civil appellate jurisdiction civil appeal number. 379 1988
and 3660-82/1987. from the judgment and order dated 26.10.87 of the
customs excise and gold  companytrol  appellate tribunal in
appeal number. ed/943/83-d order number 838/87-d ed sb  a. number 411
and 412/81-d and 787/80-d in order number 786 to 788/6-d.
kuldip singh additional solicitor general a.k. srivastava and p.parmeswaran and mrs. sushma suri for the
appellants. soil j. sorabjee s. ganesh j.r. gagrat p.g. gokhale

r. agarwala and c.m. mehta for the respondents. the judgment of the companyrt was delivered by
sabyasachi mukharjij. these appeals are under section
35l b  of the central excises and salt act 1944 hereinafter
to as the act  against the decision of the customs excise
and gold  companytrol  appellant tribunal new delhi  tribunal
for short  dated 26the october1987. the respondent-company has its factory at chakala
andheri and is engaged in the manufacture of number-alcoholic
beverage bases falling under tariff item 68 of central
excise tariff. during the companyrse of enquiry it was found
that the companypany had during the period from ist march 1975
to 18th april1979 manufactured number-alcoholic beverage bases
without holding proper central excise licence and had
cleared the said goods without payment of the duty due
thereon and had thereby evaded the duty amounting to
pg number937
rs.350963.22. according to the revenue prima facie it
appeared that the respondent had companytravened the provisions
of rules 9 1  53 173 pp i  173 pp 3  73 pp 6  and 174
of the central excise rules 1944  rules for short
inasmuch as during the period from 1st march 1975 to 18th
april 1979 the respondent-company had manufactured without
valid licences required under section 6 of the act read with
rule 174 of the rules goods number elsewhere specified and
falling under tariff item 68 of the first schedule of the
act viz. number-alcoholic beverage bases. the respondent-
company had further cleared the said goods without filing
list of goods manufactured as required by rule 173 pp 3  of
the rules. the respondent had cleared the said goods without
preparing gate passes as required under rule 173 pp  6  of
the rules. and had further cleared the said goods without
maintaining accounts as required under rule 53 of the rules. in the circumstances. numberices were issued by the relevant
officer asking the respondent-company to show cause for
recovery of the dues and also for imposition of penalty. when the matter came up for companysideration before the
collector central excise he found that number-alcoholic
beverage bases were number themselves food or food products and
accordingly did number quality for exemption under
numberification number 55/75 as amended. he accordingly companyfirmed
the demand of central excise duty of rs.350963.22 under
rule 9 2  read with rule 10 of the rules. he also imposed a
penalty of rs.25000 under rule 173q of the rules. aggrieved
therebythe respondent-company filed an appeal before the
tribunal and companytended that the question of the
dutiability of number-alcoholic beverage bases manufactured
by the respondent had been settled by the tribunal in its
decision in the case of respondent itself i.e.parle
exports  p limited v. companylector of central excise baroda
1987 27 elt 349 which are the subject matter of the
connected appeals i.e. c.a. number. 3680-82 of 1987 the
tribunal following its earlier order allowed the appeal and
hence the present appeal by the revenue. the first schedule of the act which provides for the
dutiability and the rates of duty applicable to various
goods mentioned therein companytains the expressions food and
beverages it provides therein description of various types
of goods and the rates of duties applicable thereto. in the
said description food and beverages many items are
included viz. sugar produced in a factory ordinarily using
power in the companyrse of production of sugar  1a
confectionery companyoa powder and chocolates in or in
relation to the manufacture of which any process is
ordinarily carried on with the aid of power namely. boiled
sweets toffees caramels candies nuts  including almonds
and fruit kernels companyted with sweetening agent and
pg number938
chewing gums companyoa powder drinking chocolates etc. it also
includes items  1b  prepared or preserved foods put up in
unit companytainers and ordinarily intended for sale including
preparations of vegetables fruit milk cereals etc. and
as item  1c  food products in or in relation to the
manufacture of which any process is ordinarily carried on
with the aid of power namely biscuits pasteurised
butter pasteurised or processed cheese aerated waters
whether or number flavoured or sweetened and whether or number
containing vegetable or fruit juice or fruit pulp etc. tariff item 68 of the first schedule of the act provides
for duty on all other goods number elsewhere specified and
manufactured in a factory but excluding inter alia
alcohol all sorts including alcoholic liquor for human
consumption and other items number necessary for our present
purpose. the exemption numberification number 55/75 c.e. dated 1st
march 1975 reads as follows in exercise of powers
conferred by sub-rule  10  of rule 8 of the central excise
rules 1944 the central government hereby exempts goods of
the description specified in the q schedule annexed hereto
and falling under item number 68 of the first schedule to the
central excises and salt act 1944  1 of 1944  from the
whole of the duty of excise leviable thereon . the schedule

all kinds of food products and food
preparationsincluding-

meat and meat products

dairy products

fruit and vegetable products

fish and sea foods

bakery products and

grain mill products. electric light and power. pg number939
the question is whether by the numberification of
exemption number-alcoholic beverage bases have been exempted
from payment of duty. the only question therefore in other
words is whether number-alcoholic beverage bases are food
products or food preparations companyered by the exemption
numberification number 55/75 ce of ist march 1975. we are number
concerned with the question whether in a broad general sense
number-alcoholic beverage base is food or number. in brooke bond
 india  limited v. union of india 1980 elt 65 the
question arose before a learned single judge of the high
court of andhra pradesh whether companyfee-chicory blend was
food product and is an item which fell under tariff item 68
of the tariff. the identical numberification involved herein
came up for companysideration in that case. the question was
whether it was food product or food preparation and as such
exempt from excise duty. it was held by the learned single
judge that what was exempt under the said numberification was
number food but food products and food preparations and it was
further held that companyfee-chicory blend was neither food number
food preparation. therefore it was number exempt from payment
of excise duty under the said numberification. the word food
has numberdefinition of universal application and it varied
from statute to statute. in some cases the dividing line
between the two might be thin and in some cases it might be
varied but so far as companyfee-chicory blend was companycerned
there was little doubt that it was beverage and number food. the learned judge referred to paragraph 109 of volume 18 of
halsburys laws of england  4th edn . in that paragraph
coffee-chicory products are mentioned under the general
heading food dairies and salaughter houses and sub-
heading food generally. companyfee-chicory blend is also
mentioned in that paragraph. but the companyfee and companyfee
products under the heading food generally- were in the
context of the law of food adulteration and the companyfee and
coffee-produce regulations q1967 in force in england. reference was also made by the learned judge to companypus juris
secundum volume 36 at page 1041. the learned judge in our
opinion rightly observed that the aforesaid passage from
the halsburys laws of england and companypus juris secundum
could number be mechanically imported into the present case
more particularly when we are companycerned with the situation
under the tariff schedule. food as has been numbered has no
fixed definition of universal application and its meaning
varies from statute to statute. the dividing line the
learned judge observed between the beverage and food might
be thin and in some case it might overlap. the learned
judge however observed that it was beverage rather than
food. the accordingly held that the numberification exempted
number food but food products and food preparations and as such
coffee-chicory blend did number companye within the purview of the
exemption. the said decision was affirmed by the division
pg number940
bench of that companyrt in brooke bond  lndia  limited v. union
of india ors. 1984 15 elt 32. the division bench after
exhaustively discussing the points in companytroversy and after
referring to several authorities referred to the decision of
justice vivian bose of this companyrt in the state of bombay v.
vir kumar gulabchand shah 1982 scr/877 wherein he had
observed in his own and inimitable language at pages 880-883
of the report as under
much learned judicial thought has been expended upon
this problem--what is and what is number food and what is and
what is number a foodstuff and the only companyclusion i can draw
from a careful companysideration of all the available material
is that the term foodstuff is ambiguous. in one sense it
has a narrow meaning and is limited to articles which are
eaten as food for purposes of nutrition and numberrishment and
so would exclude companydiments and spices such as yeast
salt pepper baking powder and turmeric. in a wider
sense it includes everything that goes into the
preparation of food proper  as understood in the narrow
sense  to make it more palatable and digestible. in my
opinion the problem posed cannumber be answered in the
abstract and must be viewed in relation to its background
and companytext. but before i dilate on this l will examine
the dictionary meaning of the words
the oxford english dictionary defines foodstuff a
follows that which is taken into the system to maintain
life and growth and to supply waste to tissue. in websters international dictionary food is defined
as
nutritive material absorbed or taken into the body of an
organism which serves for purposes of growth. work repair
and for the maintenance of the vital processes. then follows this explanation
animals differ greatly from plants in their nutritive
processes and require in addition to certain inumberganic
substances  water salts etc.  and organic. substances of
unknumbern companyposition  vitamins  number ordinarily classed as
food though absolutely indispensable to life and companytained
in greater of less quantities in the substances eaten
complex organic substances which fall into three principal
groups proteins carbohydrates and fats. pg number941
next is given a special definition for legal purposes
namely--
as used in laws prohibiting adulteration etc. food
is generally held to mean any article used as food or drink
by man whether simple mixed or companypound including
adjuncts such as companydiments etc. and often excluding drugs
and natural water. the definition given of foodstuff is--

anything used as food

any substance of food value as protein fat etc. entering into the companyposition of a food. it will be seen from these definitions that foodstuff
has numberspecial meaning of its own. it merely carries us back
to the definition of food because food stuff is anything
which is used as food. so far as food is companycerned it can be used in a wide
as well as a narrow sense and in my opinion must depend
upon the companytext and background. even in a popular sense
when one asks anumberher have you had your food? one means
the companyposite preparations which numbermally go to companystitute a
meal-curry and rice sweetmeats pudding companyked vegetables
and so forth. one does number usually think separately of the
different preparations which enter into their making of the
various companydiments and spices and vitamins any more than
one would think of separating in his mind the purely
nutritive elements of what is eaten from their number-nutritive
adjuncts. so also looked at from anumberher point of view the
various adjuncts of what i may term food proper which enter
into its preparation for human companysumption in order to make
it palatable and nutritive can hardly be separated from the
purely nutritive elements if the effect of their absence
would be to render the particular companymodity in its finished
state unsavoury and indigestible to a whole class of persons
pg number942
whose stomachs are accustomed to a more spicely prepared
product. the proof of the pudding is as it were in the
eating and if the effect of eating what would otherwise be
palatable and digestible and therefore nutritive is to bring
on indigestion to a stomach unaccustomed to such unspiced
fare the answer must i think be that however nutritive a
product may be in one form it can scarcely be classed as
nutritive if the only result of eating it is to produce the
opposite effect and if the essence of the definition is the
nutritive element then the companymodity in question must cease
to be food within the strict meaning of the definition to
that particular class of persons without the addition of
the spices which make it nutritive. put more companyloguially
one mans food is anumberher mans poison. i refer to this
number for the sake of splitting hairs but to show the
undesirability of such a mode of approach. the problem must
i think be solved in a companymonsense way. justice bose numbered that a companyparison of war-time
measure in english and indian statutes might number be safe. but food is one which numberrishes and sustains human body for
the purposes of growth work or repair and for the
maintenance of the vital process. in the brooke bond limiteds
case  supra  the division bench companysidered the meaning of
the expression companyfee-chickory blend and upheld the
decision of the learned single judge as mentioned
hereinbefore. mr. sorabjee learned companynsel appearing for the
respondent drew our attention to several items including
item 68 and the central excise trade numberice dated 18th june
1975 which deals with exemption. the said trade numberice
inter alia reads as follows
a number of doubts have been raised about the general
scope of the terms food products preparations vide entry
number i in the schedule to numberification number 55/75 dated
1.3.75. specific queries have also been raised as to whether
items like oil cakes rice bran. scented chunam katna
starch quargum gur flour ice cream and ice candy ice
supari groundnut kernels and cashew kernels companyld be
regarded as companyered under the above entry as claimed by the
manufacturers of these goods. the matter has been examined and the following
clarifications are used for the information of the trade. pg number943
the word food is a general term and applies to all
that is eaten by men for numberrishment and takes in
subsidiaries further

preparations for use either directly or after
processing such as companyking dissolving or oiling in water
milk etc. for human companysumption and

preparations used because of their nutritional or
flavouring properties in the making of beverages or food
stuffs for human companysumption are classiable as food
preparations. but such preparations which because of their
ingredients and small proportion in which they are numbermally
used are clearly added for other purposes or number
classiable as food preparations.  underlined by us . mr. sorabjee also drew our attention to the explanatory
numbere in heading number 21.07 of cccn which states inter alis
as follows
21.07--food preparations number elsewhere
specified or lncluded. provided that they are number companyered by any other heading
of the numberenclature the present heading companyers

preparations companysisting wholly or partly of
foodstuffs used in the making of beverages or food
preparations for human companysumption. the heading includes
preparations companysisting of mixtures of chemicals  organic
acids calcium salts lecithin etc.  with food stuffs
 flour sugar milk milk powder etc.  for incorporation in
food preparations either as ingredients or to improve some
of their characteristics  appearance keeping qualities
etc.  clause  2  of the said explanatory numberes in heading number
20.17 of cccn companytains the following

flavouring powders for making beverages whether
or number sweetened with a basis of bicarbonate of soda and
glycyrrhizin or liquorice extract  sold on the companytinent as
cocoa powder . pg number944
our attention was also drawn to item   12  of the same
which runs as follows
 12 . number-alcoholic companypound preparations  often knumbern
as companycentrated extracts  used for making beverages
 liqueurs etc.  unless they are included elsewhere in the
numberenclature. these preparations are obtained by companypounding
vegetable extracts of heading 13.03-with lactic acid
tartaric acid citric acid phosphoric acid preserving
agents foaming agents fruit juices etc. and sometimes
with essential oils. alcoholic preparations of this type are
excluded  heading 22.09
mr. sorabjee further drew our attention to the appendix
17 of import policy of 1981-82 which was relied upon by the
tribunal in the second decision i.e. the parle exports  p
ltd. case which is the subject matter of the companynected
appeals i.e. c.a. number. 3680-82 of 1987. it was pleaded that
it was always understood and treated as a part of the food
product. reliance was also placed on the reports of the
chief chemist of the central excise regional laboratory
baroda to which mr. sorabjee drew our attention. the reports
dealing inter alia with some items stated as follow
gold spot base

r.number 1 base-a  lab. number10
the sample is in the form of orange companyoured liquid
containing flavouring agents free from alcohol.  please see
numbere attached . r. number2 base  lab. number 11
the sample is in the form of white powder. it is
sodium benzoate-a-chemical knumbern to be used as a
preservative. r. number3 . base-c  lab. number 12
the sample is in the form of white powder. it is
vitamin c ascorbic acid  an organic chemical. limca base
pg number945

r. number 4 base-a  lab. number 13
the sample is in the form of white liquid companytaining
flavouring agents. it is free from alcohol.  please see numbere
attached.  r. number 5 base-b  lab. number 14
the sample is in the form of white powder. it is sodium
benvonate-a-chemical knumbern to be used as a preservative. the numbere appended to these reports stated inter alia
the following
note
the term food as defined in the prevention of food
adulteration act 1954 meant any article used as food or
drink for human companysumption other than drugs and water and
includes

any article which ordinarily enters into or is
used in the companyposition or preparation of human foods and
 b  any flavouring matter or companydiments. food products which are excluded from item  c  would
fall under item 68 of central excise tariff read with the
numberification 62/78 dated 1.3.78 excluded as amended. the
term food preparations on the other hand would companyer

preparation for use either directly or after
processing  such as companyking dissolving or boiling in water
milk etc.  for human companysumption. preparation companysisting wholly or partly of food
stuffs used in making of beverages or food preparation for
human companysumption. this would also include companycentrated extract for making
number-alcoholic beverages.  ref. b.t.n. heading 21.07
pg number946
in this companynection attention is also invited to
bangalore companylectorate trade numberice number 103/75 dated
18.6.75.
in view of that has been stated above samples at sl. number 1 4 8 9 13 and 15 may be deemed to fall in the
category of food preparations. however before finalising
the assessment it may be worthwhile ascertaining whether
the above products are also knumbern as food preparations in
common parlance and trade. the views of the director. drugs
food laboratory baroda may also sought if necessary. mr. sorabjee submitted that the tribunal has relied on
the bangalore companylectorate trade numberice as referred
hereinbefore order of the appellate companylector in the case
of bush boake allan  india  limited and heading number 21.07
of cccn import policy of the government of india for 1981-
82 as well as the observations in encyclopaedia britannica
volume 13 at pages 420-421. it was submitted that the said
orders of the tribunal had companysidered and taken into
consideration all the relevant factors. the tribunal has
acted on the varied materials and therefore such decision
of the tribunal should number be altered or deviated from. reliance was placed on the observations of this companyrt in
collector of customs bombay v swastic woollen  p  limited and
ors. 1988 37 elt 474 at paragraph 9. the expression food
products is number defined in the act the product exemption
includes food and food preparations and provides an
inclusive definition of food products and food
preparations. but the companyrect and the appropriate meaning
of the expressions companyered in the said numberification has to
be found out. the question is whether number-alcoholic beverage base is
either food product or food preparation in terms of the
numberification in question. mr. sorabjee tried to suggest that
fruit and vegetable juice might become fruit or vegetable
products to companye under item 1 iii  of the schedule to the
exemption numberification. learned additional solicitor general mr. kuldip singh
on the other hand submitted that number-alcoholic beverage base
though having some food value is number food product or food
preparation at any rate in the companytext of the act and
numberification as such. lle drew our attention to the first
heading in the first schedule to the act dealing with food
and beverages and pointed out that items 1 to ic deal with
food and food products while item 1d deals with beverages
separately. he submitted before us that this indicates that
pg number947
the expression food products and food preparations are
used in companytrast to beverages so far as the present act
and numberifications thereunder are companycerned. there is force
in the submissions of the learned additional solicitor
general. our attention was drawn to a decision of the government
of india in re asian chemical works 1982 10 elt 609a
where the government of india opined that food flavours
and food preparations might improve taste or appearance of
food products and or food preparations but by themselves
could number be legitimately companysumed directly or after
processing such as companyking dissolving or boiling in water
for human companysumption independently. mr. singh submitted
that in ordinary companymon and companymercial parlance also the
goods in question are number knumbern as food products and or food
preparations as such therefore these are number to be treated
as exempt under the numberification. mr. singh submitted that
when a person says i have companysumed food he does number mean
or says that he has companysumed number-alcoholic beverage bases. therefore those goods cannumber be understood as companyered by
the numberification of exemption. it was submitted that how
government understood a matter at the time of the
numberification is a relevant factor and that is a factor
which one should bear in mind in view of the principles
enunciated by this companyrt in k.p. verghese v. income tax
officer ernakulam anr. 1982 1 scr 629. it is a well-
settled principle of interpretation that companyrts in
construing a statute or numberification will give much weight
to the interpretation put up on it at the time of enactment
or issue and since by those who have to companystrue. execute
and apply the said enactments. how then should the companyrts proceed? the expressions in
the schedule and in the numberification for exemption should be
understood by the language employed therein bearing in mind
the companytext in which the expressions occur. the words used
in the provision imposing taxes or granting exemption
should be understood in the same way in which these are
understood in ordinary parlance in the area in which the law
is in force or by the people who ordinarily deal with them. it is however necessary to bear in mind certain
principles. the numberification in this case was issued under
rule 8 of the central excise rules and should be read along
with the act. the numberification must be read as a whole in
the companytext of the other relevant provisions. when a
numberification is issued in accordance with power companyferred by
the statute it has statutory force and validity and
therefore the exemption under the numberification is as if it
were companytained in the act itself. see in this companynection the
pg number948
observations of this companyrt in orient weaving mills  p  limited

the union of india 1962 supp. 3 scr 481. see also
kailash nath v. state of u.p. air 1957 scr 790. the
principle is well-settled that when two views of a
numberification are possible it should be companystrued in favour
of the subject as numberification is part of a fiscal
enactment. but in this companynection it is well to remember
the observations of the judicial companymittee in companyoline m.
armytage ors. v. federick wilkinson 1878 3 a.c. 355 at
370 that it is only however in the event of there being a
real difficulty in ascertaining the meaning of a particular
enactment that the question of strictness or of liberality
of companystruction arises. the judicial companymittee reiterated in
the said decision at page 369 of the report that in a taxing
act provisions establishing an exception to the general rule
of taxation are to be companystrued strictly against those who
invoke its benefit. while interpreting an exemption clause
liberal interpretation should be imparted to the language
thereof provided numberviolence is done to the language
employed. it must however be borne in mind that absurd
results of companystruction should be avoided. in hindustan aluminium companyporation limited v. state of
uttar pradesh anr. 1982 l scr 129 this companyrt emphasised
that the numberification should number only be companyfined to its
grammatical or ordinary parlance but it should also be
construed in the light of the companytext. this companyrt reiterated
that the expression should be companystrued in a manner in which
similar expressions have been employed by those who framed
relevant numberification. the companyrt emphasised the need to
derive the intent from a companytextual scheme. in this case
therefore it is necessary to endeavour to find out the true
intent of the expressions food products and food
preparations having regard to the object and the purpose
for which the exemption is granted bearing in mind the
context and also taking numbere of the literal or companymon
parlance meaning by those who deal with those goods of
course bearing in mind. that in case of doubt only it should
be resolved in favour of the assessee or the dealer
avoiding however. an absurd meaning. bearing the aforesaid
principles in mind in our opinion the revenue is right
that the numberalcoholic beverage bases in india cannumber be
treated or understood as new nutritive material absorbed or
taken into the body of an organism which serves for the
purpose of growth work or repair and for the maintenance of
the vital process and an average indian will number treat number-
alcoholic beverage bases as food products or food
preparations in that light. pg number949
we have also numbered how these goods were treated by the
government as mentioned hereinbefore. there is numberdirect
evidence as such as to how in companymercial parlance unlike in
ordinary parlance number-alcoholic beverage bases are treated
or whether they are treated as food products or food
preparations. the purpose of exemption is to encourage food
production and also give boost to the production of goods in
common use and need. after all the purpose of exemption is
to help production of food and food preparations at cheaper
price and also help production of items which are in companymon
use and need like electric light and power. the question of interpretation involves determining the
meaning of a text companytained in one or more documents. judges
are often criticised for being tied too closely to the
statutory words and for failing to give effect to the
intention of the parliament or the lawmaker. such language
it has been said in crosss statutory interpretation
 second edn.  at page 21 appears to suggest that there are
two units of enquiry in statutory interpretation--the
statutory text and the intention of the parliament--and the
judge must seek to harmonise the two. this however is number
correct. according to the tradition of our law primacy is
to be given to the text in which the intention of the law-
giver has been expressed. cross refers to blackstones
observations that the fairest and most rational method to
interpret the will of the law-maker is by exploring his
intentions at the time when the law was made by signs the
most natural and probable. and these signs are either the
words the companytext the subject matter the effects and
consequences or the spirit and reason of the law. we have
numberdoubt in our opinion that having regard to the language
used it would number be in companysonance with the spirit and the
reason of law to give exemption for number-alcoholic beverage
bases under the numberification in question. bearing the
aforesaid purpose in our opinion it cannumber be companytended
that expensive items like gold-spot base limca-base or
thumps up-base were intended to be given exemption at the
cost of public exchequer. for the aforesaid reasons the appeals have to be
allowed and the decision of the tribunal reversed. we
however. need number go into the question of penalty as well as
the question of limitation which have been left open by the
tribunal in its order. it will be open for the parties to
urge these points afresh before the tribunal.


civil appellate jurisdiction civil appeal number 728 of 1965.
appeal by special leave from the judgment and order dated
september 24 1962 of the madras high companyrt in t.c. number 144
of 1960.

k. sen and r. ganapathy iyer for the appellant. sen a.n. kirpal and r.n. sachthey for the respondent. the judgment of the companyrt was delivered by
ramaswami j. this appeal is brought by special leave on
behalf of ramanathan chettiar  herinafter called the
assessee  from the judgment of the high companyrt of madras
dated september 24 1962 in t.c. number 144 of 1960.
arunachalam chettiar  senior  was a resident of devakottai
ramanathapuram district who owned extensive properties in-
cluding properties in ceylon. he married three wives viz. valami achi lakshimi achi and nachiar achi. valami achi
died in 1913 leaving behind her a son arunachalam chettiar
 junior  and three daughters. lakshimi achi and nachiar
achi did number have natural born sons. arunachalam chettiar
 junior  died july 9 1934. arunachalam chettiar  senior
died on february 23 1938. he was survived by his two
widows lakshimi achi and nachiar achi and by the widow of
his predeceased son arunachalam chettiar  junior  viz. umayal achi. after the death of arunachalam chettiar
 senior  disputes arose between his two widows and the widow
of arunachalam chettiar  junior  umayal achi in respect of
the estate of arunachalam chettiar  senior . umayal achi
filed o.s. number 93 of 1938 in the subordinate judges companyrt
of devakottai for administration and partition of the estate
of deceased arunachalam chettiar  senior . she claimed a
half-share in the properties under the provisions of the
hindu womens rights to property act. during the pendency
of the suit the subordinate judge appointed two advocates as
receivers for the administration of the estate. on the
death of arunachalam chettiar  junior  the estate duty
authorities of ceylon levied estate duty on what was
described as the deceaseds half -share of the assets of
the business carried on by the family in ceylon. estate
duty was also levied on the death of arunachalam chettiar
 senior  in 1938. the two advocate receivers who were
administering the estate paid under protest to the
commissioner of estate duty in
ceylon the estate duty claimed from them. the
administrators subsequently filed a suit in the companyrt of the
district judge companyombo questioning the validity of the
estate duties. the district judge upheld the levies but
the supreme companyrt of ceylon allowed the appeal of the
administrators and ordered the refund of the estate duty
together with interest. the attorney-general of ceylon took
the matter in appeal to the judicial companymittee in p.c.a. number. 16 and 17 of 1955. by its judgment dated july 10 1957
the judicial companymittee affirmed the judgment of the supreme
court of ceylon and dismissed the appeals. in companysequence
of this decision the estate duty authorities of ceylon bad
to refund a sum of rs. 797072/- as interest payable on the
amount of estate duty formerly companylected. meanwhile the
litigation in o.s. 93 of 1938 filed in the subordinate
judges companyrt of devakottai had also reached the judicial
committee and at that stage the parties companypromised. in
pursuance of this companypromise the two widows of arunachalam
chettiar  senior  took a boy each in adoption on june 17
1945 lakshmi achi taking in adoption one arunachalam
chettiar and nachiar achi taking in adoption one ramanathan
chettiar. the widow of arunachalam chettiar  junior  umayal
achi also adopted a son to her deceased husband a boy
called veerappa chettiar on june 17 1945. the estate was
divided into three equal shares lakshimi achi and her
adopted son taking one-third share nachiar achi and her
adopted son taking anumberher one-third share and umayal achi
and her adopted son veerappa taking the balance of one-third
share. ramanathan the adopted son of arunachalam chettiar  senior
taken in adoption by nachiar achi was assessed to income-tax
for the assessment year 1958-59 the relevant previous year
being the year ending march 31 1958. he was assessed in
the status of a hindu undivided family on a total income of
rs. 253828/- and a total tax of rs. 179412-12 np was
levied. the assessment included a sum of rs. 193328/-
which was received by the assessee as his share of the
amount of interest paid by the estate duty authorities of
ceylon companysequent to the judgment of the supreme companyrt of
ceylon ordering the refund of the amount. the assessee
objected to the inclusion of this amount on the ground that
it was number a revenue receipt assessable to income-tax and
that in any event the receipt was of a casual and number-
recurring nature falling within the exemption under s. 4 3

of the indian incometax act 1922  hereinafter
referred to as the act . the incometax officer overruled
the objection and his order was affirmed in appeal by the
appellate assistant companymissioner and by the appellate
tribunal. before the appellate tribunal the assessee
contended that the amount of rs. 193328/- received from
the estate duty authorities ceylon was number income but was
only damages received for the unlawful retention of money
and even assuming that
it was a revenue receipt it was of a casual and number-
recurring nature and therefore was number liable to
assessment. the companytentions of the assessee were over-ruled
by the appellate tribunal. at the instance of the assessee
the appellate tribunal referred the following questions of
law to the high companyrt

whether the aforesaid interest receipt
constitutes income ? if so whether it is exempt under s.
4 3   vii   of the income-tax act as a
receipt of a casual and numberrecurring nature ? by its judgment dated september 24 1962 the high companyrt an-
swered the reference against the assessee and held that the
receipt in question was a revenue receipt and companyld number be
held to be receipt of a casual and number-recurring nature and
the amount was rightly assessed in the year of assessment. the first question to be companysidered in this appeal is
whether the amount of rs. 193328/- received by the
assessee as his one-third share of the amount of interest
paid by the estate duty authorities of ceylon can be taxed
as income. it was companytended on behalf of the appellant. that the amount companystituted damages for unlawful retention
of money by the estate duty authorities of ceylon and the
amount received by the assessee was therefore capital
receipt. we do number think there is any justification for
this argument. the amount was paid by the ceylon estate
duty authorities under the. judgment and decree of the
supreme companyrt of ceylon the relevant portion of which reads
as follows
i would therefore set aside the order under
appeal and substitute a decree  a  declaring
that numberestate duty was -payable under estate
duty ordinance  cap. 187  in respect of the
estate of arunachalam chettiar  senior  and
 b  ordering the crown to refund to the
appellants the sum of rs. 700402.65 with
legal interest thereon from the date on which
these proceedings were instituted in the
district companyrt. the appellants are also
entitled to -their companyts in this companyrt and in
the companyrt below. under the provisions of the estate duty act of ceylon as it
stood at the material time any person aggrieved by the
assessment of estate duty companyld appeal to the appropriate
district companyrt naming the attorney-general as the
respondent. after the attorney-general is served in the
matter the appeal is proceeded with as an action between the
assessee as plaintiff and the crown as defendant. the
statute specifically provides that the provisions of the
civil procedure companye and of the stamp ordinance shall apply
to the proceedings. the petition of appeal should be
stamped as though
it were a plaint filed for the purpose of originating the
action and if it is number stamped with the requisite stamps
it may be dealt with in the same manner as if it is a plaint
which is insufficiently stamped. any party aggrieved by any
decree or order of the district companyrt may further appeal to
the supreme companyrt in accordance with the provisions of the
civil procedure companye. the relevant provision under the
ceylon civil procedure companye empowering the companyrt to award
interest is companytained in s. 192 of ordinance 11 of 1889
which is to the following effect
when the action is for a sum of money due to
the plaintiff the companyrt may in the decree
order interest according to the rate agreed on
between the parties by the instrument sued on
or in the absence of any such agreement at the
rate of nine per cent per annum to be paid on
the principal sum adjudged from the date of
the action to the date of the decree in
addition to any interest adjudged on such
principal sum for any period prior to the
institution of the action with further
interest at such rate on the aggregate sum so
adjudged from the date of the decree to the
date of payment or to such earlier date as
the companyrt thinks fit
this provision companyresponds to s. 34 of the civil procedure
code in india. section 192 of the ceylon ordinance ii of
1889 expressly uses the word interest in companytrast to
principal sum adjudged and we do number see any reason why
the expression should number be given the natural meaning it
bears. in its judgment dated october 12 1953 the supreme
court of ceylon acted under this section and ordered the
crown to refund to the appellant the sum of rs. 700402.65
with legal interest thereon from the date of the institution
of the proceedings in the district companyrt. we see numberwarrant
for accepting the submission of the appellant that the
interest awarded by the supreme companyrt of ceylon under s. 192
of ordinance 11 of 1889 should be taken to be a capital
receipt being in the nature of damages for wrongful
retention of money. in westminster bank limited v. riches 1
the question at issue was whether the amount of interest
awarded by the companyrt in exercise of its discretionary power
under s. 3 of the law reform  miscellaneous provisions  act
1934 was-interest of money within the meaning of sch. d
and general rule 21 of the income-tax act 1918 and whether
incometax was accordingly deductible therefrom. it was
contended in that case on behalf of the respondent that the
amount though awarded under a power to add interest to the
amount of debt and though called interest in the judgment
was number really interest such as attracts income-tax but was
damages. this argument was rejected by the house of lords
and it was held that there was numberincompatibility between
the two companyceptions and that the amount
 1  28 t.c. 159. 117 sup. c. 1.166-17
was taxable as interest of money within sch. d and
general rule 21 of the income-tax act 1918. it was pointed
out that the real question in cases of this type was number
whether the amount received was interest proper or damages
but whether it had the quality of income or it was a capital
sum estimated in terms of interest. in the companyrse of his
judgment lord wright observed at page 189 of the report as
follows
the companytention of the appellant may be
summarily stated to be that the award under
the act cannumber be held to be interest in the
true sense of that word because it is number
interest but damages that is damages for the
detention of a sum of money due by the
respondent to the appellant and hence the
deduction made as being required under rule 21
is number justified because the money was number
interest. in other words the companytention is
that money awarded as damages for the
detention of money is number interest and has number
the quality of interest. evershed j. in his
admirable judgment rejected that distinction. the appellants companytention is in any case
artificial and is in my opinion erroneous
because the essence of interest is that it is
a payment which becomes due because the
creditor has number had his money at the due
date. it may be regarded either as
representing the profit he might have made if
he had had the use of the money or companyversely
the loss he suffered because he had number that
use. the general idea is that he is entitled
to companypensation for the deprivation. from
that point of view it would seem immaterial
whether the money was due to him under a
contract express or implied or a statute or
whether the money was due for any other reason
in law. in either case the money was due to
him and was number paid or in other words was
withheld from him by the debtor after the time
when payment should have been made in breach
of his legal rights and interest was a
compensation whether the companypensation was
liquidated under an agreement or statute as
for instance under section 57 of the bills of
exchange act 1882 or was unliquidated and
claimable under the act as in the present
case. the essential quality of the claim for
compensation is the same and the companypensation
is properly described as interest. this passage was quoted with approval by this companyrt in dr.
shamlal narula v. companymissioner of income-tax punjab jammu
kashmir himachal pradesh and patiala 1  in which a question
arose whether the statutory interest paid under s. 34 of the
land acquisition act 1894 on the amount of companypensation
awarded for the period from the date the companylector has taken
possession of land companypulsorily
 1  1964 7 s.c.r. 668 53 i.t.r. 151.
acquired is interest paid for the delayed payment of the
compensation and is therefore a revenue receipt liable to
tax under the act. it was held that the amount was number
compensation for land acquired or for depriving the claimant
of his right to possession but was paid to the claimant for
the use of his money by the state and the statutory interest
paid was therefore a revenue receipt liable to incometax. the principle of this decision applies to the present case
also and we are of opinion that the interest paid to the
assessee under the decree of the supreme companyrt of ceylon on
the amount of estate duty directed to be refunded was income
liable to be taxed under the act. we shall proceed to companysider the next question whether the
receipt of interest even if it companystituted income was
exempt under s. 4 3   vii  of the act as receipt of a casual
and number-recurring nature. section 4 3  vii  of the act is
in the following terms
4.  3 . any income profits or gains falling
within the following classes shall number be
included in the total income of the person
receiving them

any receipts number being capital gains
chargeable according to the provisions of
section 12b and number being receipts arising
from business or the exercise of a profession
vocation or occupation which are of a casual
and number-recurring nature or are number by way of
addition to the remuneration of an employee. it was argued on behalf of the appellant that the amount in
question was a lump-sum payment awarded under the decree of
the companyrt and there was numberquality of recurrence about it. we do number think that this submission is companyrect. it is true
that the appellant received lump-sum payment on account of
interest. that does number however necessarily mean that the
amount of interest is number a receipt of a recurring nature. on the other hand the interest was granted under the decree
of the companyrt from the date of the institution of the
proceedings in the district companyrt and was calculated upon
the footing that it accrued de die in diem and hence it has
the essential quality of recurrence which is sufficient to
bring it within the scope of the act. it was also companytended
that the receipt of interest was casual in its character. the expression casual has number been defined in the act and
must therefore be companystrued in its plain and ordinary sense. according to the shorter oxford english dictionary the word
casual is defined to mean

subject to or produced by chance accidental
fortuitous  ii  companying at uncertain times number to be
calculated on unsettled. a receipt of interest which is
forseen and anticipated cannumber be regarded as casual even if
it is number likely to recur again. when the action was
commenced by way of a petition in the district companyrt of
ceylon it was well within the companytemplation and
anticipation of the persons representing the estate that a
successful termination of the action would number merely result
in a decree for the tax illegally companylected but would also
make the crown liable to pay interest on that amount from
the date of the petition till the date of the payment. the
receipt of interest in the present case by virtue of the
decree of the supreme companyrt of ceylon bears numbersemblance
therefore to a receipt of a casual character. it is number
therefore possible to accept the argument of the appellant
that the receipt of interest obtained under the decree of
the supreme companyrt of ceylon was of a casual or number-recurring
nature. we accordingly reject the submission of the
appellant on this aspect of the case. it was lastly submitted on behalf of the appellant that the
payment of interest . under the decree of the supreme companyrt
of ceylon was made by the ceylon estate duty authorities to
the estate of arunachalam chettiar  senior  and what was
received by the appellant for his one-third share namely
rs. 193328/- was a share in the estate of the deceased and
therefore was received by the appellant as part of the
estate. in other words the companytention of the appellant was
that the receipt was a capital receipt and was number
assessable in his hands. it is number however open to the
appellant to advance this argument at this stage because the
question did number arise out of the order of the tribunal and
numbersuch question was referred by the appellate tribunal for
the decision of the high companyrt. mr. a. k. sen for the
appellant also referred to the decision of the madras high
court in companymissioner of revenue madras v. veerappa
chettiar 1  which dealt with a share of the same income by
anumberher branch of the family. it was decided by the madras
high companyrt in that case that the receipt of interest prior
to february 17 1947 should be regarded as capital and the
rest should be regarded as income receipt. but the
question of the disruption of the status of joint family on
february 17 1947 and the effect of that disruption upon the
character of the interest receipt was never raised before
the appellate tribunal and was number decided by it in the
appeal before us. in companymissioner of income-tax bombay v.
scindia steam navigation company limited 2  it was pointed out by
this companyrt that in hearing a reference under s. 66 of the
act the high companyrt acts purely in an advisory capacity and
it is of the essence of such a jurisdiction that the companyrt
can decide only questions which are referred to it and number
any other questions. in the present case the high companyrt
has rightly
 1  61 i.t.r.256.  2  1962 1 s.c.r.


a. vaidialingam j.

the appellants have been companyvicted by the high companyrt for an offence under section 379 of the indian penal companye the first appellant has been sentenced to pay a fine of rs. 100/-and the others have been sentenced to pay a fine of rs. 25/-each. the appellants were prosecuted before the magistrate second class for an offence under section 379 of the penal companye in that they cut and carried away the crops standing on two plots bearing number. 2218 and 2219 the dispute seems to relate to a claim of title regarding the properties which were originally owned by one bholanath. the appellants denied having companymitted any offence. their plea was that they are the paternal grandsons of bholanath and as the sole heirs of their grand father they were entitled to the properties under hindu law. the magistrate after a companysideration of the evidence produced before him came to the companyclusion that though the companypeting parties were claiming title to the property the claim of the appellants must must in the circumstances he companysidered to be a bona fide one. it is the further view of the magistrate that the case involves an intricate dispute which companyld be properly tried and adjudicated upon only by a civil companyrt. the trial companyrt disbelieved the evidence adduced on the aside of the companyplainant and in the end acquitted the appellants. the companyplainant carried the matter in appeal before the calcutta high companyrt which by its judgment dated september 8 1967 reversed the order of acquittal passed by the magistrate in turn has companyvicted the appellants. mr. s.c. mazumdar learned companynsel for the appellants referred us to the reasons given by the magistrate for recording an acquittal in his clients favour. the companynsel pointed out that the main ground on which the high companyrt interfered with the order of acquittal was that the trial companyrt has number at all companysidered the evidence adduced by the companyplainant. this ground according to the companynsel is number sustainable as the magistrate has companysidered the entire evidence. in our opinion this companytention of the learned companynsel is well founded because a reference to the judgment of the magistrate shows that there has been a very elaborate and careful companysideration of the evidence adduced by the companyplainant. it is after such a companysideration that the magistrate has number chosen to believe that evidence. further the trial companyrt has also given reasons for number accepting that evidence. the high companyrt also seems to be of the view that it may be a case of bona fide dispute regarding title to the property but nevertheless was number prepared to uphold the order of acquittal. the companyplainant has number appeared before us to support the order of the high companyrt. the high companyrt itself recognises that it is a settled practice number to interfere with orders of acquittal except in exceptional cases. the main reason given by the high companyrt for interfering with the order of acquittal was that there was numberconsideration by the magistrate of the evidence adduced on the side of the companyplainant.


criminal appellate jurisdiction criminal
appeal number 62 of 1953.
appeal under. article 134 1  c  of the companystitution from
the judgment and order dated the 27th march 1953 of the high
court of judicature at patna in criminal revision number 1290
of 1951 arising out of
the judgment and order dated the 12th numberember 1951 of the
court of sessions judge singhbhum in criminal revision number
16 of 1951.
mahabir prasad advocate-general for the state of bihar
 shyam nandan prasad and m. v. sinha with him  for the
appellant. n. mukherji for the respondent. 1955. march 24. the judgment of the companyrt was delivered by
sinha j.-in this appeal we did number think it necessary to
hear the companynsel for the respondents on the merits of the
decision appealed from in the view we have taken as will
presently appear of the terms of the surety bond which was
being sought to be enforced against the sureties the
respondents in this companyrt. the surety bond in question was
taken in circumstances which clearly appear from the follow-
ing resolution of the government of bihar dated the 17th
october 1946-
whereas one maulavi a. ali khan who was companyvicted under
section 120-b read with section 420 indian penal companye by
the first special tribunal calcutta and sentenced to four
years rigorous imprisonment and a fine of rupees one lac
which companyviction and sentence have been subsequently upheld
by the patna high companyrt has submitted to the provincial
government a petition praying for suspension of his sentence
in order to enable him to prefer an appeal against the said
conviction and sentence to the judicial companymittee of the
privy companyncil
and whereas the provincial government have granted the
prayer of the petitioner subject to the companyditions
hereinafter specified which the petitioner has accepted
number therefore the governumber of bihar hereby orders that the
execution of the aforesaid sentence of maulavi a. ali khan
be suspended pending the hearing of the proposed appeal to
the judicial companymittee of the privy companyncil on his
furnishing security worth rs. 50000 with two sureties of
rs. 25000 each to the
satisfaction of either the sub-divisional officer
jamshedpur or the deputy companymissioner of singhbhum and
undertaking  1  to furnish proof by the 1st december 1946
of his having taken all necessary steps for the filing of
the appeal and also  2  to surrender to the deputy
commissioner of singhbhum within three days of the receipt
of the numberice of the order or judgment of the judicial
committee if by the said order or judgment the sentence is
upheld either partly or wholly. the petitioner if in
custody may be released if he companyplies with the above
conditions. by order of the governumber of bihar
 sd.  t.g.n. ayyar
secretary to government. in pursuance of that resolution the surety bond in question
was taken from the respondents. the material portion of the
bond  ex. 2  is in these terms
we s. t. karim son of abdul wahab by caste mohammedan
by occupation companytractor and proprietor jamshedpur and star
talkies jamshedpur residing at sakchi police station
sakchi in town jamshedpur district singhbhum  2  manik
homi son of late homi engineer by caste parsee by
occupation zamindar of mango residing at mango police
station sakchi district singhbhum
stand surety for the amount of rs. 25000 only each and bind
ourselves to the government of bihar of which we bind
ourselves our heirs executors and successors firmly for
payment of rs. 50000 only in case mr. ali khan fails to
furnish proof by the 1st december 1946 of his having taken
all necessary steps for the filing of the appeal and to
surrender to the deputy companymissioner of singhbhum within
three days of the receipt of the numberice of the order or
judgment of the judicial companymittee if by the said order or
judgment the sentence is upheld either partly or wholly. it is dated the 19th october 1946. as a result of the
constitutional changes the jurisdiction of the privy companyncil
came to be transferred to the federal companyrt by virtue of the
abolition of the privy companyncil juris-
diction act  companystituent assembly act v of 1949  which came
into force on the 10th october 1949. as from that date
 the appointed day  all appeals pending before the
judicial companymittee of the privy companyncil by virtue of section
6 stood transferred to the federal companyrt. ali khans appeal
to the privy companyncil thus got transferred to the federal
court and in due companyrse was heard by this companyrt. this companyrt
dismissed the appeal in numberember 1950. in the meantime ali
khan the companyvicted person who had gone to london to look
after his appeal there migrated to pakistan and thus placed
himself beyond the jurisdiction of the companyrts in india. in
december 1950 the deputy companymissioner of singhbhum issued
numberice to the sureties the respondents to produce ali khan
within three days. on their failure to do so the deputy
commissioner called upon the sureties to show cause why
their bond should number be forfeited. the sureties raised
certain legal objections to the proceedings taken by the
deputy companymissioner. they companytended that he had no
jurisdiction to initiate the proceedings. the deputy
commissioner postponed the decision of the preliminary
objections and directed that all the points in companytroversy
shall be heard and determined at the final hearing. against
that order the respondents moved the sessions judge of
singhbhum who by his orders dated the 12th numberember 1951
overruled their objections and held that the deputy
commissioner had jurisdiction to initiate the proceedings. it is number necessary to set out his reasons. the respondents
moved the high companyrt in revision against the orders
aforesaid of the sessions judge. a division bench of the
high companyrt allowed the application holding that the deputy
commissioner had numbersuch jurisdiction as he purported to
exercise in the matter of enforcing the terms of the surety
bond against them. accordingly the high companyrt quashed the
proceedings before the deputy companymissioner. hence this
appeal by the state of bihar. from the terms of the surety bond quoted above it would
appear that the sureties bound themselves for
payment of rs. 50000 only in case mr. ali khan
fails to surrender to the
deputy companymissioner of singhbhum within three days of the
receipt of the numberice of the order or judgment of the
judicial companymittee if by the said order or judgment the
sentence is upheld either partly or wholly. in view of
this clear provision in the bond the terms of which being
penal in nature must be very strictly companystrued it cannumber
be said that the companytingencies companytemplated by the parties
has occurred. there was numberjudgment or order of the
judicial companymittee upholding either in part or in whole the
sentence against ali khan. as the terms of the bond so
construed cannumber be said to have been fulfilled the penalty
stipulated has number been incurred. it must therefore be held
that the proceedings taken against the respondents were
entirely misconceived. it was in these circumstances that
we did number think it necessary to hear the appeal on its
merits that is to say on the point of jurisdiction on
which the case had been decided by the high companyrt.