# M/s Rapti Commission Agency v. State of U.P. and another

- **Citation:** (2003) 2 ILRA 516
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2003-07-08
- **Case number:** Civil Misc. Writ Petition No. 865 of 2001
- **Bench:** M. Katju, R.S. Tripathi
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-rapti-commission-agency-v-state-of-u-p-and-another-40158
- **Pages:** 17

## Headnote

U.P. Trade Tax Act- Section 8E-the
petition is firm M/s Tian Yuan India Pvt.
Ltd.- Consignment of mentha oil- on the
ground that the firm has not deducted
the
Taxes
from
the
seyers
and
agriculturist- held liable to pay the trade
taxes.

Held -Para 21

The petitioner is certainly liable to pay
purchase tax under the U.P. Trade Tax
Act in respect of his purchases within the
State. Hence there can be no doubt that
intra state purchases made by the
petitioner can be subjected to tax under
the Act.
Case law discussed:
http:\\allahabadhighcourt.nic.in
2 All] M/s Rapti Commission Agency V. State of U.P. and another
517
1982 U.P.T.C. 971, 1998 U.P.T.C.-1140, 1999
U.P.T.C.-969,
1983
U.P.T.C.
387,
2000
U.P.T.C.-374, 2000 U.P.T.C. 459, 2001 S.T.I.
169, 12 S.T.C. 357, 1993 (3) SCC-677, AIR
1989 SC 2015, AIR 1986-1041, AIR 1959 SC
459, 1977 (4) SCC 98, AIR 1955 SC-367, AIR
1962 SC-1044, AIR 1971 SC 2486, AIR 1995
SC-142, 1979 (1) SCC 23, AIR 1978 SC 1675,
AIR 2001 SC-724, AIR 1997 SC-1511, AIR
1978 747, AIR 1963 SC 1207, AIR 1963 SC
1638, AIR 1964 SC-1230, 1975 (4) SCC 754,
AIR 1978 SC-747, AIR 1970 SC 494, AIR 1970
SC 264, 273 U.S. 418

## Text

_Characters 0–39,981 of 54,214. This is a partial read: ask again with offset=39981 for what follows._

INDIAN LAW REPORTS ALLAHABAD SERIES [2003
516
In view of the above, our conclusions
are-

(1) The petitioner is entitled to be
notionally reinstated forthwith since the
order of dismissal has already been set
aside by the Apex Court vide judgment
and order dated 27-3-2003 in Civil
Appeal
treating
the
petitioner
in
continuous service till he attained the age
of superannuation.

(2) The petitioner will be entitled to all
benefits, privileges in terms of money,
arrears of salary; etc, had he continued in
service without taking into account the
order of dismissal and later set aside by
the Supreme Court along with 10% per
annum simple interest from the date
amounts became due till the date of actual
payment.

(3) The petitioner will be entitled to all
post retrials benefits treating as if there
has been no break in service and he
continued throughout, as indicated above.
Relevant papers shall be submitted by the
petitioner forthwith along with certified
copy of this judgment within six weeks
from today before the concerned authority
for necessary compliance as above within
three months of receipt of certified copy
of this judgment.

(4) The petitioner shall deposit Rs.
46,000/- along with 10% simple interest
per annum from the date of dismissal till
the date of actual payment. The Bank
shall be entitled to deduct and account for
the aforesaid amount while making
payment of any arrears to the petitioner
from 1987 till he attained the age of
superannuation,
provided
the
loan
amounts or part thereof, in respect of
which, petitioner was charged, has not
been refunded by the borrower or realised
by the Bank so far.

10. The petition stands partly
allowed to the extent and subject to the
directions indicated above.

No order as to costs.
---------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 08.07.2003

BEFORE
THE HON'BLE M. KATJU, J.
THE HON'BLE R.S. TRIPATHI, J.

Civil Misc. Writ Petition No. 865 of 2001

M/s Rapti Commission Agency...Petitioner
Versus
State of U.P. and another ...Respondents

Counsel for the Petitioner:
Sri P.K. Misra
Sri Bharat Ji Agarwal
Sri Piyush Agrawal

Counsel for the Respondents:
S.C.

U.P. Trade Tax Act- Section 8E-the
petition is firm M/s Tian Yuan India Pvt.
Ltd.- Consignment of mentha oil- on the
ground that the firm has not deducted
the
Taxes
from
the
seyers
and
agriculturist- held liable to pay the trade
taxes.

Held -Para 21

The petitioner is certainly liable to pay
purchase tax under the U.P. Trade Tax
Act in respect of his purchases within the
State. Hence there can be no doubt that
intra state purchases made by the
petitioner can be subjected to tax under
the Act.
Case law discussed:
http:\\allahabadhighcourt.nic.in
2 All] M/s Rapti Commission Agency V. State of U.P. and another
517
1982 U.P.T.C. 971, 1998 U.P.T.C.-1140, 1999
U.P.T.C.-969,
1983
U.P.T.C.
387,
2000
U.P.T.C.-374, 2000 U.P.T.C. 459, 2001 S.T.I.
169, 12 S.T.C. 357, 1993 (3) SCC-677, AIR
1989 SC 2015, AIR 1986-1041, AIR 1959 SC
459, 1977 (4) SCC 98, AIR 1955 SC-367, AIR
1962 SC-1044, AIR 1971 SC 2486, AIR 1995
SC-142, 1979 (1) SCC 23, AIR 1978 SC 1675,
AIR 2001 SC-724, AIR 1997 SC-1511, AIR
1978 747, AIR 1963 SC 1207, AIR 1963 SC
1638, AIR 1964 SC-1230, 1975 (4) SCC 754,
AIR 1978 SC-747, AIR 1970 SC 494, AIR 1970
SC 264, 273 U.S. 418

(Delivered by Hon'ble M. Katju, J.)

1. In this bunch of writ petitions the
petitioners
have
challenged
the
constitutional validity of Section 8-E of
the U.P. Trade Tax Act (hereinafter
referred to as 'the Act') which has been
inserted by Section 7 of the U.P. Act No.
11 of 2001. We are treating writ petition
no. 865 of 2001 as the leading case. The
petitioner in that petition has also
challenged the notices, copies of which
are Annexure 2 and 11 of the writ petition
issued under Section 8-E.

2. The petitioner in writ petition no.
865 of 2001 is a sole proprietorship
concern whose business is to get purchase
orders from its Ex-U.P. principals, and to
purchase goods in pursuance of such
orders from agriculturist / farmers. The
petitioner has entered into an agreement
with M/s Tian Yuan India (P) Limited,
Raigarh,
Maharastra,
for
purchasing
goods on their behalf. The petitioner
purchases Mentha oil for and on behalf of
Ex-U.P. principals and it dispatches the
same to its Ex-U.P. principals, namely,
M/s Tian Yuan India Pvt. Limited in
accordance with the agreement dated
2.4.2001 Annexure 1 to the writ petition.
Earlier also the petitioner entered into
similar agreement with the said company.
3. By notice dated 8.7.2001 the
consignment of Mentha oil was detained
by the respondent no. 3, Trade Tax
Officer, Mobile Squad, Jhansi, and the
driver of the vehicle was informed about
it on 9.7.2001 by the notice dated
8.7.2001, Annexure 2 to the writ petition
which has been issued under Section 8-E
of the Act. A perusal of the said notice
shows that the detention has been made
because the petitioner has not deducted
the tax from the sellers/agriculturists and
has not deposited the same.

4. The petitioner sent a reply on
11.7.2001 stating that the purchase of
Mentha oil was for and on behalf of ExU.P. principals from the agriculturists and
all
documents
accompanying
the
consignment clearly established this fact.
Section 8-E of the Act states as follows:
" Deduction by Agent -Every agent
referred to in sub-clause (v) of Clause ( c
)of Section 2 who for the dealer residing
outside the State, is responsible for
making payment to a person who is not
treated as a dealer under the proviso to
clause ( c ) of the said Section, or
discharge of any liability on account of
the valuable consideration payable for the
sale of agricultural or horticultural
produce grown by that person or grown
on any land in which such person has an
interest, whether as owner, usufructury
mortgage, tenant or otherwise, or for the
sale of poultry of diary products from
fouls or animals kept by him, shall at the
time of making such payment, deduct an
amount equal to four percent or at such
lower rate mentioned under Section 3-D
and the provisions of sub-sections (3) to
(9) of Section 3-D shall mutatis mutandis
apply in respect thereof."

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INDIAN LAW REPORTS ALLAHABAD SERIES [2003
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5. A perusal of the above provision
shows that it provides for deduction of
4% while making payment to a seller who
is not a dealer under the U.P. Trade Tax
Act for discharge of any liability on
account of valuable consideration payable
for the sale of agricultural or horticultural
produce grown by that person or grown
on any land in which such person has any
interest. It is alleged in paragraph 13 of
the writ petition that a seller who is not
liable for payment of any tax, as he is not
a dealer under the Act, will not permit a
deduction of 4% on the sale price which
he is entitled to receive.

6. The petitioner has relied on the
decision of the Supreme Court in CST vs.
Bakhtawar Lal Kailash Chand Arhati,
1992 UPTC 971. He has also relied on the
decision of this Court in Commissioner of
Trade Tax vs. M/s Tian Yuan 1998 UPTC
1140 and the decision in CST vs. Rapti
Commission Agency 1999 UPTC 969.
Photocopy of the reply of the petitioner to
the notice is Annexure 4 to the writ
petition.

7. In paragraph 29 of the writ
petition it is alleged that the deduction, if
any,
can
be
made
if
the
agriculturist/selling dealer is liable for
payment of tax but not otherwise. It is
alleged in paragraph 30 of the writ
petition that the seller is not liable to pay
any tax as he is not a dealer under the Act
in view of the proviso to Section 2 (c) of
the Act. Hence it is alleged that there
cannot be any deduction from the
petitioner while paying the sale price to
the agriculturalist.

8. It is further alleged in paragraph
31 of the writ petition that the goods
accompanying the documents cannot be
detained
under
Section
13-A.
The
petitioner has relied on the decision of
this Court in Shaw Scott Distilleries vs.
S.T.O. 1983 UPTC 387. In that decision it
was held that the provisions of Section
13-A made it clear that the power to seize
goods is conferred upon an officer
authorized in that behalf where either the
goods cannot be traced to any bona fide
dealer or where it is doubtful if the goods
are properly accounted for. It is alleged
that these two conditions do not exist in
the present case, and hence the detention
is illegal.

9. The petitioner has alleged that a
provision similar to Section 8-D was
considered by the Supreme Court in Steel
Authority of India vs. State of Orissa 2000
UPTC 374 and the Supreme Court has
struck down Section 13- AA of Orissa
Sales Tax Act which provided for
deduction of 4% as TDS in respect of
payment made to the contractors. The
judgment of the Supreme Court is
Annexure 5 to the writ petition. Similarly
In M/s Nathpa Jhakri Jt. Venture vs. State
of Himachal Pradesh, 2000 UPTC 459 a
similar provision of the Himachal Pradesh
General Sales Tax Act was declared void,
vide Annexure 6 to the writ petition.

10. The petitioner has also alleged
that it was an interstate sale and hence the
U.P. Trade Tax does not apply vide CST
vs. M/s Bakhtawar Lal Kailash Chand
(Supra), CST vs. Vanaspati Trading
Company, Gorakhpur 2001 STI 169 and
CTT vs. Munshi Ram Madan Lal 2001
UPTC 343 vide Annexure 8 and 9 to the
writ petition.

11. In paragraph 38 of the writ
petition it is alleged that photocopies of
the
documents
accompanying
the
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519
consignment clearly show that these
documents are duly accounted for and the
same had been dispatched in pursuance of
the earlier agreement.

12. After the petitioner filed his
reply the respondent no. 2 issued notice
dated 11.7.2001 Annexure 11 to the writ
petition stating that the petitioner has not
made deduction as required under Section
8-E while making the payment to the
farmers/agriculturists.

Aggrieved this petition has been filed
in this Court.

13. A counter affidavit has been
filed on behalf of the State Government. It
is alleged in paragraph 3-A of the counter
affidavit that a final determination has yet
to be made whether the goods were
purchased by the petitioner on his own
account or in the course of interstate
purchase. It is alleged in paragraph 10 that
Section 8-E is a valid piece of legislation
under Entry 54 of List II of the 7th
Schedule of the Constitution. It is alleged
in paragraph 12 that a person who is not a
dealer under the Act may yet be a dealer
under the Central Sales Tax when he is
making interstate sales to the agent of an
Ex-U.P. principal. It is alleged that
Section 8-E is in parimateria with Section
8-D whose validity has been upheld by
this Court. It is alleged that Section 8-E
provides an effective mechanism for
collection of tax.

14. A counter affidavit has also been
filed by the respondent no. 3 and we have
perused the same. It is alleged in
paragraph 8 that the goods were detained
because the detaining authority could not
be satisfied about the deduction made
under Section 8-E.
We have also perused the rejoinder
affidavit.

15. Learned counsel for the
petitioner,
Shri
Bharatji
Agarwal,
submitted that this writ petition deserves
to be allowed as it is squarely covered by
the decisions of the Supreme Court in
Steel Authority of India Limited vs. State
of Orissa and others 2000 UPTC 374 and
M/s Nathpa Jhakri Jt. Venture vs. State of
Himachal Pradesh and others 2000
UPTC 459. In both these decisions similar
provisions for deduction of 4% were
struck down on the ground that these
provisions made no distinction between
interstate or export sale / purchase on the
one hand, and intra-state sale / purchase
on the other.

16. Shri Agarwal submitted that if
Section 8-E had provided that it will not
apply to interstate, outside, or export,
sales / purchases then it is possible that it
could have been held to be a valid
provision. However, he submitted, a
careful perusal of Section 8-E shows that
it applies to all kinds of sales and
purchases, whether intrastate, interstate,
outside or export, and in every case there
has to be 4% deduction.

17. Learned counsel, relying on the
Supreme Court decision in C.S.T. vs.
Bakhtawar Lal Kailash Chand (Supra)
submitted that the U.P. legislature has no
jurisdiction to legislate on a sale or
purchase in the course of inter state trade
or commerce, or regarding outside /
export sales and purchases. It can only
legislate regarding intrastate sales or
purchases. Since Section 8-E makes no
such distinction, and it taxes all sales,
whether intra state, inter state, outside or
export, which fall within its purview,
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INDIAN LAW REPORTS ALLAHABAD SERIES [2003
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hence in view of the decisions of the
Supreme Court in Steel Authority of
India's case (Supra) and M/s Nathpa
Jhakri's case (Supra) it must be held that
Section 8-E is ultra vires the legislative
competence of the State legislature, and
consequently the impugned notices must
also be held to be illegal.

Section 2 (c) of the U.P. Trade Tax
Act define dealer as follows:
""dealer" means any person who
carries on in Uttar Pradesh (whether
regularly or otherwise) the business of
buying, selling, supplying or distributing
goods directly or indirectly, for cash or
deferred
deferred
payment
or
for
commission,
remuneration
or
other
valuable consideration and includes ---
(i) ........................
(ii) a factor, broker, Arhati, commission
agent, del credere agent, or any other
mercantile agent, by whatever name
called
and
whether
of
the
same
description as herein before mentioned or
not, who carries on the business or
buying, selling, supplying or distribution
goods belonging to any principal, whether
disclosed or not;
(iii) .......................
(iv) ..........................
(v) every person who acts within the
State, as an agent of a dealer residing
outside the State, and buys, sells, supplies
or distributes goods in the State or acts on
behalf of such dealer as --
(a) a mercantile agent as defined in
the Sale of Goods Act , 1930; or
(b) an agent for handling of goods
or documents of title relating to goods; or
(c) an agent for the collection or
the payment of the sale price of goods or
as a guarantor for such collection or such
payment;"

18. A perusal of the above provision
shows that a dealer includes a commission
agent as well as an agent of a dealer
residing outside the State who buys, sells
or supplies goods in the State on behalf of
such dealer outside the State. From the
above definition it is evident that the
petitioner is a dealer since admittedly he
buys goods on behalf of Ex-U.P.
principal.

19. No doubt the agriculturist /
farmer who sells his produce to the
petitioner is not a dealer in view of
proviso to Section 2(c) which states:

"Provided that a person who sells
agricultural or horticultural produce
grown by himself or grown on any land in
which he has an interest, whether as an
owner, usufructuary mortgagee, tenant,
or otherwise, or who sells poultry or dairy
products from fowls or animals kept by
him shall not, in respect of such goods be
treated as a dealer."

20. However, though the farmer /
agriculturist, not being a dealer, may not
be liable to pay sales tax under the Act,
the petitioner as a dealer is certainly liable
to pay purchase tax in view of Section
3(1) of the Act which states:

"Liability to tax under the Act ---
(1) Subject to the provisions of this Act,
every dealer shall, for each assessment
year, pay a tax at the rates provided by or
under Section 3-A, or Section 3-D on his
turnover of sales or purchases or both as
the case may be] which shall be
determined in such manner as may be
prescribed."

21. It may be noticed that Section 3
of the Act imposes tax on not only sales
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521
but also on purchases. Since the petitioner
is purchasing the goods from the farmers /
agriculturists, and he is a dealer within the
meaning of definition in Section 2(c), the
petitioner is certainly liable to pay
purchase tax under the U.P. Trade Tax
Act in respect of his purchases within the
State. Hence there can be no doubt that
intra state purchases made by the
petitioner can be subjected to tax under
the Act.

Section 8-E is only a convenient
method of collecting tax which the
legislature thought may otherwise would
have been evaded.

22. In West U.P. Sugar Mills
Association and others vs. State of U.P.
2001 UPTC 1110 a Division Bench of
this Court held that a provision which was
a convenient device for facilitating the
collection of tax which the Legislature
thought would otherwise be evaded is
valid. In that decision this Court relied on
the Supreme Court decisions in Orient
paper Mills vs. State of Orissa, 12 STC
357 and Chhote Bhai Jetha Bhai Patel vs.
State of M.P. 30 STC 1 in which it was
held that power to collect a tax means the
power
to
collect
it
properly
and
effectively. The same view was taken by
the Supreme Court in Venkateshware
Theatre vs. State of Andhra Pradesh,
1993 (3) SCC 677, Buza Dooras Tea
Company vs. State of West Bengal, AIR
1989 SC 2015, Govind Saran Ganga
Saran vs. Commissioner of Sales Tax, AIR
1986 SC 1041, Kheer Bori Tea Company
vs. State of Assam, AIR 1964 SC 925 and
M.D. Century Co-operative Bank vs. ITO
AIR 1975 SC 2016, etc.

In V.K. Singhal vs. State of U.P.
1995 UPTC 337 this Court upheld the
validity of Section 8-D and observed that
the power to impose tax also includes the
power of its collection by means of
advance payment of tax or deduction of
tax at source to be finally adjusted at the
time of filing of the return.

In our opinion the legislature in its
wisdom can always provide for a
convenient device for collection of tax. It
is not for this Court to go into the
question whether there could be a better
method
than
that
devised
by
the
legislature for collection of the tax. The
Court may feel that the mischief sought to
be remedied by the law may better have
been achieved by adopting some other
course of action or by some other law, but
on this ground it cannot strike down the
law. The legislature in its wisdom is free
to choose different methods of remedying
an evil, and the Court cannot say that this
or that method should have been adopted.
As Mr. Justice Cardozo observed in
Anderson vs. Wilson, 289 U.S. 20:

"We do not pause to consider
whether a statute differently conceived
and framed would yield results more
consonant with fairness and reason. We
take this statute as we find it."

There are various provisions in
various Taxing Statutes which provide for
deduction at source e.g. under the Income
Tax Act, Sales Tax Act, etc. and the
validity of all these provisions have been
upheld. Hence Section 8-E is not a new
concept in Tax Law. It was made by the
Legislature in its wisdom for more
efficient mechanism for collection of tax.
This court cannot sit as a Court of appeal
over the wisdom of the Legislature as
long as the Legislature is acting within its
legislative competence.
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INDIAN LAW REPORTS ALLAHABAD SERIES [2003
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Sales and purchase tax are mentioned
in Entry 54 of List II of the 7th Schedule
to the Constitution which states:

"Taxes on the sale or purchase of
goods other than newspapers, subject to
the provisions of sentry 92 A of List I."

It is well settled that the Entries in
the Lists in the Constitution should be
given the widest scope of their meaning
vide Sri Ram Vs. State of Bombay AIR
1959 SC 459 (vide para 12); Banarasi vs.
WTO AIR 1965 SC 1387 (vide para 6),
etc. It has also been held by the Supreme
Court that the general words in an entry
would be held to extend to all ancillary or
subsidiary matters which can fairly and
reasonably be comprehended in it vide
R.S. Joshi v. Ajit Mills, 1977 (4) SCC 98,
Hans Muller vs. Superintendent AIR 1955
SC 367, Navin Chandra Mafatlal vs.
C.I.T. AIR 1955 SC 58, Chaturbhai vs.
Union of India AIR 1960 SC 424; Rai
RamKrishna vs. State of Bihar AIR 1963
SC 1667 etc. The various entries in the
three lists are not powers of legislation
but fields of legislation vide Union of
India vs. Dhillon 1971 (2) SCC 779 (vide
para 22), Harakchand vs. Union of India
1970 (1) SCR 479, Calcutta Gas Co. vs.
State of W.B. A.I.R. 1962 SC 1044 etc.

The submission of the learned
counsel for the petitioner that the
deduction in question can only be made if
the selling dealer is liable for payment of
tax has no merit. As already mentioned
above, even if a seller who is not a dealer
is not liable for payment of tax, the
purchaser, if a dealer, is liable for
payment of tax as is evident from a bare
perusal of Section 3 (1) of the Act.

As regards the submission of the
petitioner that the goods in question
cannot be detained in view of the decision
in M/s Shaw Scott Distilleries Private Ltd
vs. S.T.O. 1983 UPTC 387, a perusal of
Section 13-A of the Act makes it clear
that goods can be seized by the authorized
officer where either the goods cannot be
traced to any bonafide dealer or when it is
doubtful if such goods are properly
accounted for by the dealer vide Section
13-A (1-A). Hence we make it clear that
the detention in respect of Section 8-E
shall only be made if the conditions of
sub-section (1-A) of Section 13-A are
fulfilled, and the other provisions in
Section 13-A must also be complied with.
At this stage we cannot say whether the
provisions of sub-section (1-A) of Section
13-A are fulfilled or not and this should
be decided by the detaining authority at
the earliest.

We
come
now
to
the
main
submission of the learned counsel for the
petitioner on which he has heavily relied,
namely, that Section 8-E has to be struck
down in view of the Supreme Court
decisions in Steel Authority of India
Limited vs. State of Orissa (Supra) and
M/s Nathpa Jhakri's case (Supra). Under
Entry 92 A of List I of the Seventh
Schedule, inter-state sales can only be
taxed by Parliament, but, it is submitted,
Section 8-E makes no distinction between
intra state sales and inter-state sales.

We have carefully considered the
aforesaid decisions of the Supreme Court.
In Steel Authority of India Limited case
(Supra), it has been observed by the
Supreme Court (vide paragraph 15) that:

"Section 13AA of the Orissa Sales
Tax Act should have been precisely
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523
drafted to make it clear that no tax was
levied on that part of the amount credited
or paid that related to inter-state sales,
outside sales and sales in the course of
import .............."

A careful perusal of the above two
decisions, namely, Steel Authority of
India Limited case (Supra) and Nathpa
Jhakri's case (Supra) shows that the
Supreme Court was not invited to
consider, nor did it actually consider, the
principle of statutory interpretation of
reading down the language of a statutory
provision if that is necessary to make the
provision constitutionally valid, rather
than to adopt the plain or wide meaning
which would make it unconstitutional.
This principle has been laid down in a
series of Supreme Court decisions,
(referred to below) many of which are
Constitution Bench decisions, whereas the
decision in Steel Authority of India
Limited case (Supra) is a three Judge
Bench decision and the decision in
Nathpa Jhakri's case (Supra) is a two
Judge Bench decision of the Supreme
Court.

It is well settled that there is
presumption
in
favour
of
the
constitutional validity of a Statute vide
Chiranjit Lal vs. Union of India 1950 SCR
869, Madhu Limaye Vs. S.D.A. AIR 1971
SC 2486, P.J. Krishnalal vs. Government
of Kerala 1995 AIR SCW 1325, Jilu Bhai
Nan Bhai vs. State of Gujrat AIR 1995 SC
142 etc.

If two interpretations are reasonably
possible the Court should take an
interpretation which would uphold the
constitutional validity of the statute even
if that involves narrowing down the scope
of the statutory provision. No doubt a
plain reading of Section 8-E indicates that
even inter-state sales are covered by it,
but such an interpretation would make the
provision
unconstitutional.
Hence
narrower
interpretation
should
be
adopted.

In our opinion the decision of the
Supreme Court in Steel Authority of India
case (Supra) and M/s Nathpa Jhakri's
case (Supra) are distinguishable because
they have not noted the decisions of the
Supreme Court in a plethora of cases
(including several Constitution Bench
decisions) where it was clearly laid down
that the language of a statutory provision
can be narrowed down if that is necessary
to sustain its Constitutional validity. In
our opinion, the language of Section 8-E
can be narrowed down so as to make it
applicable only to intra - state sales /
purchases, as this would make the
provision valid.

In Mark Netto vs. State of Kerala,
1979 (1) SCC 23 (vide para 6) a
Constitution Bench decision of the
Supreme Court read down a statutory
provision so as to make it constitutional.
In that case the constitutional question
was whether Rule 12(iii) of the Kerala
Tax Rule 1959 was violative of Article 30
of the Constitution. A plain and literal
interpretation of the provision would
make it violative of Article 30 of the
Constitution, and hence the Supreme
Court narrowed down the scope of the
said rule so as to sustain its validity.

Similarly in Sunil Batra Vs. Delhi
Administration, AIR 1978 SC 1675 (vide
para 38) another Constitution Bench
decision the Supreme Court observed:

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"Constitutional deference to the
Legislature
and
the
democratic
assumption that people's representatives
express the wisdom of the community lead
courts into interpretation of statutes
which preserves and sustains the validity
of the provision,"

There is always a presumption that
the Legislature does not exceed its
jurisdiction vide Union of India vs
Elphinstone Spinning and Weaving Co.
Ltd. AIR 2001 SC 724 (page 733), State of
Bihar vs. Bihar Distillery Ltd. AIR 1997
SC 1511 (1519) etc.

It follows from the above principle
that if one construction of the statute will
make it ultra vires whereas another
construction will sustain its constitutional
validity the Court should prefer the latter
on the ground that the legislature is
presumed not to have intended to exceed
its jurisdiction vide Union of India vs.
Tulsiram Patel AIR 1986 SC 1541, State
of Kerala vs. Krishnan Nayar AIR 1978
SC 747, (759), Rayala Corporation vs.
Director of Enforcement AIR 1970 SC
494 (499), Jothi Timber Mart vs. Calicut
Municipality AIR 1970 SC 264 (266),
Venkataraman & Co. vs. State of Madras
AIR 1966 SC 1089 (1104), Corporation of
Calcutta vs. Liberty Cinema, AIR 1965 SC
1107 (1113), Govindlalji vs. State of
Rajasthan AIR 1963 SC 1638 (1655),
Kedarnath vs. State of Bihar AIR 1962 SC
955
(969),
State
of
Bihar
vs.
Charusiladasi AIR 1959 SC 1002 (1010)
and Express Newspapers Ltd. vs. Union of
India AIR 1958 SC 578 (623).

It is a well settled principle of
interpretation that the general words in a
statute may be construed narrowly in
order to sustain its validity vide New
Delhi Municipal Committee vs. State of
Punjab AIR 1997 SC 2847 (2901). Hence
if it is possible to read a statutory
language as subject to an implied term to
sustain its validity the Court should be
very ready to make such an implication
vide A.G. Gambia vs. Momodon Jobe,
(1984) AC 689 (702) (PC, Hector vs.
Attorney
General
of
Antique
and
Barbuda, (1990) 2 All ER 103, p.107
(PC).

In re, Hindu Women's Right to
Property Act. AIR 1941 FC 72, the
Federal Court upheld the validity of the
Hindu Women's Rights to Property Act,
1947 by construing the word 'property' as
meaning 'property other than agricultural
land.'

In
that
decision
Gwyer,
C.J.
observed:

"If that word 'property' necessarily
and inevitably comprises all forms of
property, including agricultural land,
then clearly the Act went beyond the
powers of the Legislature, but when a
Legislature with limited and restricted
powers makes use of a word of such wide
and general import, the presumption must
surely be that it is using it with reference
to that kind of property with respect to
which it is competent to legislate and to
no other."

The
learned
Chief
Justice
further
observed:
"There is a general presumption
that a Legislature does not intend to
exceed its jurisdiction, and there is ample
authority for the proposition that general
words in a statute are to be construed
with reference to the powers of the
Legislature which enacts it."
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The above rule was applied by the
Supreme Court in Kedarnath vs. State of
Bihar AIR 1962 SC 955 and the Supreme
Court took a narrow construction of
Section 124-A of the Indian Penal Code
so as to avoid making it unconstitutional
in view of Articles 19 (1)(a) and 19(2) of
the Constitution.

Section 124-A of the Indian Penal
Code which relates to sedition makes a
person punishable who 'by words either
spoken or written or by sign or visible
representations or otherwise, brings or
attempts to bring into hatred or contempt,
or
excites
disaffection
towards
the
Government established by law.'

A perusal of the above provision
shows that if it is construed in a plain or
wide manner it will violate Articles
19(1)(a) and 19(2) of the Constitution.
Hence, the Supreme Court, in order to
make the provision constitutionally valid,
limited the scope "to acts involving
intention or tendency to create disorder or
disturbance of law and order or incitement
to violence."

Sinha, C.J. speaking for the Court in
that decision observed :

"It is well settled that if certain
provisions of law, construed in one way,
would make them consistent with the
Constitution, and another interpretation
would render them unconstitutional, the
Court would lean in favour of the former
construction.

In
Sunil
Batra
vs.
Delhi
Administration
(Supra)
the
Supreme
Court upheld the validity of Section 30(2)
of the Prisons Act, 1894, which provides
for solitary confinement of a prisoner
under sentence of death in a cell and
Section 56 of the same Act, which
provides for the confinement of a prisoner
in irons for his safe custody, by
construing these provisions narrowly so
as to avoid their being declared invalid on
the ground that they were violative of the
rights guaranteed under Articles 14, 19
and 21 of the Constitution.

Similarly, in New India Sugar Mills
vs. Commissioner of Sales Tax AIR 1963
SC 1207, a wide definition of the word
'sale' in the Bihar Sales Tax Act, 1947
was restricted by construction to exclude
transactions, in which property was
transferred from one person to another
without any previous contract of sale,
since a wider construction would have
resulted in attributing to the Bihar
Legislature an intention to legislate
beyond its competence.

In New Delhi Municipal Committee
vs. State of Punjab AIR 1997 SC 2847
provisions in the municipal laws levying
property tax on lands and buildings did
not contain any exception in respect of the
property of the State. These provisions
was
upheld
by
taking
a
narrow
construction by excluding the property of
the State since such property is exempted
from taxation under Article 289 of the
Constitution.
Although
the
aforesaid
provisions did not expressly exclude
property of the State from taxation, yet by
adopting a narrow construction the
validity of the provisions was sustained.

In Govindlalji vs. State of Rajasthan
AIR 1963 SC 1638 the words 'affairs of
the temple' occurring in Section 16 of the
Rajasthan Nathdwara Temple Act were
construed as restricted to secular affairs,
as on a wider construction the section
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would have violated Articles 25 and 26 of
the Constitution.

In R.L. Arora vs. State of U.P. AIR
1964 SC 1230 (at page 1234) the Supreme
Court while construing Section 40(1) (aa)
of the Land Acquisition Act, as amended
by Act 31 of 1962 construed the words
'building or work' to such building or
work which would sub serve the public
purpose of the industry or work in which
the company, for which acquisition is
made, is engaged. A wider and literal
construction of the clause would have
brought it in conflict with Article 31(2) of
the Constitution, and hence the narrower
construction was adopted.

In
Indian
Oil
Corporation
vs.
Municipal Corporation AIR 1993 SC 844
Section 23 of the Punjab Municipal
Corporation Act 1976 which empowered
the Corporation to levy octroi on articles
and animals 'imported into the city' was
read down to mean articles and animals
'imported into the municipal limits for
purposes of consumption, use or sale,'
since a wide construction would have
made the provision unconstitutional being
in excess of the power of the State
Legislature conferred by Entry 52 of List
II of 7th Schedule.

In Union of India vs. Elphinstone
Spinning & Weaving Co. AIR 2001 SC
724 (733) the Supreme Court observed :

"It is also a cardinal rule of
construction that if one construction
being given the statute will become ultra
vires the powers of the Legislature
whereas on another construction which
may be open, the statute remains effective
and operative then the Court will prefer
the latter, on the ground that the
Legislature is presumed not to have
intended an excess of jurisdiction."

In Morey vs. Doud (354 US 457
(1957) Mr. Justice Frankfurter, of the U.S.
Supreme Court observed :

"In the utilities, tax and economic
regulation cases, there are good reasons
for judicial self-restraint if not judicial
deference to legislative judgment. The
Legislature after all has the affirmative
responsibility. The Courts have only the
power to destroy, not to reconstruct. The
uncertainty, the liability to error, the
bewildering conflict of the experts, and
the number of times the Judges have been
overruled by events - self-limitation can
be seen to be the path to judicial wisdom
and institutional prestige and stability."

In the same decision Justice Frankfurter
also observed:

"The Court must always remember
that "legislation is directed to practical
problems, that the economic mechanism is
highly sensitive and complex, that many
problems are singular and contingent,
that laws are not abstract propositions
and do not relate to abstract units and are
not
to
be
measured
by
abstract
symmetry"; "that exact wisdom and nice
adaptation of remedy are not always
possible" and that "judgment is largely a
prophecy
based
on
meager
and
uninterrupted
experience."
Every
legislation,
particularly
in
economic
matters, is essentially empiric and it is
based on experimentation, or what one
may call trial and error method, and
therefore it cannot provide for all possible
situations or anticipate all possible
abuses. There may be crudities and
inequities in complicated experimental
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economic legislation but on that account
alone it cannot be struck down as
invalid."

In Superintendent and Remberancer
of Legal Affairs, West Bengal vs. Girish
Kumar Navalakha 1975 (4) SCC 754 (SC)
the Supreme Court observed:

"It would seem that in fiscal and
regulatory matters the court not only
entertains a greater presumption of
constitutionality but also places the
burden on the party challenging its
validity to show that it has no reasonable
basis for making the classification."

In State of Kerala vs. Krishnan Nair
AIR 1978 SC 747 (vide paragraph 11) a
seven Judge Bench decision of the
Supreme Court observed:

"There is ample authority of this
Court for the proposition that where two
constructions are possible, that one which
leads to unconstitutionality must be
avoided and the other which tends to
make the provision constitutional should
be adopted, even if straining of language
is necessary."

In M/s Rayala Corporation (P)
Limited vs. The Director of Enfocement,
AIR 1970 SC 494 (vide paragraph 7)
(which is also a Constitution Bench
decision) the Supreme Court in order to
validate the law took a view that
whenever there is contravention by any
person punishable under clause (a) or (b)
of Section 23-D (1) of Foreign Exchange
Regulation
Act,
the
Director
of
Enforcement
must
first
initiate
proceedings under the principal clause of
Section 23-D (1), and he is empowered to
file complaint in Court only when he
finds that he is required to do so in
accordance with the proviso to Section 23
-D (1).

In Jothi Timber Mart vs. The
Corporation of Calicut AIR 1970 SC 264
the
Supreme
Court
observed
(vide
paragraph 6):

"When the power of the Legislature
with limited authority is exercised in
respect of a subject - matter, but words of
wide and general import are used, it may
reasonably
be
presumed
that
the
Legislature was using the words in regard
to that activity in respect of which it is
competent to legislate and to no other,
and that the Legislature did not intend to
transgress the limits imposed by the
Constitution."

In K.S. Venkataraman and Co. vs.
State of Madras AIR 1966 SC 1089 (vide
paragraph
40)
the
Supreme
Court
following the decision of the Federal
Court in AIR 1941 FC 72 observed:

"There is general presumption that a
Legislature does not intend to exceed its
jurisdiction and there is ample authority
for the proposition that general words in
a statute are to be construed with
reference to the powers of the Legislature
which enacts it."

In Corporation of Calcutta vs.
Liberty Cinema AIR 1965 SC 1107 (vide
paragraph 9) the Supreme Court observed
that a statute has to be read so as to make
it valid and, if possible, an interpretation
leading to a contrary position should be
avoided. It has to be construed ut res
magis valeat quam pareat (vide Broom's
Legal Maxims (10th Ed.) p. 361, Craies on
Statute (6th Ed.) p. 95, Maxwell on
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Statutes (11th Ed.) p.221, and Cooley's
'Constitutional
Limitations.'
In
the
aforesaid decision the word 'fee' in
Section 548 of the Calcutta Municipality
Act was read as meaning a tax, for any
other reading would make the Section
invalid.

In State of Bihar vs. Smt. Charusila
Dasi, AIR 1959 SC 1002 the Supreme
Court observed :

"It is now well settled that there is a
general presumption that the legislature
does not intend to exceed its jurisdiction,
and it is a sound principle of construction
that the Act of a sovereign legislature
should, if possible, receive such an
interpretation as will make it operative
and not inoperative."

It may be noticed that in neither of
the two decisions relied upon by the
learned counsel for the petitioner viz.
Steel Authority of India Limited (Supra)
and M/s Nathpa Jhakri (Supra) the
plethora of decisions mentioned above
(many of which are Constitution Bench
decisions) were brought to the notice of
their lordships. The principle laid down in
the aforesaid decisions namely that if a
narrow or restricted interpretation of a
statutory
provision
can
save
its
constitutional validity, it should be
preferred to the plain and literal meaning
which invalidated it, was also not brought
to the notice of their lordships in the cases
of Steel Authority of India Limited (Supra)
and M/s Nathpa Jhakri's case (Supra).
Hence these two decisions are clearly
distinguishable.

A careful perusal of these two
decisions also shows that there is no
discussion therein about the aforesaid
settled principle of interpretation which
has been upheld in a plethora of Supreme
Court decisions referred to above.