Santhosh Maize & Industries Limited (APPELLANT) Vs. The State of Tamil Nadu & Anr. (RESPONDENTS)

CIVIL APPEAL NO. 5731 OF 2009
(2JB, S. RAVINDRA BHAT and DIPANKAR DATTA JJ., delivered by DIPANKAR DATTA, J.)

Facts: The present appeals by special leave have been preferred by the appellant from orders passed by a Division Bench of the Madras High Court, wherein it dismissed the review petition of the appellants against the decision which held that the maize starch will not be entitled to the benefit of exemption and upheld the validity of the Circular dated 8th October, 1998 which classified maize starch under Entry No. 61 subject to a 4% tax.

Issue: Whether maize starch will be exempt from taxation or to be subject to a 4% tax rate?

Arguments on behalf of counsel for appellant: Mr. K.K. Mani

It is submitted that the High Court failed to consider the correct entry pertaining to the assessment year 1998-99 as Exemption Entry No. 8 clearly outlined an exemption in favour of products of millet, including maize. The decision in Reliance Trading Company, Kerala vs. State of Kerala was referred to in support of the contention that an exemption will only arise when there is a liability to pay tax. Exemption Entry No. 8, therefore, is nothing but a re-enactment of the language of the Exemption Notification in the form of a statutory provision and reflects the intention of the Legislature to exempt maize starch from tax. It was also contended that the High Court made an erroneous assessment in both the writ petition and the review application by considering Entry No. 44 of Part B of Schedule III for the assessment year 1998-1999 which, as per the Court, excludes maize. However, the aforesaid entry was introduced only in 2002 vide an amendment, wherein the reference to maize was explicitly removed. Having regard to the clarifications issued in favour of exemption, the Circular dated 8th October, 1998 requiring the recovery of taxes retrospectively is a mere change of opinion without cogent reason and, therefore, is liable to be quashed and the aforesaid Circular cannot have a retrospective effect and will take effect only from the date of issue, i.e., on and from 8th October, 1998.

Arguments on behalf of counsel for respondents: Mr. C. Kranthi Kumar

It is submitted that in the Assessment Year 1998-1999, maize starch will fall under Taxation Entry No. 61, categorized as ‘sago and starch of any kind’, and will be subject to a 4% tax rate. The term ‘starch of any kind’, encompasses all types of starch, including maize starch. The decision in Associated Cement Company Ltd. vs. Commissioner of Customs was relied on to support the contention that the words ‘any kind’ ought to be interpreted in an inclusive manner to include all kinds of goods within its ambit. Secondly, the Exemption Notification gained statutory support starting only from 1st April, 1994, through an amendment that introduced Exemption Entry No. 8 exempting products of millets. However, Taxation Entry ‘sago and starch of any kind’ had already existed since 1993 and hence, was the applicable entry. Thirdly, Exemption Entry No. 8 modified the exempting provision as provided under the Notification and omitted the word ‘like’ which restricted the benefit of the exemption only to the items specified therein. Fourthly, Exemption Entry No. 8 envisages maize which is a raw product and not maize starch which is a processed product. Finally, the legislative intent is clearly discernible from the 2002 amendment, wherein Exemption Entry No. 8 was repositioned as Entry No. 44, and the specific reference to ‘maize’ was eliminated, thereby denying exemption to all the maize products.

Held: The court dismissed the present appeal on the grounds of being of no merit. It was held that, “Law is well settled that if in any statutory rule or statutory notification two expressions are used – one in general words and the other in special terms – under the rules of interpretation, it has to be understood that the special terms were not meant to be included in the general expression; alternatively, it can be said that where a statute contains both a general provision as well as a specific provision, the latter must prevail. What emerges from the above discussion is that Taxation Entry No.61 is relatable to ‘starch’ of any kind whereas Exemption Entry No.8 relates to products of ‘millet’. 26. Looking at the specific (Taxation Entry No.61) in contradistinction with the general (Exemption Entry No.8), there can be no manner of doubt that maize starch would be covered by the taxation entry and not by the exemption entry.”