(Mysore) Ltd. Vs. Asstt. Commercial Tax
Officer  INSC 91 (7
Reddy, B.P. (J) Jeevan Reddy, B.P. (J) Hansaria B.L. (J)
1994 SCR (1) 682 1994 SCC (2) 434 JT 1994 (1) 692 1994 SCALE (1)512
Judgment of the Court was delivered by B.P. JEEVAN REDDY, J.- The question in
this batch of appeals is whether the publishers of newspapers are entitled to
the benefit of Section 8(3)(b) read with Section 8(1)(b) of the Central Sales
Tax Act, 1956, hereinafter referred to as 'the Act'. If they are so entitled,
they can purchase the raw material required by them at the concessional rate of
not, they will be liable to pay tax @ 10%. The Madras and Kerala High Courts have taken the view that they are entitled
to the said benefit while the Karnataka High Court has held to the contrary. We
may briefly indicate how the question arises.
publishers of newspapers require various goods, hereinafter referred to as the
raw material, for producing, i.e., for printing and publishing their
newspapers. These publishers are registered as dealers under the Tax Act.
purchase their raw material from other registered dealers. Most of these
purchases are inter-State purchases; in the hands of the selling dealers they
are inter-State sales exigible to tax.
Section 8 prescribes the rate of tax on inter-State sales. Sub-section (1)says
that "every dealer who in the course of inter-State trade or commerce ...
(b) sells to a registered dealer other than the Government goods of the
description referred to in sub-section (3), shall be liable to pay tax under
this Act which shall be 4% of his turnover". According to this subsection,
a dealer selling goods of the description referred to in sub-section (3) to a
registered dealer is entitled to pay a concessional rate of tax, viz., 4%
subject to compliance with sub-section (4), as will be explained presently.
Sub-section (2) says that where the inter-State sale pertains to goods not
falling under sub-section (1), the selling dealer shall pay tax at a higher
rate, i.e., if they are declared goods, he shall pay at twice the rate
applicable to the sale or purchase of such goods inside the appropriate State
and in the case of there goods, @ 10% or at the rate applicable to the sale
inside the appropriate State, whichever is higher. Sub-section (3) specifies
the goods or the purposes of clause (b) of sub- section (1) of Section 8. We
are concerned herein only with clause (b) in sub-section (3). Having regard to
its crucial relevance, it would be appropriate to set out clause (b) of
(3) The goods referred to in clause (b) of sub-section (1)- 438 (a) [omitted]
(b) are goods of the class or classes specified in the certificate of
registration of the registered dealer purchasing the goods as being intended
for resale by him or subject to any rules made by the Central Government in
this behalf, for use by him in the manufacture or processing of goods for sale
or in mining or in the generation or distribution of electricity or any other
form of power;" (emphasis ours) 4.Clause (b) thus refers to three
categories of goods, viz.,
of the class or classes specified in the certificate of registration of the
registered dealer purchasing the goods as being intended for resale by him;
goods specified in the certificate of registration of the registered dealer
purchasing the goods for use by him in the manufacture or processing of goods
for sale, subject to any rules made by the Central Government in that behalf;
goods of the class or classes specified in the certificate of registration of
registered dealer purchasing goods for use by him in mining or in the
generation or distribution of electricity or any other form of power. We are
concerned herein with the second category among the said three. Sub-section (4)
of Section 8 says that provisions of sub-section (1) shall not apply to any
sale unless the selling dealer furnishes to the prescribed authority in the
prescribed manner "a declaration duly filled and signed by the registered
dealer to whom the goods are sold containing the prescribed particulars in a
prescribed form obtained from the prescribed authority". The rules framed
under the Act prescribe the authority and other particulars contemplated by
sub-section (4)(a). The rules prescribe the form of certificate of registration
of the registered dealer purchasing the goods (Form 'B') as well as the form in
which the declaration has to be issued by such purchaser (Form 'C').* 5.Section
8, read as a whole, says inter alia: where a dealer purchases goods (being
non-declared goods) required by him for use in the manufacture or processing of
goods for sale and issues Form 'C' to the selling dealer, the selling dealer
shall be liable to pay tax only @ 4% as per Section 8(1) and not 10% as
provided in Section 8(2), provided that the certificate of registration of the
purchasing dealer specifies the class of goods purchased by him. (In case of
declared goods, the selling dealer has to pay tax at the rate applicable to
sale of such goods within the appropriate State.) It necessarily means that the
selling dealer will collect (pass on) tax from the purchasing dealer only at
the said concessional rate. The idea behind this provision is self-evident. It
is to ensure that the price of the product A perusal of From 'B' shows that it
contains all the particulars, namely,the business of the dealer, the
class/classes of goods specified for the purposes of sub- sections (1) and (3)
of Section 8 and in particular whether the goods being purchased are meant for
resale or for being used in the manufacture or processing of goods for sale or
for other purposes mentioned in Section 8(3)(b). It also mentions inter alia
the goods manufactured by that dealer.
'C' similarly contains all the relevant particulars.
has to be issued by the purchasing dealer. In this certificate, the purchasing
dealer mentions his registration certificate number and all other particulars
including the statement that the goods being purchased by him are meant for
being used inter alia in the manufacture or processing of goods for sale.
manufactured by such purchasing dealers does not go up to the detriment of the
consumers of those goods. The Parliament does not want to tax both the raw material
and the finished goods at the full rate. Where the finished goods are meant for
sale, the raw material utilised or consumed for the manufacture of said
finished goods is taxed at the concessional rate, for the reason that the State
derives revenue again by taxing the sale of the finished goods. However, it is
not necessary that the finished goods are actually subjected to tax on their
sale for they may be 'exempted either by the Act or by a notification issued thereunder.
It is enough that the finished goods are meant for sale. Ordinarily, of course,
their sale is taxed.
expression "goods" is defined in clause (d) in Section 2. As
originally enacted, the definition read: "(d) 'goods' includes all
materials, articles, commodities and all other kinds of movable property but
does not include actionable claims, stocks, shares and securities;". (The Central
Sales Tax Act, 1956 came into force on January 5, 1957.) By amending Act 31 of
1958, the word "newspapers" was inserted in the said definition after
the words "but does not include" and before the words
"actionable claims, stocks, shares and securities". After the
amendment, the definition reads as follows:
goods' includes all materials, articles, commodities and all other kinds of
movable property, but does not include newspapers, actionable claims, stocks,
shares and securities;" 7.Now the situation is this: before the amendment
of the definition of the expression "goods" by the 1958 Amendment
Act, the publishers of the newspapers [who held the certificate of registration
contemplated by Section 8(3)(b)] were issuing Form 'C' [declarations
contemplated by Section 8(4)(a)] and on that basis the selling dealer was
collecting from them Central Sales Tax at the concessional rate of 4% (in the
case of non-declared goods). They were like any other manufacturer in this
respect. But after the newspapers were excluded from the purview of the
"goods" by the 1958 (Amendment) Act, the Central Sales Tax
authorities took the stand that by virtue of the said amended definition, the
printers/publishers of newspapers were not entitled to the benefit of Section
8(3)(b) read with Section 8(1)(b) and are, therefore, not entitled to issue
reasoning was this: Since the expression "goods" does not take in
newspapers, it cannot be said that publishers of newspapers are purchasing the
goods (raw material) for use by them "in the manufacture or processing of
goods for sale"; what they purchase may be goods but goods manufactured
out of them (newspapers) are not goods; hence, they do not satisfy the
requirement of Section 8(3)(b). The result was that the publishers of
newspapers were disabled from issuing Form 'C' and hence became liable to pay
tax at the higher rate of 10% on goods (non-declared goods) purchased by them
as raw material for producing (manufacturing) their newspapers, while all other
manufacturers continued to enjoy the said benefit. The publishers of the
newspapers, therefore, questioned the action of the Central Sales Tax
authorities in 440 various High Courts. The earliest decision is of the Madras
High Court in Indian Express, (Madurai) Ltd. v. Dy. CTO1 which held in favour
of the newspapers. That decision is said to have become final. The Kerala High
Court took a similar view in Malayala Manorama Co. v. Assistant Commissioner2
which is the subject-matter of appeal arising from SLP (C) No. 2 of 1991 in
this batch. Leave granted.
Karnataka High Court, however, took a contrary view in Printers (Mysore) Ltd.
v. Asstt. CTO3 which decision too is the subject-matter of an appeal [C.A. No.
1550 (NT) of 1985] in this batch. The decision in Printers (Mysore) Ltd.3 was
followed by the Karnataka High Court in the case of other newspapers as well
against which SLP (C) No. 3439 of 1992 [preferred by Indian Express (Madurai)
Ltd.] and CA No. 2494 of 1993 (preferred by M/s Kasturi & Sons Ltd.) have
been preferred. They too are included in this batch. Leave granted in SLP (C)
No. 3439 of 1992.
literal construction is conceded on all hands that the view taken by the
Karnataka High Court is the correct one. But what the Madras and Kerala High
Courts have done is to take the spirit behind the amendment of the definition
of the expression "goods" as well as the scheme underlying Entry 54
of List I read with Entries 92 and 92-A of List I of the VII Schedule to the
Constitution and hold on that basis that the expression " goods"
occurring in the latter half of clause (b) of Section 8(3) does not exclude
newspapers from its purview. Accordingly, they held, the publishers of
newspapers are entitled to the benefit of Section 8(3)(b) read with Section
8(1)(b). In this batch of appeals, we are called upon to decide which of the
two views is the correct one.
a proper appreciation of the question at issue, it would be appropriate to
notice certain provisions of the Constitution as well as the basic importance
and relevance of the freedom of press.
19(1)(a) of the Constitution declares that all citizens shall have the right to
freedom of speech and expression. Though freedom of press is not explicitly
guaranteed as a fundamental right, it is no longer in doubt that it is implicit
in the freedom of speech and expression.
was so stated by Dr Ambedkar in the Constituent Assembly during the deliberations
on Article 19(1)(a) (vide Constituent Assembly Debates Vol. 7, page 780) and it
has been so held by this Court as far back as 1958 in Express Newspapers v.
Union of India4 nay even in Romesh Thappar v. State of Madras5.
54 of List II of the Constitution, which empowers the State legislatures to
levy tax on the sale of goods expressly excludes newspapers. The result is, the
State legislatures arid not competent to levy tax on the sale or purchase of
newspapers. Entry 92 of List I empowered the Parliament to 1 (1972) 29 STC 88
(Mad) 2 O.P. No. 143 of 1989, decided on Aug. 18, 1990 3 (1985) 59 STC 306
(Kant) 4 AIR 1958 SC 578: 1959 SCR 12: (1961) 1 LJ 339 5 AIR 1950 SC 124: 1950
SCR 594: 51 Cri LJ 1514 441 levy taxes on the sale or purchase of newspapers
and on advertisements published therein but the Parliament has not chosen to do
so until now. By the Constitution Sixth (Amendment) Act, 1956, Entry 92-A was
introduced in List I and Entry 54 in List II was amended to make it subject to
the provisions of Entry 92-A of List I. After the Sixth Amendment, the three
entries read as follows:
54 List II.- Taxes on the sale or purchase of goods other than newspapers,
subject to the provisions of Entry 92-A of List 1.
92 List I.- Taxes on the sale or purchase of newspapers and on advertisements
92-A List I- Taxes on the sale or purchase of goods other than newspapers,
where such sale or purchase takes place in the course of inter-State trade or
stated above, though the Parliament was empowered at any rate, till 1956 to
levy tax on sale or purchase of newspapers, no such tax was ever levied by it.
On the contrary, soon after the coming into force of the Constitution, the
Parliament enacted the Taxes on Newspapers (Sales and Advertisements) Repeal
Act, 1951 whereby taxes levied earlier on the sale of newspapers and on the
advertisements published therein was repealed. It may be recalled that under
the Government of India Act, 1935, Entry 48 in List 11 of the Seventh Schedule
did not exclude the sale of newspapers from its purview and on that account,
they were liable to pay tax on their sale. It is this feature which was sought
to be put an end to by the aforesaid repealing Act. Entry 92-A of List I, it is
relevant to notice, while empowering the Parliament to levy tax on sale or
purchase of goods taking place in the course of inter-State trade or commerce,
specifically excluded newspapers from its purview which means that no tax can
be imposed upon the inter-State sale or purchase of newspapers.
short, the position is: no tax can be imposed on the inter-State sale of
newspapers and no tax is imposed on their intra-State sale. This special
treatment of newspapers has a certain philosophy and a historical background
behind it which may briefly be noticed.
of press has always been a cherished right in all democratic countries. The
newspapers not only purvey news but also ideas, opinions and ideologies besides
much else. They are supposed to guard public interest by bringing to fore the
misdeeds, failings and lapses of the Government and other bodies exercising
therefore, it has been described as the Fourth Estate. The democratic
credentials of a State are judged today by the extent of freedom the press
enjoys in that State. According to Douglas, J. (An Almanac of Liberty)
"acceptance by Government of a dissident press is a measure of the
maturity of the nation". The learned Judge observed in Terminiello v. Chicago6:
function of free speech under our system of government is to invite dispute. It
may indeed best serve its high purpose when it induces 6 93 L Ed 1 131 : 337 US 1 (1 949) 442 a condition of unrest, creates
dissatisfaction with conditions as they are, or even stirs people to anger.
Speech is often provocative and challenging. It may strike at prejudices and
preconceptions and have profound unsettling effects as it presses for
acceptance of an idea. ... There is no room under our Constitution for a more
restrictive view. For the alternative would lead to standardisation of ideas
either by legislatures, courts or dominant political or community groups."
The said observations were of course made with reference to the First Amendment
to the US Constitution which expressly guarantees freedom of press but they are
no less relevant in the Indian context subject, of course, to clause (2) of
Article 19 of our Constitution. We may be pardoned for quoting another passage
from Hughes, C.J. in De Jonge v. State of Oregon7 to emphasise the fundamental significance of free speech. The learned
Chief Justice said:
greater the importance of safeguarding the community from incitements to the
overthrow of our institutions by force and violence, the more imperative is the
need to preserve inviolate the constitutional rights of free speech, free press
and free assembly in order to maintain the opportunity for free political
discussion, to the end that Government may be responsive to the will of the
people and that changes, if desired, may be obtained by peaceful means. Therein
lies the security of the Republic, the very foundation of constitutional
government." 14.It is true that very often the press, whether out of
commercial reasons or excessive competition, descends to undesirable levels and
may cause positive public mischief but the difficulty lies in the fact, recognised
by Thomas Jefferson, that this freedom "cannot be limited without being
lose,. Thomas Jefferson said, "it is, however, an evil for which there is
no remedy; our liberty depends on the freedom of the press and that cannot be
limited without being lost" (in a letter to Dr J. Currie, 1786). It is
evident that "an able, disinterested, public-spirited press, with trained
intelligence to know the right and courage to do it, can preserve that public
virtue without which popular Government is a sham and a mockery. A cynical,
mercenary, demagogic press will produce in time a people as base as itself. The
power to could the _future of the Republic will be in the hands of the
journalism of _future generations," as stated by Joseph Pulitzer.
does not mean that the press is immune either from taxation or from the general
laws relating to industrial relations or from the State regulation of the
conditions of service of its employees, as has been emphasised by this Court in
Express Newspapers v. Union of India4. Nor is it immune from the general law of
the land including civil and criminal liability for libel and defamation. The
prohibition is upon the imposition of any restriction directly relatable to the
right to publish, to the right to disseminate information and to the
circulation of newspapers. In Sakal 7 299 US 353:81 LEd 278 (1937) 443 Papers
v. Union of India8 an Act, the Newspaper (Price and Page) Act, 1956, empowering
the Central Government to regulate the price of newspapers in relation to their
pages and size and to regulate the allocation of space for advertising matter,
was struck down as violative of Article 19(1)(a). It was held that the said Act
was not saved by clause (2) of Article 19. It was held that freedom of press
was implicit in Article 19(1)(a) and that a citizen not only has the right to
propagate his ideas but has also the right to publish them, to disseminate them
and to circulate them either by word of mouth or by writing. It was further
held that the said right extended not merely to the matter which he was
entitled to circulate but also to the volume of circulation. It was further
held that the freedom of speech could not be restricted for the purpose of
regulating commercial aspect of the activities of the newspapers.
Bennett Coleman & Co. v. Union of India the validity of the Newsprint
Control Order, 1982 issued under Section 3 under the Essential Commodities Act,
1955 was questioned.
said control order imposed several restrictions, viz.,
bar was created on starting a newspaper or editions by common ownership unit;
rigidly limited the pages of newspaper to 10;
imposed a bar on interchangeability within common ownership unit; and
allowed a 20% page increase only to newspapers. below 10 pages.
import policy evolved for the year 1972-73 under the said control order was
struck down on various grounds. For our purpose, it is sufficient to notice one
of those grounds, viz., that the compulsory reduction of newspapers to 10 pages
offends Article 19(1)(a) and infringes the right to freedom of speech and
expression. It was held that fixation of pages will not only deprive the
newspapers of their economic viability but also restrict the freedom of
expression by reason of compulsive reduction of page level entailing reduction
of circulation and denuding the area of coverage for news and views.
must be made in this connection to the judgment in Indian ExpressNewspapers v.
Union of India10 wherein not only the importance of freedomof press was emphasised,
it was also held that a newspaper cannot surviveand sell itself at a price
within the reach of a common man unless it is allowed to take in
advertisements. (See para 84). This decision is significant for the reason that
it seeks to place freedom of press on a higher footing than other enterprises.
E.S. Venkataramiah, J., as he then was, speaking for the Bench, said: (SCC p.
686, para 69) "In view of the intimate connection of newsprint with the
freedom of the press, the tests for determining the vires of a statute taxing
newsprint have, therefore, to be different from the tests usually adopted for
testing the vires of other taxing statutes.
case of ordinary taxing statutes, 8 (1 962) 3 SCR 842: AIR 1962 SC 305 9 (1972)
2 SCC 788 10 (1985) 1 SCC 641 :1985 SCC (Tax) 121 444 the laws may be
questioned only if they are either openly confiscatory or a colourable device
to confiscate. On the other hand, in the case of a tax on newsprint, it may be
sufficient to show a distinct and noticeable burdensomeness, clearly and
directly attributable to the tax."
coming back to the amendment of the definition of "goods" in Section
2(d) of the Central Sales Tax Act, the said amendment, brought in with a view
to bring the said definition in accord with the amendments brought in by the
Constitution Sixth (Amendment) Act (referred to hereinbefore) was actuated by
the very same concern, viz., to exempt the sale of newspapers from the levy of
Central Sales Tax. The amendment was not intended to create a burden which was
not there but to remove the burden, if any already existing on the newspapers a
policy evidenced by the enactment of the Taxes on Newspapers (Sales and
Advertisements) Repeal Act, 1951. This concern must have to be borne in mind
while understanding and interpreting the expression "goods" occurring
in the second half of Section 8(3)(b). Now, the expression "goods"
occurs on four occasions in Section 8(3)(b). On first three occasions, there is
no doubt, it has to be understood in the sense it is defined in clause (d) of
Section 2. Indeed, when Section 8(1)(b) speaks of goods, it is really referring
to goods referred to in the first half of Section 8(3)(b), i.e., on first three
occasions. It is only when Section 8(3)(b) uses the expression
"goods" in the second half of the clause, i.e., on the fourth
occasion that it does not and cannot be understood in the sense it is defined
in Section 2(d). In other words, the "goods" referred in the first
half of clause (b) in Section 8(3) refers to what may generally be referred to
as raw material (in cases where they were purchased by a dealer for use in the
manufacture of goods for sale) while the said word "goods" occurring
for the fourth time (i.e., in the latter half) cannot obviously refer to raw
material. It refers to manufactured "goods", i.e., goods manufactured
by such purchasing dealer in this case, newspapers. If we attach the defined
meaning to "goods" in the second half of Section 8(3)(b), it would
place the newspapers in a more unfavourable position than they were prior to
the amendment of the definition in Section 2(d). It should also be remembered
that Section 2 which defines certain expressions occurring in the Act opens
with the words: "In this Act, unless the context otherwise requires".
This shows that wherever the word "goods" occurs in the enactment, it
is not mandatory that one should mechanically attribute to the said expression
the meaning assigned to it in clause (d). Ordinarily, that is so. But where the
context does not permit or where the context requires otherwise, the meaning
assigned to it in the said definition need not be applied. If we keep the above
consideration in mind, it would be evident that the expression
"goods" occurring in the second half of Section 8(3)(b) cannot be
taken to exclude newspapers from its purview. The context does not permit it.
It could never have been included by Parliament. Before the said amendment, the
position was the State could not levy tax on intra-State sale of newspapers;
the Parliament could but it did not and Entry 92-A of List I bars the
Parliament from imposing tax on inter-State sale of newspapers; as a result of
the above 445 provisions, while the newspapers were not paying any tax on their
sale, they were enjoying the benefit of Section 8(3)(b) read with Section
8(1)(b) and paying tax only @ 4% on non-declared goods which they required for
printing and publishing newspapers. Their position could not be worse after the
amendment which would be the case if we accept the contention of the Revenue.
If the contention of the Revenue is accepted, the newspapers would now become
liable to pay tax Co) 10% on non-declared goods as prescribed in Section 8(2).
This would be the necessary consequence of the acceptance of Revenue's
submission inasmuch as the newspapers would be deprived of the benefit of
Section 8(3)(b) read with Section 8(1)(b). We do not think that such was the
intention behind the amendment of definition of the expression
"goods" by the 1958 (Amendment) Act. Even apart from the opening
words in Section 2 referred to above, it is well settled that where the context
does not permit or where it would lead to absurd or unintended result, the
definition of an expression need not be mechanically applied. [Vide T.M. Kanniyan
v. ITO' Pushpa Devi v. Milkhi Ram 12 (para 14) and CIT v. J. H. Gotla13.]
For the above reasons we hold that the expression "goods " occurring
in the words "for use by him in the manufacture or processing of goods for
sale" in Section 8(3)(b) of the Central Sales Tax Act, 1956 does take in,
i.e., does not exclude newspapers. We agree with the view taken by the Madras
and Kerala High Courts. In our view, the view taken by the Karnataka High Court
the above reasons, Civil Appeal No. 1550 of 1985, C.A. No. 2494 of1993 and C.A.
No. 694 of 1994 [arising from SLP.(C) No. 3439 of 19921 are allowed and the
Civil Appeal No. 672 of 1994 [arising from SLP (C) No. 2 of 19911 is dismissed.
No orders in W.P. (C) No. 278 of 1991. No costs.