in the context of the manufacture, would not be as defined in section 2(d). The court pointed out that when section 8(3)(b) used the word “goods” in the context of manufacture, it did not and could not be understood in the sense it is defined in section 2(d); the word “goods” in the latter half would include newspapers despite the exclusion in the definition.

Thus, the definition section, which uses the expression, “unless the context otherwise required” shows that it is not necessary that the definition of goods should be applied mechanically throughout the Act.  If the context otherwise requires or it results in absurdity, a different interpretation must be given. Accordingly, the court held that the expression “goods” occurring in the phrase “for use by him in the manufacture or processing of “goods” for sale in section 8(3)(b) would not include “newspapers.” It pointed out that when the Constitution prohibits levy of sales tax on newspapers, a literal interpretation would result in newspapers becoming liable to pay tax at 10%. This would be an absurd and unintended result requiring a different interpretation being given to the word “goods” in the latter half of section 8(3)(b).

Arvind P Datar is a Senior Advocate of the Madras High Court.