Andhra Pradesh State Board for Prevention Vs. Andhra
Pradesh Rayons Ltd. & Ors  INSC 309 (30 September 1988)
Sabyasachi (J) Mukharji, Sabyasachi (J) Kania, M.H. Rangnathan, S.
1989 AIR 611 1988 SCR Supl. (3) 380 1989 SCC (1) 44 JT 1988 (4) 154 1988 SCALE
INFO : R 1992 SC 224 (11,19)
(Prevention and Control of Pollution) cess Act, 1977: Section 3 and Schedule
I--Cess--Levy and collection of Industry manufacturing Rayon Grade pulp--Neither
chemical, textile nor paper industry.
Statutory Interpretation: Taxing Statute--Interpretation of--No room for any
intendment--No equity about tax--No presumption as to tax--Whether any industry
falls within realm of taxation--To be judged by predominant purpose and
process--Not by any ancillary or Incidental process carried on by the industry.
respondent, Andhra Pradesh Rayons Ltd., manufacturing Rayon Grade Pulp, a base
material for the manufacture of synthetics or man-made fabrics, was assessed by
the petitioner under the provisions of Water (Prevention and Control of
Pollution) Cess Act, 1977 which provided for levy and collection of Water cess
from the specified industries enumerated in Schedule I of the Act. On appeal,
the Appellate late Committee confirmed the order of assessment on the ground
that the respondent was manufacturing Rayon Grade Pulp which came under the
category of Textile industry.
respondent filed a writ in the High Court challenging the levy Inter alia on
the ground that it was not one of the industries mentioned in the Schedule. The
High Court upheld this contention.
this Court, it was sought to be canvessed by the petitioner that Rayon Grade
Pulp was covered either by Item No. 7 of the Schedule, which was chemical
industry, or item No. 10 which was textile industry, or item No.11 which was
the petition, it was, PG NO 380 PG NO 381
The Act being fiscal in nature must be strictly construed. The question as to
what is covered must be found out from the language according to its natural
meaning, fairly and squarely read. [385F; 386B]
a taxing Act one has to look merely at what is clearly said. There is no room
for any intendment. There is no equity about a tax, there is no presumption as
is to be read in, nothing is to be implied. [385H]
Whether a particular industry is an industry covered in Schedule I has to be
judged normally by what that industry produces mainly, its predominant purpose
and process, and not by any ancillary or incidental process carried on by it.
Chemical process would be involved to a certain extent, more or less in all
industries, but an industry would be known as a chemical industry if it carries
out predominantly chemical activities and is involved in chemical endeavours.
Taxing consideration may stem from administrative experience and other factors
of life and not artistic visualisation or neat logic and so the literal, though
pedestrian, interpretation must prevail. [386C]
One of the well recognised canons of construction is that the legislature
speaks its mind by use of correct expression and unless there is any ambiguity
in the language of the provision the Court should accept literal construction
if it does not lead to an absurdity. [387E]
There is no absurdity in the literal meaning.
and literally it can be said that the Rayon Grade Pulp is neither chemical
industry nor textile industry nor paper industry. [387G;386H] In Re Micklethwait.,
 II EX 452. 456; Tenant v. Smith,  AC 150; St. Aubyan v. AG.,
 2 All E.R. 473; Cape Brandy Syndicate v. IRC.,  1
KB 64 at 71; Gursahai Saigal v. C.I.T. Punjab,  3 SCR 893; C.I.T. Madras
v. MR. P. Firm, Muar,  1 SCR 815; Controller of Estate Duty, Gujarat v. Kantilal Trikamlal,  1 SCR
9; IRC v. Duke of Westminster,  AC 1 at 24; AV Fernandez v.
The State of Kerala,  SCR 837; Martand Dairy & Farm v. Union of
India,  Supp. SCR 265; Lt Col. Prithi Pal Singh Bedi v. Union of India,
 1 SCR 393, referred to.
382 M/s. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. Mavoor
v. The Appellate Committee for Water Cess, Trivandrum, A.I.R. 1983 Kerala 110. overruled.
APPELLATE JURISDICTION: Special Leave Petition (C) No. 8566 of 1988.
the Judgment and Order dated 9.10.1987 of the Andhra Pradesh High Court in W.P.
No. 306 of 1983.
Mohan for the Petitioner.
Judgment of the Court was delivered by SABYASACHI MUKHARJI, J. This petition is
for leave to appeal under Article 136 of the Constitution from the judgment and
order of the High Court of Andhra Pradesh dated 9th October, 1987. The question that was urged before the High Court and the
question which is sought to be raised in this petition is whether the
respondent Pradesh Rayons Ltd.
is manufacturing Rayon Grade Pulp, a base material for manufacturing of
synthetics or manmade fabrics is an industry as mentioned in Schedule I of the
Water (Prevention and Control of Pollution) cess Act, 1977 for the purposes of
levy of Water Cess under the Act. The water (Prevention and Control Of
Pollution) Act, 1974 was passed by the Parliament to "provide for the
prevention and control of water pollution and the maintaining or restoring of
wholesomeness of water, for the establishment, with a view to carrying out the
purposes aforesaid, of Boards for the prevention and control of water
pollution, for conferring on and assigning to such Boards powers and functions
relating thereto and for matters connected therewith". For the aforesaid
purposes, the Act contemplated creation of State Boards at State level and the
Central Board at the national level. Thereafter, the Water (Prevention and
Control of Pollution) Cess Act, 1977 being Act 36 of 1977 was passed
(hereinafter called 'the Act'). The preamble to the said Act states that the
said Act was "to provide for the levy and collection of a cess on water
consumed by persons carrying on certain industries and by local authorities,
with a view to augment the resources of the Central Board and the State PG NO
383 Boards for the prevention and control of water pollution constituted under
the Water (Prevention and Control of Pollution) Act, 1974". Therefore, the
said Act was passed only for the purpose of providing for levy and collection
of cess on water consumed by persons carrying on certain industries with a view
to augment the resources of the Central Board and the State Boards. Section
2(c) stipulates A `specified industry' means any industry specified in Schedule
T. Section 3 provides as follows:
Levy and collection of cess.--(1) There shall be levied and collected a cess
for the purposes of the Water (Preven-tion and Control of Pollution) Act, 1974
and utilisation there under.
The cess under sub-section ( I) shall be payable by- (a) every person carrying
on any specified industry; and (b) every local authority, and shall be
calculated on the basis of the water consumed by such person or local
authority, as the case may be, for any of the purposes specified in column (1)
of Schedule II, at such rate, not exceeding the rate specified in the
corresponding entry in column (2) thereof, as the Central Government may, by
notification in the Official Gazette, from time to time, specify."
Therefore, this section provides for levy and collection of cess from the
specified industries. Specified industry is one which is mentioned in Schedule
I which is as follows:
Ferrous metallurgical industry.
Non-ferrous metallurgical industry.
4. Ore processing industry.
Textile industry 11. Paper industry.
(including coke) industry.
Power (thermal and diesel) generating industry.
Processing of animal or vegetable products industry."
the short question, is, whether the industry run by the respondent herein for
manufacturing Rayon Grade Pulp, a base material for manufacture of synthetics
or man- made fabrics is one of the industries mentioned in Schedule I
this case, the respondent company was registered as company in 1975. The supply
of energy to the company commenced on August 22, 1981 and the production began from September 1, 1981. The company manufactures rayon
grade pulp of 26250 tonnes per annum. The Company was served with a notice on 12th August, 1981 to furnish the quantum of water
consumed for assessment under the Act. Based on the returns filed by the
respondent as required under section S of the Act, assessment of water cess was
made by an order dated 31st
Aggrieved by the said order the respondent filed an appeal before the Appellate
Committee constituted under the Act. The Appellate committee by its order dated
30th November, 1982 conformed the orders of the
assessment passed by the petitioner. Before the Appellate Committee various
contentions were urged and only one of such contention survives now and is
agitated before us, namely, that the Rayon Industry is nOt included in Schedule
I of the said Act. The Appellate Committee by its order said as follows:
are unable to agree with the arguments advanced by the learned counsel. The
appellant industry is manufacturing Rayon Grade Pulp which comes under the
category of textile industry as it involves the production of Rayon Grade Pulp.
material for manufacture of synthetic of man-made fibres.'' PG NO 385 From the
aforesaid, it appears that the Appellate Committee was of the view that the
respondent herein was manufacturing Rayon Grade Pulp which comes under the
category of Textile mentioned in Schedule I of the Act.
industry is item No. 10 in the aforesaid Schedule.
by the decision of the Appellate Committee, the respondent herein filed writ
petition challenging the constitutional validity of the Act as well as the levy
of cess on water on the ground that it was not one of the industries mentioned
in the Schedule. The High Court by its order dated 9th October, 1987 rejected
the contention relating to the constitutional validity but upheld the
contention that the respondent's industry was not an industry which is
mentioned in Schedule I and as such was not liable to pay cess. It is the
propriety or the correctness of that decision which is sought to be canvassed
before us by this petition. It must, therefore, be made clear that we are not
concerned with the correctness or otherwise of the decision of the High Court
about the constitutional validity of the Act in question. That is not at issue
before us since the petitioner, Andhra Pradesh State Board for Prevention and
Control of Water Pollution has not challenged that finding. The only question
is whether the respondent is an industry as mentioned in the aforesaid
schedule. The High Court in the impugned judgment has held that Rayon Grade
Pulp is not covered by any of the items specified in the said Schedule. We are
of the opinion that the High Court was right. Before us it was sought to be
canvassed that Rayon Grade Pulp is covered either by Item No. 7 which is
chemical industry or 13y item No. 10 which is textile industry or item No. I1
which is paper industry. We are unable to accept the contention.
to be borne in mind that this Act with which we are concerned is an Act
imposing liability for cess. The Act is fiscal in nature. The Act must,
therefore, be strictly construed in order to find out whether a liability is
fastened on a particular industry. The subject is not to be taxed without clear
words for that purpose; and also that every Act of Parliament must be read
according to its natural construction of words. See the observations in Re Micklethwait,
 11 EX 452, 456. Also see the observations in Tenant v. Smith,  AC
150 and Lord Halsbury's observations at page 154. See also the observations of
Lord Simonds in St. Aubyn v. AG,  2 All E.R. 473 at 485. Justice Rowlatt
of England said a long time ago, that in a
taxing ACt one has to look merely at what is clearly said. There is no room for
is no equity about a tax. There is no presumption at to tax. Nothing is to be
read in, nothing is to be implied.
has to look fairly at the language used. See the observations in Cape Brandy
Syndicate v. IRC, J 1 KB PG NO 386 64 at 71. This Court has also
reiterated the same view in Gursahai Saigal v. C.I.T. Punjab,  3 SCR 893;
S.L. T. Madras v. V. MR. P. Firm, Muar,  I
SCR 815. and Controller of Estate Duty Gujarat v. Kantilal Trikamlal,  1 SCR 9.
question as to what is covered must be found out from the language according to
its natural meaning fairly and squarely read. See the observations in IRC v.
Duke of Westminster,  AC I at 24, and of this Court in A V Fernandez v. The
State of Kerala,  SCR 837. Justice Krishna Iyer
of this Court in Martand Dairy & Farm v. Union of India,  Suppl. SCR
265 has observed that taxing consideration may stem from administrative
experience and other factors of life and not artistic visualisation or neat
logic and so the literal, though pedestrian, interpretation must prevail.
this case where the question is whether a particular industry is an industry as
covered in Schedule I of the Act, it has to be judged normally by what that
industry produces mainly. Every industry carries out multifarious activities to
reach its goal through various multifarious methods.
a particular industry falls within the realm of taxation, must be judged by the
predominant purpose and process and not by any ancillary or incidental process
carried on by a particular industry in running its business.
process would be involved to a certain extent, more or less in all industries,
but an industry would be known as a chemical industry if it carries out
predominantly chemical activities and is involved in chemical endeavours.
fail to see that Rayon Grade Pulp could be considered even remotely connected
as such with chemical industry or textile industry or paper industry. In all
preparations, there is certain chemical process but that does not make all
industries chemical industries. The expression "chemical" means,
according to Collins English Dictionary. any substance used in or resulting
from a reaction involving changes to atoms or molecules or used in chemistry.
The Concise Oxford Dictionary, 8th Edition page 170 defines "chemical'' as
made by or relating to, chemistry. Broadly and literally, in our opinion, it
can be said that the Rayon Grade Pulp is neither chemical industry nor textile
industry nor paper industry. We find it difficult on a broad and literal
construction to bring the industry of the respondent into any of these
categories. In other words, to find out the intention of the legislation, if
possible it should be PG NO 387 found out from the language used in case of
doubt. The purpose of legislation should be sought for to clarify the ambiguity
only, if any. The fairest and most rational method, says Blackstone, to
interpret the will of the legislator is by exploring his intentions at the time
when the law was made, by signs the most natural and probable.
these signs are either the words, the context, the subject matter, the effects
and consequence, or the spirit and reason of the law. See Commentaries on the
Laws of England by Blackstone (facsimile of 1st edition of 1765, University of
Chicago Press, 1979 Vol. 1 p. 59.). The words are generally to be understood
`in their usual and most known signification', although terms of art `must be
taken according to the acceptation of the learning in each art, trade and
science. If words happen still to be dubious, we may establish their meaning
from the context, which includes the preamble to the statute and laws made by
the same legislator on the same subject. Words are always to be understood as
having regard to the subject matter of the legislation. See Cross Statutory
Interpretation, 2nd Edition page 21.
Court in Lt Col. Prithi Pal Singh Bedi etc. v. Union of India & Ors.,
 I S.C.R. 393 at page 404 of the report reiterated that the dominant
purpose in construing a statute is to ascertain the intention of the
Parliament. One of the well recognised canons of construction is that the
legislature speaks its mind by use of correct expression and unless there is
any ambiguity in the language of the provision the Court should adopt literal
construction if it does not lead to an absurdity. Therefore, the first question
to be posed is whether there is any ambiguity in the language used. If there is
none, it would mean the language used, speaks the mind of Parliament and there
is no need to look somewhere else to discover the intention or meaning. If the
literal construction leads to an absurdity, external aids to construction can
be resorted to. To ascertain the literal meaning it is equally necessary first
to ascertain the juxtaposition in which the rule is placed, the purpose for
which it is enacted and the object which it is required to subserve and the
authority by which the rule is framed.
the aforesaid principle in mind, we find that there is no absurdity in the
literal meaning. The purpose of the Act is to realise money from those whose
activities lead to pollution and who must bear the expenses of the maintenance
and running of the State Board. It is a fiscal provision and must, therefore,
not only be literally construed but also be strictly construed. Having regard
to the literal expression used and bearing in mind the purpose for the
legislation, we arrive at a result that certain PG NO 388 industries have to
pay the expenses of the maintenance and functioning of the State Boards.
Considering the principle broadly and from commonsense point of view, we find
nothing to warrant the conclusion that Rayon Grade Pulp is included in either
of the industries as canvassed on behalf of the petitioner here and as held by
the High Court in the judgment under appeal.
this case, we must also note that neither the water Pollution Board nor any
authorities under the Act nor the High Court proceeded on any evidence how
these expressions are used in the particular industry or understood in the
trade generally. In other words, no principle of understanding in "common
parlance" is involved in the instance case.
that view of the matter, we are of the opinion that the contention sought for
by the petitioner is of no substance.
attention, however, was drawn to the decision of a learned single Judge of the
High Court of Kerala in M/s. Gwalior Rayon
Silk Mfg. (Wvg.) Co. Ltd., Mavoor v. The Appellate Committee for Water Cess, Trivandrum and others, A.I.R. 1983 Kerala 110.
There, the learned single Judge of the Kerala High Court held that industry
manufacturing rayon-grade pulp is chemical industry. The High Court has
observed that the product of the Pulp Division of a rayon silk manufacturing
company is rayon-grade pulp, extracted from bamboo or wood. The High Court
noted that the pulp produced in the Pulp Division of the company is the raw
material for the Staple Fibre Division. The High Court further observed that
the pulp in question is a chemical used as chemical raw material, in the form
known as chemical cellulose, for preparation of fibres. The High Court noted
that for the scientist cellulose is a carbohydrate an organic compound, a saccharide
and for the layman also it is a chemical like salt and sugar. Manufacture of
pulp from wood or bamboo involves consumption of large quantities of water
which get polluted in the process; and "chemical industry'' in the context
in which it is used in Schedule I of the Act, can therefore, include an
industry manufacturing rayon-grade pulp. We are unable, with respect, to accept
the circuitous process of reasoning of the Kerala High Court. As mentioned
hereinbefore, looked at from this circuitous method every industry would be
chemical industry. It could not have been the intention to include all
industries because every industry has to go to certain chemical process more or
less and, therefore, it could not be so construed.
expression should, therefore, be construed reasonably, strictly and from a
commonsense point of view. The High PG NO 389 Court of Kerala has set out in
the said judgment the company's case in that case which also produced Rayon
Grade Pulp and the manufacturing process consisted only of isolating cellulose
present in bamboo and wood by removal of "lignin" and other contents,
and that the resultant product is not chemical cellulose. It explained the
process as under:
actual process of manufacture of Rayon grade pulp is by feeding the raw materials
on the conveyors leading to the chippers, where they are chipped into small
pieces in uniform sizes. The raw materials are washed by a continuous stream of
water before they are fed into chippers for removal of their adhering mud and
dirt. The chips are then conveyed into Digesters, where they are subjected to
acid pre-hydrolysis, using dilute sulphuric acid solution. The spent liquor is
then drained out, and the chips washed to remove the acid. The chips are again
cooked using a solution containing cooking chemicals at high temperature of
above 160C. After the chips are thus cooked the pressure is released, and the
material is collected in a blow tank, from where the chipped pulp is sent to
"Knotter Screen" for removal of uncooked particles. The pulp is
washed in a series of washers in a counter-current manner. The washed pulp is
bleached in a multi-staged Bleaching Plant, and converted into sheets in a
continuous machine. The pulp sheets so obtained are sent to other factories for
their conversion into Staple Fibre." The said High Court also relied on a
passage from the "Book of Popular Science" Grolier, 1969, Vol. 7, p.
55 which reads as follows:
what is a chemical, after all? Presumably it is a pure chemical substance (an
element or compound) and not a mixture. Thus sulphuric acid is a chemical ..
But common salt and sugar, with which all of us are familiar, are also pure
chemical substances .... The truly chemical industries, which manufacture
chemicals, are seldom well known to the public. This is because we, as
consumers, do not ordinarily make use of chemicals in their pure form. Instead
they are converted into products that reach the consumer only after a number of
operations ...." (Emphasis supplied) PG NO 390 As mentioned hereinbefore,
the expression should be understood not in technical sense but from broad
commonsense point of view to find out what it truly means by those who deal
with them. Bearing the aforesaid perspective in mind, we are unable to agree
with the view of the Kerala High Court expressed in the aforesaid judgment. In
that conspectus of the Kerala High Court everything would be included in the
process of chemical.
aforesaid view of the matter we are of the opinion that the High Court of
Andhra Pradesh in the impugned judgment was right and the High Court of Kerala
in the judgment referred to hereinbefore was not right.
aforesaid view of the matter this petition fails and is accordingly dismissed.