PETITIONER: <ORG> Vs. RESPONDENT: UNION OF INDIA DATE OF JUDGMENT08/10/1987 BENCH: SHETTY, K.J. (J) BENCH: SHETTY, K.J. (J) MUKHARJI, SABYASACHI (J) CITATION: 1987 AIR 2414 1988 SCR (1) 383 1988 SCC (1) 86 JT 1987 (4) 35 1987 SCALE (2)715 CITATOR INFO : R 1988 SC 354 (11) RF 1992 SC1075 (3) RF 1992 SC2169 (28) ACT: Refusal of permission by <ORG> to charge concessional station to station freight rate for the carriage of Naptha for a fertilizer factory complaint under section 41(1)(a) and (b) of the <ORG> Act , 1980, against <ORG>: The appellant, a company, set up a fertilizer factory at Kota in Rajasthan. The factory manufactures urea for which the main raw material is Naptha, which has to be transported from the Koyali Refinery of <ORG>. Before the actual setting up of the factory, the appellant requested <ORG> by letter for a concessional frieght rate for the carriage of Naptha to the factory. <ORG> by its letter EX 5 dated November 5, 1966, quoted station to station rate equal to 85-B (special) as against the rate equivalent to classification 62.5-B requested for by the appellant, and also stated that as the special rate was being quoted ahead of the actual setting up of the factory, the frieght rate would be reviewed when the traffic actually began to move. When the factory was almost ready for operation, the appellant again requested <ORG> by letter for charging the rate under classification 62-5-B instead of 85- B (special) quoted by it. <ORG> refused to oblige. The appellant wrote another letter to the <ORG>, requesting it to permit charging the rate equivalent to 85-B (special) pending its final decision, as the movement of naptha was to commence from June/July, 1968. <ORG> refused to grant that request also, saying that it could reconsider the question if on the basis of the facts and figures of the cost of production vis-a-vis the sale price of the fertilizers, it could be established that the production of the fertilisers at Kota was uneconomical unless freight concession on the movement of naptha was granted. The appellant filed a complaint under section 41(1)(a) and (b) of the <ORG> Act , 1890, before <ORG>. The Tri- 384 bunal decided against the appellant. Aggrieved, the appellant appealed to this <ORG> by special leave for relief against the order and judgment of the <ORG>. Dismissing the appeal, the <ORG> ^ HELD: Three questions arise for consideration of the <ORG>: (1) whether <ORG> was bound to allow the concessional rate offered to the appellant, that is, 85-B (special) quoted in its letter Ex. C 5 dt. November 5, 1966, to the appellant, (2) whether the rate charged for the carriage of the naptha between the stations concerned was unreasonable, and (3) whether the <ORG> were showing undue preference or advantage in respect of other traffic in contravention of the provisions of section 28 of the <ORG> Act. [389E-F ] Dealing with the third question first, which relates to the contravention of section 28 of the <ORG> Act, the scope of the section was considered by this <ORG> in <CITATION> ,  SCR 236 at 241, and <ORG>, considering the material on record in the light of the decision of the <ORG> in case, held that there was no evidence produced by the appellant to justify any grievance under section 28 . This conclusions is perfectly justified. [390E; 391C] The second question above-said relates to the rate charged by <ORG> being per se unreasonable. Even assuming, as argued by appellant's counsel, that the <ORG> are earning some surplus income, that by itself is no ground to hold that the frieght charged is per se unreasonable. In the case of commodities of national needs such as foodgrains, crude oil etc., it may be necessary for the <ORG> to charge below the operation cost, and to offset the loss, the <ORG> may charge higher freight for some other classified commodities. The cost of operation cannot by itself be the basis for judging the reasonableness of the rate charged. Counsel for the appellant also argued that crude oil and naptha were comparable commodities for the purpose of carriage but there was disparity in the rates charged in respect of the two, naptha being charged at a much higher rate. The <ORG> rejected the demand of the appellant for parity in frieghts, and the <ORG> cannot interfere with the finding to the <ORG> in this appeal under Article 136 of the Constitution. On merits also, there is no justification to demand that neptha should take the same freight rate as that of the crude oil. [391D, F-H; 392B. D-E] 385 Lastly, the first question: It relates to the correctness of the view taken by the <ORG> on doctrine of promissory estoppel consequent upon the letter Ex. 5 of <ORG>. The <ORG> rejected this claim of the appellant. Considering the conclusion of the <ORG> on this question, it appears the <ORG> has not correctly understood the doctrine of promissory estoppel: The party asserting the estoppel must have relied and acted upon the assurance given to him. It means the party has changed or altered the position by relying on the assurance or representation. The alteration of position by the party is the only indispensable requirement of the doctrine. It is not necessary to prove further any damage, detriment or prejudice to the party asserting the estoppel. "A promise intended to be binding, intended to be acted upon, and in fact acted upon, is binding", said Lord <NAME>, sitting as a trial judge in <ORG> v. <ORG>,  K.B. 130. If the promisee has acted upon the promise, the promisor is precluded from receding from his promise. The concept of detriment as it is understood now is whether it appears unjust, unreasonable or inequitable that the promisor should be allowed to resile from his assurance or representation, having regard to what the promisee has done or refrained from doing in reliance on the assurance or representation. It is, however quite fundamental that the doctrine of promissory estoppel cannot be used to compel the public bodies or The <ORG> to carry out the representation or promise which is contrary to law or which is outside their authority or power. Secondly, the estoppel stems from equitable doctrine. it requires that he who seeks equity must do equity. The doctrine, therefore, cannot also be invoked if it is found to be inequitable or unjust in its enforcement. or the purpose of invoking the doctrine, it is not necessary for the appellant to show that the insurance contained in Ex. (I S was mainly responsible for the establishing of the factory at Kota. There may be several representation to one party from different authorities in regard to different matters. Or there may be several representations from the same party in regard to different matters; In the instant case, there was one representation by the Rajasthan government to supply power to the appellant's factory at concessional rate. There is another representation from the same government to exempt the appellant from payment of tax for a certain period. If those representations have been relied upon by the appellant, the <ORG> would compel the authorities to adhere to their representations. What is required is the fact that the appellant was induced to act on the representations. The assurance given by <ORG> in the letter Ex. S was not clear and unqualified. it was subject to review to be undertaken 386 when the appellant started moving the raw material. Accordingly, A appellant was put to notice that it has to approach <ORG> again when it would review the whole matter. From the tenor of Ex. 5, the railways are entitled to say that they have reviewed the matter and found no justification for a concessional frieght rate for naptha; that does not amount to resiling from the earlier assurance. No question of estoppel arises in favour of the appellant in the case out of the representation made in Ex 5. The <ORG> agreed with the conclusion of the <ORG> but not for all the reasons stated. <CITATION> ,  SCR 234 at 241; <ORG> v. <ORG>,  KB 130; <ORG> v. <ORG>,  3 All ER 905 at 909; Article "Recent Development in the Doctrine of Consideration"-Modern Law Review, Vol. 15, P. 5, Grundt v. <ORG>,  59 CLR 641; <CITATION> ,  2 SCR 641 at 695=  2 SCC 409; <CITATION> ,  4 SCC 369=  Supp. 3 SCR 123 and Halsbury's Laws of England-4th Edn., Vol. 16, P. 1071, para 1595, referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 223 of 1974.

From the Judgment and order dated 13.7.1973 of <ORG>, Madras in Complaint No. 2 of 1969.

<NAME>, <NAME>, <NAME> and <NAME> for the Appellant.

<NAME>, Ms. <NAME>.<NAME>, Mrs. <NAME>, <NAME> and <NAME> for the Respondent.

The Judgment of the Court was delivered by <NAME>, J. This appeal, with Special Leave, is against the order and judgment dated July 13, 1973, of <ORG> Madras, in complaint filed by the appellant under Section 41(1) of the Indian Railways Act No. 9 of 1890. The background facts are these:

The appellant is a <ORG>. It has set up a fertilizer factory at Kota in Rajasthan. It is said to be an industrially backward area. The factory manufactures Urea for which the main raw material is Naptha. Naptha has to be transported from Koyali Refinery of <ORG>. The nearest railway station is Bajuva near Baroda. The nearest railway station serving <ORG>'s factory is Dadhevi in Rajasthan. The distance between Bajuva and Dadhevi is about 520 kms. For transportation, the Naptha has been classified by the <ORG> under Clause 110-B of the tariff.

Before the actual setting up of the factory, the Company, by its letter dated September 5, 1966 requested <ORG> for a concessional frieght rate for the carriage of <ORG>. It requested <ORG> for fixed Station to Station rate equivalent to classification 62.5-B. That would have meant reduction of about 43% in the normal tariff under clause 110-B. In that letter it was pointed out that if such concessional rate was not fixed, the Company would be put to disadvantageous position as against the other factories located at ports or near the refineries. <ORG> by its letter Ex. C5 dated November 5, 1966 agreed to quote station to station rate equal to 85-B (Special). In the said letter it was also stated that as the special rate was being quoted ahead of the actual setting up of the factory the freight rate need to be reviewed when the traffic actually begins to move.

When the factory was almost ready for operation the company wrote a letter dated June 5, 1967 requesting <ORG> for charging the rate under classification 62.5-B instead of 85-B(Special). <ORG> did not accede to the request. On May 31, 1968 the company wrote another letter informing <ORG> that the movement of Naptha would commence from June/July 1968 and pending decision of the company's earlier request, <ORG> may permit charging the rate equivalent to 85-B (Special) already offered in terms of the letter Ex. 5. <ORG> refused to grant that request also. <ORG>, however, informed the <ORG> in the letter dated July 11, 1968 as follows:

"However, if on the basis of facts and figures your cost of production (date to be furnished for at least one complete year) vis-a-vis the sale price of fertilizers, it can be established that production of fertilizers at Kota is uneconomical, until freight concession on the movement of Naptha from Bajuva/Trombay to Kota is granted, <ORG> would be prepared to reconsider the question."

on April 19, 1969, the company filed a complaint under Section 41(1)(a) and (b) of the Railways Act , 1890 before <ORG> Madras. The principal contentions raised in the complaint are as follows:

"(i) <ORG> was estopped and/or precluded from going back on the assurance Of quoting station to station concessional rate 85-B when the company had in vested a large amount of capital in setting up the factory at a place away from the refinery or port (ii) The rate charges by the <ORG> for the carriage of Naptha between two stations-Bajuva and Dadhevi was unreasonable under Section 41(1)(b) of the Indian <ORG>s Act, 1980, and (iii) The <ORG>s were showing undue preference or advantage in respect of other traffic and contravening the provisions of Section 28 of the Indian <ORG> Act, 1890."

With these and other contentions, the company requested the tribunal to declare the rate charged for the carriage of <ORG> as unreasonable and to fix a reasonable rate for such carriage.

<ORG> in its reply maintained that while quoting the concessional rate equal to 85-B (Special) it was made clear to the company that the rate was subject to review when the traffic starts moving and that concessional rate was provisional in character. The company did not construct the factory relying solely on the concessional rate offered by <ORG>. There was no scope for any such understanding since the <ORG> reserved its right to determine the correct rate when the traffic started moving. It was later found that the chemicals have been advisedly given low class rate with a view to encourage fertilizer industry and no further concession was necessary to the company. It was further stated that the question of any undue prejudice of undue favour to any party does not arise when charging the respective class rates for specified commodities.

On these pleadings the <ORG> considered among others, the following issues:

1. Whether freight charges, now charged, for the carriage of a <ORG>'s traffic in Neptha from Bajuva to Dadhevi station are unreasonable under Section 41(1) of the Indian Railways Act, 1890?

2. Whether the <ORG> are contravening Section 28 of the Indian <ORG> Act in charging the respective class rates for commodities naptha, chemical manures, divisions A & B, Urea and Gypsum?

3. Whether the <ORG> are estopped by the doctrine of promissory estoppel in view of the assurance given in the letter Ex. C?

The <ORG> determined all these questions against the company. It was held that there was no unreasonableness in the rate charged for the carriage of <ORG> from Bajuva to Dadhevi. The <ORG> are not contravening Section 28 of the <ORG> Act. The rate charged has not caused any prejudice to the company. On the question of promissory estoppel, the <ORG> held that the assurance given by <ORG> in the letter Ex. C5 was not mainly responsible for setting up of fertilizer factory at Kota. It was further held that even if <ORG> was an assurance to the Company the withdrawal of that assurance has not adversely affected the interests of the company.

Upon the submissions made by learned counsel on both sides, the following questions arise for our consideration:

(1) Whether <ORG> was bound to give the concessional rate offered to the company under Ex. C5 dated November 5, 1966?

(2) Whether the rate charged for the carriage of Naptha between Bajuva and Dadhevi is unreasonable? (3) Whether the <ORG> are showing undue preference or advantage in respect of other traffic and contravening the provisions of Section 28 of the <ORG> Act?

We may conveniently take up third question first for consideration.

The relevant provisions of the Railways Act , 1890, which have a material bearing on the question are these: Section 41 provides for filing complaints against <ORG>. The Section provides as follows, so far as it is material:

41(I) Any complaint that a railway administration

(a) is contravening the provisions of Section 28 or

(b) is charging for the carriage of any commodity between two stations a rate which is unreasonable, or

(c) x x x x x may be made to the <ORG> and the <ORG> shall hear and decide any such complaint in accordance with the provisions of this chapter.

Section 28 provides:

"28. A Railway administration shall not make or give any undue or unreasonable preference or advantage to, or in favour of, any particular person or railway administration, or any particular description of traffic, in any respect what soever, or subject any particular person or railway administration or any particular description of traffic to any undue or unreasonable prejudice or disadvantage in any respect whatsoever. "

The third question formulated by us relates, to the contravention of Section 28 of the Railways Act. The scope of this Section has been considered by this Court in <ORG> v <ORG> and another, [ 1959] SCR 236 at 241. There it was observed that a party who complains against the railway administration that the provisions of Section 28 have been contravened must establish that there has been preference between himself and his goods on the one hand and his competitor and his goods on the other. <NAME>, J. (as he then was) observed:

" Section 28 is obviously based on the principle that the power derived from the monopoly of railway carriage must be used in a fair and just manner in respect of all persons and all descriptions of traffic passing over the railway area. In other words, equal charges should normally be levied against persons or goods of the same or similar kinds pas sing over the same or similar area of the railway lines and under the same or similar circumstances; but this rule does not mean that, if the railway administration charges un-

equal rates in respect of the same or similar class of goods travelling over the same or similar areas, the inequality of rates necessarily attract the provisions of S. 28 . All cases of unequal rates cannot necessarily be treated as cases of preference because the very concept of preference postulates competition between the person of traffic receiving preference and the person or traffic suffering prejudice in consequence. It is only as between competitors in the same trade that a complaint of preference can be made by one in reference to the other."

In the light of these principles, the <ORG> considering the material on record held that there is no evidence produced by the Company to justify any grievance under Section 28 . We see no reason to disagree with this conclusion. It is, in our opinion, perfectly justified. In fact Mr. <NAME> learned counsel for the appellant also did not seriously dispute the correctness of that finding recorded by the <ORG>.

We may now turn to the second question.Mr. <NAME> urged that the rate charged by <ORG> is per se unreasonable. Here again the onus to prove the alleged unreasonableness of the freight rests on the company. It is for the company to establish that the rate charged by <ORG> for the carriage of Naptha is unreasonable. Of course, this onus could be discharged by relying upon the material produced by the <ORG>. Mr. <NAME>, therefore, relied upon a statement Ex. C46 in support of his case. Ex. C46 is a statement of surplus "working cost" in respect of carriage of Naptha from Bajuva to Dadhevi. It is, in our opinion, not necessary to analyse the statement. Even assuming that the railways are earning some surplus income after deducting the operation cost that by itself is no ground to hold that the freight charged is per se unreasonable. It must be born in mind that the railways are run as commercial undertaking and at the same time it being an instrumentality of the <ORG>, should serve the national interest as well. There is however, no obligation on the railways to pass on the extra amount realised by the carriage of goods to customers. Nor it is necessary to share the profit with the commuters. As Mr. <NAME> learned counsel for the <ORG> said that in the case of commodities of national needs such a foodgrains, crude oil etc., it may be necessary for the <ORG> to charge below the operation cost. To off set such a loss the <ORG> may charge higher freight for certain other classified commodities. Therefore, it seems to us, that the cost of operation cannot by itself be the basis for judging the reasonableness of the rate changed.

It was next urged by Mr. <NAME> that the crude oil and <ORG> are considered as comparable commodities for the purpose of carriage. The crude oil carries the rate equal to class 85-B(old), 85(new) while <ORG> carries rate 110- B(old), 105-B(new). In terms of amounts it works out at Rs.59.45 for crude oil as against Rs.73.13 for <ORG>. The counsel urged that there is no justification shown for this wide disparity in the first place. Secondly, the freight rate of crude oil was the rate offered to the company under Ex. CS and the denial of that rate without any good reason is arbitrary. This argument though attractive does not carry conviction if one analyses the evidence on record. Crude oil has been clubbed with Glycerine, fruit juices and syrups, fibres, flax etc. <ORG> has been clubbed with Aviation Spirit, <ORG>, <ORG>eum, Ether and solvent oil. From the evidence produced by the <ORG> <ORG> has been classified as a dangerous commodity with the flash point below 24.4øC spontaneously. The crude oil has no such dangerous characteristics. It is also on record that <ORG> requires special type of tank wagons and the <ORG> have to take special precautions for transportation. These and other relevant factors have been taken into account by the <ORG> for rejecting the demand of the company for parity in freights. This Court cannot, interfere with such a finding in this appeal under Article 136 of the Constitution. On the merits also, we see no justification to demand that <ORG> should take the same freight rate as that of crude oil.

We may now revert to the first question. It relates to the correctness of the view taken by the <ORG> on the doctrine of promissory estoppel resulting by the letter Ex. CS of <ORG>. The <ORG> has rejected this claim of the company by summarising its conclusion in the following terms:

"We must, therefore, hold that the assurance contained in . Ext. CS was not mainly responsible for the setting up of <ORG> at Kota. 15.3. Even if it was held that Ex. CS was a definite encouragement to the complainant to set up the Kota factory, there is no evidence on record to show that the withdrawal of the concession by Ex. 12 has adversely affected the complainant. We will show in the (i succeeding paragraphs that the complainant has suffered no material injury by virtue of the withdrawal of the concessional rate and the charging of the normal rate. It is well settled that the principle of estoppel cannot be applied unless the person pleading estoppel can show that he has been prejudiced by the conduct of the party on whose assurance l l he has acted."

Here <ORG> apparently, appears to have gone off the track. The doctrine of promissory estoppel has not been correctly understood by the <ORG>. It is true, that is the formative period, it was generally said that the doctrine of promissory estoppel cannot be invoked by the promisee unless he has suffered 'detriment' or 'prejudice'. It was often said simply, that the party asserting the estoppel must have been induced to act to his detriment. But this has now been explained in so many decisions all over. All that is now required is that the party asserting the estoppel must have acted upon the assurance given to him. Must have relied upon the representation made to him. It means, the party has changed or altered the position by relying on the assurance or the representation. The,alteration of position by the party is the only indispensable requirement of the doctrine. It is not necessary to prove further any damage, detriment or prejudice to the party asserting the estoppel. The <ORG>, however, would compel the opposite party to adhere to the representation acted upon or abstained from acting. The entire doctrine proceeds on the promise that it is reliance based and nothing more.

This principle would be clear if we study the cases in which the doctrine has been applied even since it was burst out into sudden blaze in 1946. Lord <NAME> in <ORG> v <ORG>, 11947] K.B. 130 sitting as a trial judge, asserted:

"A promise intended to be binding, intended to be acted upon, and in fact acted upon is binding .......

The history of the High Trees principle is too well known to bear repetition. It will be enough to make the following points. The promisor is bound because he led the promisee to commit himself to change the position. If the promisee has acted upon the promise, the promisor is. precluded from receding his promise. No further detriment to the promisee upon his temporal interests need be established. This position has been made clear by Lord <NAME> himself in his article "Recent Developments in the Doctrine of Consideration" <ORG>, Vol. 15 at p.

"A man should keep his word. All the more so when the promise is not a bare promise but is made with the intention that the other party should act upon it. Just a contract is different from tort and from estoppel, so also in the sphere now under discussion promises may give rise to a different equity from other conduct.

The difference may lie in the necessity of showing "detriment" where one party deliberately promises to waive, modify or discharge his strict legal rights, intending the other party to act on the faith of promise, and the other party actually does act on it, then it is contrary, not only to equity but also to good faith, to allow the promisor to go back on his promise. It should not be necessary for the other party to show that he acted to his detriment in reliance on the promise. It should be sufficient that he acted on it.

The principle governing this branch of the subject cannot be better put then in the wolds of a great Australian jurist, <NAME>, J. in <NAME> v <ORG>, [1938] 59 CLR 641. There he said:

"It is often said simply that the party asserting the estoppel must have been induced to act to his detriment. Although substantially such a statement is correct and leads to no misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That purpose is to avoid or pre vent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who altered his situation upon the faith of it cannot complain. His complaint is that when afterwards the other party makes a different state of affairs the basis of an assertion of right against him then, if it is allowed, his own original change of position will operate as a detriment. His action or inaction must be such that if the assumption upon which he proceeded were shown to be wrong, and an inconsistent state of affairs were accepted as the foundation of the rights and duties of himself and the opposite party, the consequence would be to make his original act or failure to act a source of prejudice."

This passage was referred to, with approval, by Lord <NAME> in Central Newbury Car Auction Ltd v Unity Finance Ltd, [1956] 3 All E.R. 905 at 909. The said passage has also been quoted, with approval, by <NAME>, J. (as he then was) in <ORG> v state of U.P. & Ors.,[ 1979]2 SCR 641 at p. 695= 1979(2)SCC 409. The learned Judge then said:

"We do not think that in order to invoke the doctrine of promissory estoppel it is necessary for the promisee to show that he suffered detriment as a result of acting in reliance on the promise. But we may make it clear that if by detriment we mean injustice to the promisee which could result if the promisor were to recede from his promise then detriment would certainly come in as a necessary ingredient. The detriment in such a case is not some prejudice suffered by the promisee by acting on the promise, but the prejudice which would be caused to the promisee, if the promisor were allowed to go back on the promise. "

The view taken in <ORG> case (supra) has been reiterated in <CITATION> ,, [ 1985 ] 4 SCC 369 = [ 1985 ] Supp 3 SCR 123 .

The concept of detriment as we know understand is whether it appears unjust, unreasonable or inequitable that the promisor should be allowed to resile from his assurance or representation, having regard to what the promisee has done or refrained from doing in reliance on the assurance or representation.

It is, however, quite fundamental that the doctrine of promissory estoppel, cannot be used to compel the public bodies or the <ORG> to carry out the representation or promise which is contrary to law or which is outside their authority or power. Secondly, the estoppel stems from equitable doctrine. It, therefore, requires that he who seeks equity must do equity. The doctrine, therefore, cannot, also be invoked if it is found to be inequitable or unjust in its enforcement.

We may also state that for the purpose of invoking the doctrine, it is not necessary for the company to show that the assurance contained in Ex.C5 was mainly responsible for establishing the factory at Kota. There may be several representations to one party from different authorities in regard to different matters. Or, there may be several representations from the same party in regard to different matters. As in the instant case, there was one representation by <ORG> to supply power to the company at concessional rate. There was another representation from the same Govern-

<NAME>

ment to exempt the company from payment of tax for certain period. There may be other representations from the same or some other authorities. If those representations have been relied upon by the company, the <ORG> would compel those parties to adhere to their respective representations. It is immaterial whether each of the representations was wholly responsible or partly responsible for locating the factory at <ORG>. It is sufficient if the company was induced to act on that representation.

The last and final aspect of the matter to which attention should be drawn is that for the purpose of finding whether an estoppel arises in favour of the person acting on the representation, it is necessary to look into the whole of the representation made. It is also necessary to state that the representation must be clear and unambiguous and not tentative or uncertain. In this context we may usefully refer to the following passage from Halsbury's Laws of England, Halsbury's Laws of England 4th Edn. Vol. 16 p. 1071 para 1595.

"1595. Representation must be unambiguous To found an estoppel a representation must be clear and unambiguous, not necessarily susceptible of only one interpretation, but such as will reasonably be understood by the person to whom it is made in the sense contended for, and for this purpose the whole of the representation must be looked at.

This is merely an application of the old maxim applicable to all estoppels, that they "must be certain to every intent The question now is whether the assurance given by <ORG> in the letter Ex.C5 was clear and unqualified. But unfortunately, it is not so. It was subject to review to be undertaken when the company starts moving the raw material. Ex. C5 reads:-

New Delhi I, Dated S Nov., 1966 Dear Sir, Sub: Integrated Fertilizer-PVC project at Kota, <ORG> of Naptha.

Ref: Your letter No. SFC/Gen-72 dated 5.9.1966 I am directed to state that <ORG> agree to quote a special rate equal o class 85-B (Special) CC: K for transport of Naptha in train loads from Bombay or Koyali to Kota, for manufacture of fertilizers. The proposed special rate will apply at owner's risk.

Since the special rate is being quoted ahead of the actual setting up of the factory the rate may need to be reviewed when the traffic actually begins to move. The Railway may accordingly be approached before the traffic actually starts moving.

Yours faithfully, Sd/- R.L. Sharma for <ORG>"

What does this letter mean? The first part of the letter offering the concessional rate equal to class 85-B (Special) has been completely watered down in the second part of the letter. It has been expressly stated that the rate may need be reviewed when the traffic actually begins to move. The company was put to notice that it has to again approach <ORG>. The Railway authorities now states that they have reviewed the whole matter and found no justification to offer a concessional freight rate for Naptha, since fertilizers are deliberately given a low classification in the tariff. From the tenor of Ex. S the <ORG> are entitled to state so, and it does not amount to resiling from the earlier assurance. No question of estoppel arises in favour of appellant out of the representation made in Ex. CS.

We, therefore, agree with the conclusion of the <ORG> but not for all the reasons stated.

In the result the appeal fails and is dismissed. In the circumstances. however, we make no order as to costs.

S.L. Appeal dismissed.


ORDER <NAME>, J.

1. One of us, sitting singly, having referred the matter to a Larger Bench, we are required to deal with and decide the controversy indicated below with reference to the question of law framed for the consideration of <ORG>.

2. During pendency of proceeding in this <ORG>, the revisionist, <NAME>, died and his legal representatives have been brought on record. The question raised for decision is, whether <ORG>, Mungavali, has rightly levied, property tax for three houses, as folios, on the owner, late <NAME>, for the year 1977-78, by order passed on 25-12-1980:

S. No. Ward No. House No. Annual Letting Property Tax Value 1. 1 9-A Rs. 846/- Rs. 50.80 2. 2 26 Rs. 289/- Rs. 17.35 3. 2 7 Rs. 1980/- Rs. 118/-

3. An appeal, as provided under M. P. Municipalities Act, 1961, for short the 'Act', was taken challenging the levy. That was heard and decided on 10-2-1981 by Civil Judge, Class II, <NAME>. In the appeal, it was contended that as per section 127A(2)(b) of the Act, no property tax for <ORG> of Ward No. 2 and <ORG> of Ward No. 1 of <NAME> Municipality was payable as annual letting value of each of the houses was below Rs. 1,800/-. The contention was rejected and that is reagitated in this revision.

4. We propose to extract relevant portions of the provisions cited:

"127A. Imposition of property tax. - (1) Notwithstanding anything contained in this Chapter, as and from the financial year 1976-77, there shall be charged, levied and paid for each financial year a tax on the lands or buildings or both situate in a municipality other than Class IV municipality at the rate specified in the table below:

TABLE (i) where the annual letting 6 percentum of value exceeds Rs. 1,800 but does the annual letting not exceed Rs. 6000 value. (Clauses (ii) to (v) not extracted) (2) The property tax levied under sub-section (1) shall not be leviable in respect of the following properties, namely:- (b) biuildings and lands the annual letting value of which does not exceed eighteen hundred rupees:

Provided that if any such building or land is in the ownership of a person who owns any other building or land in the same municipality, the annual letting value of such building or land shall for the purpose of this clause, be deemed to be the aggregate annual letting value of all buildings - or lands owned by him in the municipality;........"

Counsel has placed reliance on three <ORG> decisions of this Court but, those, in our view, do not support the contention pressed. The main decision indeed is in <NAME>'s case, 1977 MPLJ Note 25 = 1977 JLJ 712 which, according to us, on the other hand, contains observations negating the contention pressed before us by Shri <NAME>. Indeed, in that case, the question agitated was a different one. Grievance of a different nature had to be considered in that case, albeit founded on a provision similar to that contained in the proviso of section 127A(2)(b), aforequoted. In that case, the only contention raised and indeed rejected was that for the purpose of determining the rate at which tax could be charged on house property by <ORG>, the basis will be the total amount of the annual letting value of all houses of the same owner in that Municipality and that the rate of tax so determined will be applicable to each of the houses. It was not the contention raised or the question decided in that case if any of the houses of the same owner was to be exempted from levy of property tax because the annual letting value of any of the houses was within the exemption limit contemplated. Be it mentioned in this connection that clause (c) of section 6 of the M. P. Nagariya Sthawar Sampatti Kar Adhiniyam, 1964, as also the proviso are in pari materia with that of clause (b) of section 127A(2) of the Act and its proviso.

5. At para 7 of the report in Nihalkaran (supra), it was observed, "while assessing the tax in regard to each unit of property the rate shall have to be fixed on the basis of the annual letting value of that property and not the total annual letting value of all the properties standing in the name of one person". The short-noted decision in <NAME>'s case, 1979 JLJ SN 40 does not refer to Nihalkaran (supra) because the decision was rendered earlier, on 22-11-1976. However, as in Nihalkaran, the Bench deciding <NAME>, relied on an earlier decision of this Court in Om Prakash, 1973 MPLJ 918 = 1973 JLJ 967 and also another decision. In that case also, it was held that annual letting value of each of the houses had to be assessed separately and the four buildings owned by the petitioner had to be treated as four separate units of assessment. Reliance by <NAME> on this Court's another Bench decision in <CITATION> ., 1983 MPLJ 235 = 1983 JLJ 439 would also not benefit the revisionist. A different question was raised in that case about the different modes of determination of annual letting value, but it was still held that in so far as rate of tax is concerned, each building had to be treated as a separate unit.

6. At this stage, we may profitably refer to the question framed for our decision. That is as follows:

"In case of a "owner", owning more than one building and/or land, whether the Proviso to sub-section (2)(b) of section 127-A shall have overriding effect to the exclusion of the provision enacted in sub-section (1) of section 127-A?"

The purport of the question was to test the contention of the revisionist that the owner was liable to pay tax only for House No. 7 of Ward No. 2 whose annual letting value was Rs. 1,980/- and the rate of tax that could be charged for that house could be calculated on the basis of total or aggregate of the annual letting value of the three houses owned by him because of what is stated in the Proviso. Accordingly, it has to be examined if the proviso afore-extracted of section 127A(2)(b) has to be regarded as a substantive enactment in itself, enacted in derogation of the provision contemplated under section 127A(1).

7. We have no intention to under-rate the difficulties that are often encountered in construing a proviso. However, we may refer appropriately in this connection, to the decision in S. Sundaram, AIR 1985 SC 582, wherein their Lordships summed up the different purposes which a proviso may serve in different cases. They observed that sometimes a proviso may be "so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself. But, "normally, a proviso is meant to be an exception to something within the main enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment".

8. In order to ascertain what purpose the proviso in question serves, it has to be examined as to what object clause (b) is meant to subserve. It appears to us that owners of small holdings are meant to be exempted by the <ORG> from payment of property tax contemplated under section 127A(1). If any person owned one or more units of buildings and lands whose total annual letting value did not exceed Rs. 1,800/-, he has not to pay any property tax. Because of the expressions - "buildings and lands" - used in sub-section (2), clause (b), care was taken to ensure that if any person owned more than one unit of "buildings and lands" his liability to pay property tax was not exempted with reference to the exemption limit of Rs. 1,800/- contemplated under clause (b). For the purpose of testing his entitlement to the exemption, clubbing of annual letting value of all units of "buildings and lands" owned by him in the Municipality was contemplated. It is for this reason that in the proviso, the expressions emphasised are "for the purpose of this clause" and "deemed". It is difficult, therefore, to entertain the view that the proviso overrides the liability created under the main enactment, namely, section 127A(1). The object and purpose of clause (b) as also language used in the proviso makes it clear that the proviso in question is meant to serve as an exception only to the exemption contemplated under clause (b) of section 127A(1). The scope and ambit of the exemption is cut down and controlled by the proviso. In case of a single unit (of land and/or building), with annual letting value of Rs. 1,800/- the exemption is absolute; in other cases the proviso is attracted as indicated by the emphasized words "any other", of the proviso.

9. To the definition of the term "annual letting value" in section 126, our attention is drawn by <NAME> to contend that clubbing thereof as respects several units is destructive of the main enactment and that is otherwise unconstitutional as well. We do not agree. In the preceding para we have already given reasons, on the interpretation of the object and language of clause (b) and its proviso, for taking the view that the proviso is not an independent and substantive provision and it has to be read as an exception to clause (b). However, we may look at the other provisions of the Chapter VII, captioned "Municipal Taxation", embracing sections 126, 127 and 127A etc. Those provisions make it clear that the incidence of the "Property Tax" is not shifted at any stage to entry 82 of List I of Seventh Schedule of the Constitution. At no stage and under no provision, not even of the proviso, "income" of owner of any land and building in the Municipality is taxed; it is his status of "owner" of any one or more unit of "lands and buildings" in the Municipality that provides nexus not for the said entry 82 but for entry 49 of List II of the same Schedule. As held in <NAME>, AIR 1984 SC 762, the power to make a law with respect to a tax includes a power to make provisions in the relevant statute with respect to all matters ancillary and incidental to the levy, assessment, collection and recovery of tax.

10. The term "annual letting value" is defined to mean, really and actually, as per clause (iii) and the proviso, of section 126, the annual rent for the land and/or building for which the same "might reasonably be expected to be let out from year to year" (see, in this connection, <NAME>, AIR 1985 SC 339). There need not be actual receipt of rent or "income" by the owner from such property. According to section 127(1)(1), <ORG> may impose "a tax payable by the owners of houses, buildings or lands situated within the limits of the Municipality with reference to annual letting value of the house, building or land called property tax." The rate at which the tax can be charged, levied and collected is indicated in the Table appended to section 127A(1) of which the graduated scale provides for rates ranging from 6 percent to 20 percent of annual letting value of which the corresponding figures given are from Rs. 6,000/- to Rs. 24,000/- and more. There is no doubt that the Act envisages "annual letting value" as the single important factor for determining the mode and measure of taxation of all lands and buildings in the Municipality. The proviso expressly manifests its "deeming" object in respect of that factor, in relation to only clause (b) of section 127A(2), namely, the exemption contemplated thereunder. The deeming object touches "annual letting value"; and not the "owner". But, the legal fiction of the proviso must be given full effect to subserve its object and purpose of controlling the benefit conferred on the "owner" under clause (b), following established canons of interpretations. (See <ORG> v. <ORG>, AIR 1983 SC 72; <CITATION> , AIR 1985 SC 870).

11. For all the foregoing reasons, we answer in the negative the question framed for decision of this Larger Bench. We hold that the general liability of an owner, owning more than one building and/or lands in the Municipality in terms of sub-section (1) of section 127 A is not affected in any manner by the proviso to sub-section (2)(b) of section 127A. As earlier indicated, sub-section (2)(b) creates absolute exemption only in respect of owner of a single unit of which annual letting value is Rs. 1,800/- and in other cases recourse can be legally and validly taken to the proviso for determining liability of an owner of more than one unit in respect of property tax payable for the several units owned by him. Let it also be made clear that even when other units are found taxable because of aggregate of annual letting value exceeding Rs. 1,800/-, the rate of tax for each unit shall be as contemplated under the Table annexed to sub-section (1) of section 127A and in the matter of determining of rate applicable to the several units, the proviso has no role at all.

12. Although this matter would have gone in usual course for formal disposal before <ORG>, it is considered unnecessary to observe that formality because one of us (Dr. <NAME>, J.) had made the reference. On merit, therefore, this revision is finally disposed of because the contention that was raised by revisionist's counsel and reagitated before us has been found to be meritless and rejected. The impugned order passed in appeal by the learned Civil Judge upholding the assessment on houses abovereferred by <ORG>, Mungavali is maintained.

13. In the result, the revision fails and is dismissed. However, in facts and circumstances of the case, we make no order as to costs.


PETITIONER: <NAME> Vs. RESPONDENT: THE STATE OF KERALA DATE OF JUDGMENT: 02/04/1957 BENCH: BHAGWATI, NATWARLAL H. BENCH: BHAGWATI, NATWARLAL H. JAGANNADHADAS, B. IMAM, SYED JAFFER MENON, P. GOVINDA KAPUR, J.L. CITATION: 1957 AIR 657 1957 SCR 837 ACT: Sales Tax-Assessment--Gross and net turnover--Purchase of copra--Sale of oil both inside and outside the <ORG>- Deductions- -Assessable turnover-Constitution of India, Art. 286-- Travancore-Cochin General Sales Tax Act, 1125 (Act XI of 1125 M.E.), SS. 2 (j) (k), 3, 26--Travancore-Cochin General Sales Tax Rules, 1950, rr. 7 (k), 20 (2). HEADNOTE: The business of the appellant consisted in the purchase of copra, manufacture of cocoanut oil and cake therefrom and sale of oil and cake to parties inside the <ORG> of Travancore-Cochin and sale of oil to parties outside the <ORG>. Before the coming into force of the Constitution of India, under the provisions of the Travancore-Cochin General Sales Tax Act, 1125, and the rules made thereunder, for the purposes of assessment to sales tax, the appellant wag entitled to include in his gross turnover the total value of the oil sold by him whether inside the <ORG> or outside the <ORG> and to deduct therefrom the whole of the value of the copra purchased by him. Subsequently, in 1951, the Act was amended by the addition of s. 26 which, inter alia, provided: "Notwithstanding anything contained in this Act...... a tax on the sale or purchase of any goods shall not, after the 31st day of March, 1951, be imposed where such sale or purchase takes place in the course of inter- ,<ORG> trade......... For the year 1951-1952, the Sales Tax Officer assessed the appellant to sales tax on a net assessable turnover by taking the value of the whole of the copra purchased by him, adding thereto the respective values of the oil and the cake sold inside the <ORG> and deducting only the value of the copra corresponding to the oil sold inside the <ORG>. It was contended for the appellant that in the calculation of the net turnover he was entitled to include the total value of the oil sold by him, both inside and outside the <ORG>, and deduct therefrom the total value of the copra purchased by him, and further that, under the overriding provision of the Act under S. 26, he was entitled to have the value of the oil sold outside the <ORG> deducted. Held, that the calculation made by the Sales Tax Officer of the net turnover was correct. The non-obstante provision contained in S. 26 of the Act has the effect of taking transactions relating to inter-<ORG> trade out of the purview of the Act and they are excluded in the calculation 108 838 of the gross turnover as well as the net turnover on which sales tax can be assessed. <CITATION> , (1953) S.C.R. 1, relied on. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 232 of 1955.

Appeal under Article 132 (1) of the Constitution of India from the Judgment and Order dated November 24, 1954, of the former <ORG> in Original Petition No. 53 of 1954.

<NAME> and <NAME>, for the appellant.

<NAME> and <NAME>, for the respondent.

1957. April 2. The Judgment of the Court was delivered by BHAGWATI J.-This appeal with a certificate of fitness under Art. 132 (1) of the Constitution is directed against the order of <ORG> dismissing the Original Petition No. 53 of 1954 filed by the appellant under Art. 226 for quashing the order of the Sales Tax Officer, 2nd Circle, Quilon, assessing him to sales tax on a net assessable turnover of Rs. 7,54,144-8-4 for the year 1951-52 (1st April, 1951 to 31st March, 1952) and for issuing proper directions to <ORG> to assess the same according to law.

The appellant is a registered manufacturer of cocoanut oil and cake who has obtained a certificate of registration in Form VI as per sub-r. (i) of r. 20 of the Travancore- Cochin General Sales Tax Rules, 1950. The business of the appellant for the purposes of this appeal consisted in the' purchase of copra, manufacture of cocoanut oil and cake and sale of the same to parties inside the <ORG> of Travancore- Cochin and sale of the oil to parties outside the <ORG>. In the year 1951-52, the appellant purchased copra of the value of Rs. 7,16,048-1-4 and after manufacturing oil therefrom in his oil mills he sold the oil partly in the <ORG> and partly outside the <ORG> and the cake entirely within the <ORG>., The total value of the oil sold was Rs. 6,76,719-0-11 out of which the sales outside the <ORG> were of the value of Rs. 3,67,816-10-1 and the value of the cake sold in the <ORG> was Rs. 67,155-155. The total gross turnover of the appellant was thus Rs. 14,59,923-1-8 and he claimed to deduct therefrom the whole of the purchase price of the copra under r. 7 (1) (k) read with r. 20. The net turnover according to him was therefore only Rs. 7,43,875-0-4 and he claimed to deduct out of this a further sum of Rs. 3,67,816- 10-1 being the sale price of oil in inter-<ORG> transactions which could not be taxed under Art. 286 of the Constitution, thus showing a net assessable turnover of only Rs. 3,76 058-6-3.

The Sales Tax Officer, 2nd Circle, Quilon, however fixed the net assessable turnover of the appellant at Rs. 7,54,144-8-4. He took the purchase value of the copra at Rs. 7,16,048-1-4 but added thereto Rs. 3,08,902-6-10 and Rs. 67,155-15-5 being the respective values of the oil and the cake sold inside the State, excluding the sale price of inter-State sales of oil, namely, Rs. 3,67,816-10-1, from such computation. Having thus excluded the sale price of inter-State sales of oil, he deducted only the value of the copra corresponding to the oil sold inside the State namely, Rs. 3,35,216-0-0, as against the sum of Rs.7,16,048-1-4 deducted by the appellant. He added a sum of Rs. 3,385-0-3 being the price of gum sold by the appellant and deducted a further sum of Rs. 6,130-15-6 being the sales tax collected by him. He thus arrived at the net assessable turnover of Rs. 7,54,144-8-4 and assessed the appellant for sales tax on the same.

The appellant preferred an appeal to the Assistant Sales Tax Commissioner (S.T.A. No. 1480 of 1953-54) who dismissed the same by his order dated May 10, 1954. A further petition to the Government for redress met with the same fate and the appellant thereupon filed the petition in <ORG>. <NAME> being O.P. No. 53 of 1954 with the result indicated above.

The decision of this appeal turns on the construction of the relevant provisions of the Travancore-Cochin  General Sales Tax Act , 1125 (Act XI of 1125 M.E.) and the Travancore-Cochin General Sales Tax Rules, 1950, made thereunder which may be conveniently set out here. The preamble to the Act stated that it was enacted to provide for the levy of a general tax on the sale of goods in the United State of Travancore and Cochin. Section 2 (j) defined a " sale " as under:

" Sale " with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration........................ Explanation (2) Notwithstanding anything to the contrary in the Sale of Goods Act for the time being in force, the sale or purchase of any goods shall be deemed for the purpose of the Act, to have taken place in the United State wherever the contract of sale or purchase might have been made. "

Section 2 (k) defined " turnover " as " the aggregate amount for which goods are either bought by or sold by a dealer, whether for cash or for deferred payment or other valuable consideration, provided that the proceeds of the sale by a person of agricultural or horticultural produce grown by himself or grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover. "

An explanation was added to this definition' which is, however, not material for our purpose.

Section 3 was the charging section and it provided for levy of taxes on sales of goods in the terms following:- " (1) Subject to the provisions of this Act;(a) every dealer shall pay for each year a tax on his total turnover for such year; and (b) the tax shall be calculated at the rate of three pies for every Indian rupee in such turnover...............

(3) A dealer whose total turnover in any year is less than ten thousand Indian rupees shall not be liable to pay any tax for that year under sub-section_ (1) or sub-section (2).

(4) For the purposes of this section and the other provisions of this Act turnover shall be determined in accordance with such rules as may be prescribed. (5) The taxes under sub-sections (1) and (2) shall be assessed, levied, and collected in such manner and in such instalments, if any, as may be prescribed. Provided that:-

(i) in respect of the same transaction of sale, the buyer or the seller but not both, as determined by such rules as may be prescribed, shall be taxed; (ii) where a dealer has been taxed in respect of the purchase of any goods in accordance with the rules referred to in clause (i) of this proviso, he shall not be taxed again in respect of any sale of such goods effected by him."

Section 4 enacted that the provisions of the charging section shall not apply to the sale of electrical energy and any goods other than arrack and foreign liquor on which duty is or may be levied under the Travancore or Cochin Abkari Act, or the Travancore or Cochin Opium Act. Section 24 conferred upon the Government power to make rules to carry out the purposes of the Act.

The Act as originally enacted received the assent of the <ORG> on January 5, 1950. After the advent of the Constitution, however, the Act was amended by the Travancore-Cochin General Sales Tax (Amendment) Act, 1951, and s. 26 was added thereto which ran as under: ' " Notwithstanding anything contained in this Act :-

(a) a tax on the sale or purchase of goods shall not be imposed under this Act (i) where such sale or purchase takes place outside the State of Travancore-Cochin; or (ii) where such sale or purchase takes place in the course of import of the goods into, or export of the goods out of, the territory of India ; (b) a tax on the sale or purchase of any goods shall not, after the 31st day of March, 1951, be imposed where such sale or purchase takes place in the course of inter-State trade or commerce except in so far as <ORG> may by law otherwise provide. (2) The explanation to clause (1) of Art. 286 of the Constitution of India shall apply for the interpretation of sub-clause (i) of clause(a) of sub-section (1)."

The Travancore-Cochin General Sales Tax Rules, 1950, which were made by_the <ORG> under the rule-making power conferred upon it by sub-ss. 4 & 5 of s. 3 read with s. 24 of the Act laid down inter alia the provisions in regard to the determination of the total turnover of a dealer which was liable to be taxed. Rule 4 provided for the determination of the gross turnover:

" (1) Save as provided in sub-rule (2) the gross turnover of a dealer for the purposes of these rules ,shall be the amount for which goods are sold by him. (2) In the case of the undermentioned goods the gross turnover of a dealer for the purposes of these rules shall be the amount for which the goods are. bought by him.

(a) Cocoanut, copra, ground-nut and its kernel.

(b) Cashew, and its kernel.

Rule 7 provided that the tax or taxes under s. 3 or 5 or the notification,or notifications under s. 6 shall be levied on the net turnover of a dealer. It further provided that in determining the net turnover, the amounts specified in cls.

(a) to (k) were, subject to the conditions specified therein, to be deducted from the gross turnover. Clause (k) is relevant for our purpose. It specified " all amounts which a registered manufacturer of cocoanut and/or groundnut oil and cake may be entitled to deduct from his gross turnover under Rule 20 subject to the conditions specified in the rule. "

Rule 20 so far as it is material for our purpose provided:

" 1. Any dealer who manufactures cocoanut/ groundnut oil and cake from cocoanut and/or copra or groundnut and/or/kernel purchased by him may on application to the assessing authority having jurisdiction over the area in which he carries on his business, be registered as a manufacturer of cocoanut/groundnut oil and cake and a certificate issued in Form VI.

2. Every such manufacturer shall be entitled to a deduction under clause (k) of sub-rule (i) of rule 7 equal to the value of the cocoanut and/or copra or groundnut and/or kernel purchased and converted by him into oil and cake provided that the amount for which the oil is sold is included in his turnover."

It is not necessary to refer to any other rule for the purposes of this appeal.

The main controversy between the parties centres on the method of calculation of the net turnover. The appellant contends that in the calculation of such net turnover he is entitled to include the total value of the oil sold by him, viz., Rs. 6,76,719-0-11, irrespective of the fact whether these sales were effected inside the <ORG> or outside the <ORG> and deduct therefrom the total value of copra purchased by him from which the whole quantity of oil sold by him was manufactured, viz., Rs. 7,16,048-1-4. The resultant figure, according to him, represents the net assessable turnover on which <ORG> would be entitled to assess him to sales tax if the position in law was as is stood before the amendment of the Act by the Travancore-Cochin General Sales Tax (Amendment) Act, 1951. He next contends that s. 26 which was added to the Act by the Travancore-Cochin General Sales Tax (Amendment) Act 1951, prohibits the levy amongst others of a tax on the sale or purchase of goods where such sale or purchase takes place in the course of inter-<ORG> trade or commerce. This is an overriding provision which, it is contended, entitled him to deduct the value of the oil sold outside the <ORG>, viz., Rs. 3,67,816-10-1, from the assessable turnover arrived at as above. The result of this mode of calculation is that he claims to deduct from the gross turnover the whole of the purchase price of copra, viz., Rs. 7,16,048-1-4 and not the purchase price of copra which can be allocated to his sales of oil inside the <ORG>.

<ORG> on the other hand, contend that the appellant is not entitled to take into computation at all his 'sales of oil outside the State and is also not entitled to deduct from his gross turnover the purchase price of copra allocated to the oil sold to persons outside the State. They claim to lift the whole of these sales of oil outside the State inclusive of the purchase price of the copra which can be allocated to them out of the calculations of the net turnover because of the provisions of s. 26 set out above, relying upon the non-obstante provision contained therein, viz., "Notwithstanding anything contained in this Act, a tax on the sale or purchase of goods shall not be imposed under this Act where such sale or purchase takes place in the course of inter-State trade or commerce."

We have to decide which of these calculations of the net turnover is correct having regard to the relevant provisions of the Act and the rules made there-under.

The definition of 'sale" contained in s. 2 (j) is wide enough to include, the sales of oil manufactured by the appellant whether these sales are effected inside the <ORG> or outside the <ORG>. The definition of " turnover " contained in s. 2 (k) of the Act also makes no distinction between the sales inside the <ORG> and out,side the <ORG>. The " turnover " is there defined as the aggregate amount for which goods are either bought or 3old by a dealer and, that definition comprises within its scope both these types of sales whether inside the <ORG> or outside the <ORG>. This turnover of a dealer is under s. 3 , sub-s. (4) to be determined in accordance with such rules as may be prescribed. Rule 4 made by the <ORG> under the rule- making power prescribes that the gross turnover of a dealer for the purposes of the rules shall be the amount for which the goods are sold by him. This rule also does not make any distinction between sales inside the <ORG> or outside the <ORG>. After having thus provided for the inclusion of all sales within the gross turnover, r. 7 provides that the tax or taxes under s. 3 (which is the charging section) shall be levied on the net turnover of a dealer. Such net turnover is to be arrived at after deducting from the gross turnover various amounts specified in cls. (a) to (k) thereof and cl. (k) provides that a registered manufacturer of cocoanut and/or groundnut oil and cake will be entitled to deduct from his gross turnover such amounts as are mentioned in r. 20 subject to the conditions specified therein. The-deduction under r. 20 is available to a dealer who manufactures cocoanut/groundnut oil and cake from cocoanut and " /or copra or groundnut and/or kernel purchased by him and he is entitled to deduct the value of the cocoanut and/or copra or groundnut and/or kernel purchased and converted by him into oil and cake provided that the amount for which the oil is sold is included in his turnover. Here also we find no distinction made between sales inside the <ORG> or outside the <ORG>.

On a prima facie reading of these provisions contained in the Act and the rules made thereunder it would appear that a manufacturer of cocoanut or groundnut oil and cake would be entitled to include in his gross turnover the total value of the oil sold by him Whether inside the <ORG> or outside the <ORG> and to deduct from such gross turnover the whole of the value of the copra purchased by him and converted into oil and cake irrespective of the fact whether such oil or cake was sold by him inside the <ORG> or outside the <ORG>. The only thing which he had to do under r. 20, sub-r.(2) was to include the amount for which the oil is sold in his turnover and he would then under r. 7(1)(k) be entitled to deduct from his gross turnover the whole of the price of the copra purchased and converted by him into oil and cake, again irrespective of the fact whether the same had been sold by him inside the <ORG> or outside the <ORG>. This was certainly the position as it obtained prior to the addition of the s. 26 to the Act by the Travancore-Cochin General Sales Tax (Amendment) Act, 1951. We have, therefore., to consider what is the impact of s. 26 on the other provisions of the Act and the rules made thereunder. <ORG> decided against the appellant observing that the definitions given in s. (2)(j) and (k) of the Act applied only in the absence of "anything  repugnant in the subject or context", and on a perusal of the relevant provisions of the Act and the rules made thereunder, it was of opinion that these definitions were clearly inapplicable for the following reasons: "There can be no doubt that what has been intended is a taxation of copra at the purchase point and the avoidance of sales tax in respect of the oil extracted by a registered manufacturer from such copra to the extent of the value of the copra used for the said manufacture in all those cases where but for the concession he would have been liable to pay both the purchase tax on copra and the sales tax on oil under the Travancore-Cochin General Sales Tax Act, 1125. In other words, the object is the avoidance of a double taxation by the <ORG>, one at the purchase point of copra and the other at the sale point of oil, and it is impossible to invoke the definition and say that the concession will be available to a registered manufacturer even in those cases where only one and not both the taxes can be realized from him under the provisions of the Act."

The answer given by the learned counsel for the appellant to the above reasoning was that in fiscal statutes what you have got to look to is not the spirit of the statute but the letter of the law; and if you could not bring a particular tax within the letter of the law, the subject could not be made liable for the same. Our attention was drawn in this connection to the observations of Lord <NAME> of Killowen in <ORG> v. Duke of Westminster(1) : "I -confess that I view with disfavour the doctrine that in taxation cases the subject is to be taxed if in accordance with a <ORG>'s view of what it considers the substance of the transaction, the <ORG> thinks that the case falls within the contemplation or spirit of the statute. The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case." As Lord <NAME> said many years ago in <NAME> v. The Attorney General (1):-"As I understand the (1) [1936] A.C. 1, 24.

(2)(1869) 4 H.L. 100, 122.

principle of all fiscal legislation it is this: if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the <ORG>, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be."

The passage was quoted with approval by <ORG> in the <CITATION> (1) and <ORG> registered its protest against the suggestion that in revenue cases "the substance of the matter" may be regarded as distinguished from the strict legal position. (See also <ORG> v. <NAME> (2)). It is no doubt true that in construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the <ORG> satisfies the <ORG> that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter. We must of necessity, therefore, have regard to the actual provisions of the Act and the rules made thereunder before we can come to the conclusion that the appellant was liable to assessment as contended by the Sales Tax Authorities. It may be noted at the outset that the main bulk of the Sales Tax Act s enacted by the various Provincial Legislatures was enacted before the Constitution. There were on the Statute Book various Sales Tax Act s enacted by the Provincial Legislatures, viz., Bihar Sales Tax Act, 1947, Bengal Finance (Sales Tax) Act, 1941, Madhya Pradesh Sales Tax Act, 1947, Madras Sales Tax Act, 1939, Mysore Sales Tax Act, 1948, Orissa Sales Tax Act, 1947, East Punjab General Sales Tax Act, 1948, and the Uttar Pradesh Sales Tax Act, (1) A.I.R. (1940) P.C. 183. (2) VIII T.C. 193, 206, 1948,---all of which levied sales tax on a more or less uniform basis bringing within their ken not only the sales which were actually effected within the territory but also sales where adopting the nexus theory eve1 one of the ingredients of sale was found to have taken place within the territory. The Assam Sales Tax Act, 1947, and the Hyderabad General Sales Tax Act, 1950, also followed the same pattern. When the Constitution came to be inaugurated on January 26, 1950, Art. 286(2) laid down restrictions on the <ORG> Legislatures to enact laws imposing or authorising the imposition of tax on the sale or purchase of goods in certain cases therein specified, so that after January 26, 1950, no <ORG> could impose a tax on the sale or purchase of goods falling within these categories. The Sales Tax Act s enacted by the various Provincial Legislatures had, therefore, to be brought in line with this provision of the Constitution and various expedients were devised by the <ORG> Legislatures in order to effectuate this object. This object was sought to be achieved in the main bulk of the Sales Tax Act s by adding towards the end of the Acts sections like s. 26 of the Travancore-Cochin General Sales Tax Act, 1125, incorporating therein the terms of Art. 286 of the Constitution. The non-obstante provision was thus enacted in the main bulk of the Sales Tax Act s which laid down: "Notwithstanding anything contained in this Act the tax on the sales or purchase of goods shall not be imposed under this Act where.................. (and the provisions of Art. 286 were in terms incorporated therein)." A different expedient was adopted in the Assam Sales Tax Act, 1947 and the Hyderabad General Sales Tax Act, 1950. The Assam Sales Tax Act, 1947, had incorporated therein an addition to the charging section ( section 3 of the Act) and s. 3 (1-A) which was inserted by s. 3 of the Assam Sales Tax (Amendment) Act, 1947 (Assam Act IV of 1951) was to the following effect:

"Nothing in sub-section (1) shall,except in cases covered by the first proviso to sub-section (12) of section 2 of this Act be deemed to render any dealer liable to tax on the sale of goods-where such sale takes place:

(1) outside the State of Assam;

(2) in the course of the import of the goods into, or export of the goods out of, the territory of India; or (3) in the course of inter-State trade or commerce except in so far as <ORG> may by law otherwise provide. The Hyderabad General Sales Tax Act, 1950 had a similar provision incorporated in its definition of sale given in s. 2 (k) of the Act. The Explanation (2) which was substituted for the original Explanation (2) by s. 2 of the Hyderabad General Sales Tax (Amendment) Act, 1950 (Hyderabad Act XXXII of 1950) read as under:

Explanation (2)-" Notwithstanding anything to the contrary in any other law for the time being in force, a transfer of goods in respect of which no tax can be imposed by reason of the provision contained in Article 286 of the Constitution, shall not be deemed to be "sale" within the meaning of this clause. "

A further expedient which was adopted in this connection may be noted in r. 5 of the Bombay Sales Tax Rules, 1952, enacted under the Bombay Sales Tax Act, 1952-(Bombay Act XXIV of 1952), which authorised the deduction of certain sales coming within Art. 286 of the Constitution while calculating the taxable turnover of a dealer. We are not called upon to express any opinion as to whether the incorporation of the provisions of Art. 286 of the Constitution in the charging section as it was done in the Assam Sales Tax Act, 1947, or in the definition of "sale" as it was done in the Hyderabad General Sales Tax Act, 1950, or even in the rules in regard to the calculation of taxable turnover as it was done in the Bombay Sales Tax Rules, 1952, had the effect of taking the sales falling within the categories specified in Art. 286 out of the purview of the respective Sales Tax Act s, so that they would not be included at all within the calculation of the net turnover on which only the sales tax could be levied. What was done in the instant case before us as in the bulk of the Sales  Tax Act s above noted was the incorporation of those provisions of Art. 286 of the Constitution therein by adding a non-obstante provision at the end of the respective Sales Tax Act s in the manner above indicated. The definition of "sale" was not amended nor was the charging section. The rules as to the calculation of the net turnover also remained the same, without any deduction in regard to sales coming within Art. 286 of the Constitution being incorporated therein, with the result that <ORG> founded themselves upon the non-obstante provision incorporated in the Act by the addition of s. 26 therein by the Travancore-Cochin General Sales Tax (Amendment) Act, 1951.

What, then, is the effect of this non-obstante provision ? This Court in <CITATION> (1) made the following observations in connection with the non-obstante clause:

"It should first be ascertained what the enacting part of the section provides on a fair construction of the words used according to their natural and ordinary meaning, and the non-obstante clause is to be understood as operating to set aside as no longer valid anything contained in relevant existing laws which is inconsistent with the new enactment." The same ratio applies to the construction of the non- obstante provision contained in s. 26 of the Act with reference to all the other provisions of the Act that preceded the same.

In our opinion, s. 26 of the Act, in cases falling within the categories specified under Art. 286 of the Constitution has the effect of setting at nought and of obliterating in regard thereto the provisions contained in the Act relating to the imposition of tax on the sale or purchase of such goods and in particular the provisions contained in the charging section and the provisions contained in r. 20 (2) and other provisions which are incidental to the process of levying such tax. So far as sales falling within the categories specified in Art. 286 of the Constitution and the corresponding s. 26 of the Act are concerned, they are, as it were, (1)  S.C.R. 1, 21, 22.

taken out of the purview of the Act and no effect is to be given to those provisions which would otherwise have been applicable if s. 26 had not been added to the Act. If these provisions of the Act and the rules made thereunder do not apply to. the sales falling within those categories, the value thereof cannot be included in the turnover of the dealer and no question would &rise of the applicability of r. 7 (1) (k) and r. 20 (2) at all to these cases. The amount for which the oil is sold in inter-State trade or commerce would not be lawfully included in the turnover of the dealer and if the amount for which such oil is sold cannot thus be included in his turnover no occasion would arise for the deduction under r. 7 (1) (k) of the value of the cocoanut and/or copra or groundnut and/or kernel purchased and converted by the dealer into such oil and cake.

A distinction was sought to be made between the inclusion of the value of such oil in the turnover of the dealer for the purpose of assessment and the levy of tax thereupon. It was urged that the inclusion of such oil in the turnover for the purpose of assessment was quite distinct from the liability for tax which was the only thing prohibited by s. 26 of the Act and therefore the value of such oil could be lawfully included in the turnover involving as a necessary consequence the deduction of the value of the copra purchased by the dealer and converted by him into such oil from such turnover, the resultant turnover being the net turnover for the purposes of assessment, the value of the oil sold in the course of inter-State trade or commerce being further deducted therefrom by reason of the operation of s. 26 of the Act, thus making in effect a distinction between assessable turnover and the taxable turnover. Reliance was placed in support of this position on the observations of this Court in Messrs. <CITATION> (1): " As has been pointed out by <ORG> in <CITATION> (,) (quoting from the (1)  2 S.C.R. 290, 297. (2)  F.C.R. 116, 126.

judgment of Lord <NAME> in <NAME> v. <ORG> (1) 'there are three stages in the imposition of a tax. There is the declaration of liability, that is the part of the statute which determines what person in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex-hypothesi, has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the methods of recovery if the person taxed does not voluntarily pay"

The appellant, however, forgets that the three stages in the imposition of a tax which are laid down here predicate, in the first instance, a declaration of liability as the starting point. If there is a liability to tax, imposed under the terms of the taxing statute, then follow the provisions in regard to the assessment of such liability. If there is no liability to tax there cannot be any assessment either. Sales or purchases in respect of which there is no liability to tax imposed by the statute cannot at all be included in the calculation of turnover for the purpose of assessment and the exact sum which the dealer is liable to pay must be ascertained without any reference whatever to the same'.

There is a broad distinction between the provisions contained in the statute in regard to the exemptions of tax or refund or rebate of tax on the one hand and in regard to the non-liability to tax or non-imposition of tax on the other. In the former case, but for the provisions as regards the exemptions or refund or rebate of tax, the sales or purchases would have to be included in the gross turnover of the dealer because they are prima facie liable to tax and the only thing which the dealer is entitled to in respect thereof is the deduction from the gross turnover in order to arrive at the net turnover on which the tax can be imposed. In the latter case, the sales or purchases are exempted from taxation altogether. The <ORG> cannot enact a law imposing or authorising the imposition of a tax thereupon and they are not liable to any such imposition (1) [1926] A.C. 37.

of tax. If they are thus not liable to tax, no tax can be levied or imposed on them and they do not come within the purview of the Act at all. The very fact of their non- liability to tax is sufficient to exclude them from the calculation of the gross turnover as well as the net turnover on which sales tax can be levied or imposed. If this distinction is borne in mind, it is clear that s. 26 of the Act enacts a provision with regard to nonliability of these transactions to tax and these transactions were therefore taken out of the purview of the Act. We are therefore of opinion that the non-obstante provision contained in s. 26 of the Act has the effect of taking these transactions out of the purview of the Act with the result that the dealer is not required nor is he entitled to include them in the calculations of his turnover liable to tax thereunder.

This position is not at all affected by the provision with regard to registration and submissions of returns of the sales tax by the dealers under the Act. The legislature, in spite of its disability in the matter of the imposition of sales tax by virtue of the provisions of Art. 286 of the Constitution, may for the purposes of the registration of a dealer and submission of the returns of sales tax include these transactions in the dealer's turnover. Such inclusion, however, for the purposes aforesaid would not affect the non-liability of these transactions to levy or imposition of sales tax by virtue of the provisions of Art. 286 of the Constitution and the corresponding provision enacted in the Act, as above.

We are, therefore, of opinion that the conclusion reached by We are therefore therefore, of opinion that the conclusion reached by <ORG> was correct; the calculations of the net turnover made by <ORG> were also correct; and this appeal must stand dismissed with costs.

Appeal dismissed.


JUDGMENT

1. This Rule arises out of certain proceedings under the Land Acquisition Act .

2. The petitioner alleged that he is the owner of a salt godown, for the efficient working of which the land in front is required, and that the Deputy Collector has acquired that frontal land without making a reference, as prayed, to <ORG> under Section 49 of the Land Acquisition Act I of 1894.

3. We are invited in this Rule to set aside the order of the Deputy Collector dated the 22nd September 1910 and his proceedings up to, and including, an order of the 24th May 1911 wherein he refused to make a reference under Section 18 of the Act on the ground that the case had been completed and the award confirmed.

4. It appears that the 19th September 1910 was the date fixed by the Deputy Collector for claims to be put in. On that day, no claim was preferred nor was any petition for time filed. The order-sheet of the Deputy Collector is exceedingly brief and does not embody the details mentioned in his letter of explanation No. 1977 I.A., dated the 23rd August 1911, upon which the learned Senior Government Pleader showing cause relies. However that may be, orders were reserved on the 29th September 1910, and the award in this connection was not made until the 21st November 1910. The application of the petitioner praying for a reference under Section 49 of the Act bears date the 21st September 1910, and, apparently, reached the Deputy Collector through the post. There are two orders on this petition, the first order is "File with the record," the second order which is over a date 22nd September 1910 which has been altered, or inked over, is to the following effect: "I have seen the land and godown. The godown is now closed and no business is being done there now. The land which is now under acquisition is not in the front of the building and its acquisition will not interfere with the business if the petitioner intends to start business at any future date. The petition is, therefore, rejected. Besides, the time for filing such petition has expired." In this view of the matter, the Deputy Collector proceeded to complete the proceedings and possession was duly given of the land in question to <ORG>.

5. The first question that arises upon this Rule is whether the Land Acquisition Deputy Collector is subject to the extraordinary jurisdiction of this Court.

6. We have been referred to the cases of the Administrator-General of Bengal v. <NAME> 24-Pergannahs 12 C.W.N. 241 and <CITATION> for India 8 Ind. 107 : 12 C.L.J. 505 : 15 C.W.N. 87 : 38 C. 230. In the present state of the law, we cannot do otherwise than follow the decision of <NAME> and <NAME>, <NAME>., in Administrator-General of Bengal v. <NAME> 24 Pergannahs 12 C.W.N. 241. It would, obviously, be unjust that the Deputy Collector should refuse to obey the provisions of the Act, and to provide no remedy for the correction of his mistaken action; where the law gives a right to a party to a certain procedure, it must also be deemed to give a remedy for the rectification of any irregularities committed in that connection. Section 49 of the Act clearly leaves no option to the Collector. It says "he shall refer to the determination of such question (whether any land proposed to be taken under this Act does or does not form part of a house, manufactory or building) to <ORG>." He appears to have recognised the applicability of sect-ion 49 by framing the second order of the 22nd September 1910 which we have already re-produced. We entertain no doubt, therefore, that we have jurisdiction to set right the error committed by the Deputy Collector in not making a reference under Section 49 .

7. The second question involved in this Rule is whether the petitioner is an owner of any house, manufactory or building, a part of which house, manufactory or building is being acquired.

8. The word owner is not defined in, the Act, but an owner must be declared to be one of the persons interested in the land being acquired [see Section 3(6) of Act I of 1894], Reading Section 10 of the Act we think that the proprietor, sub-proprietor, mortgagee, tenant or subtenant are all owners for the purposes of Section 49 . The petitioner is an under-tenant of some kind. He is, therefore, admittedly, interested in the acquisition of the land, which for the purposes of Section 49 , until <ORG> finds otherwise, may be presumed to be part of his salt go-down.

9. The question for inquiry will be whether the piece of land in front of the godown forms the only means of approach to that godown or is reasonably necessary for the proper working of the salt business.

10. We, therefore, think that the petitioner was competent to apply -under Section 49 for a reference to <ORG>.

11. The third contention of the learned senior Government Pleader is that the application for a reference was not filed in time. The first proviso to Section 49 , however, says that the owner may, at any time before the Collector has made his award, withdraw his application, and it would follow that it was equally open to the petitioner to make a substantive application for a reference at some time before the award was actually made, that is, before the 21st November 1910. As a matter of fact, he made his application two months earlier, that is, on the 21st September 1910, and the Deputy Collector dealt with it on its merits by recording his second order after a local inquiry.

12. It is unfortunate that the Deputy Collector overlooked the imperative language of the second proviso to Section 49 . We have no alternative but to set aside his proceedings from, and after, the 22nd September 1910, and to direct him to proceed in accordance with law under Section 49 of the Land Acquisition Act: whether any reference will be necessary under Section 13 is a matter contingent upon the decision of <ORG> as to whether the land does or does not form part of the petitioner's salt go-down.

13. The Rule is made absolute. There will be no costs in this matter.