# THIRD MANICKAM AND CO v. THE STATE OF TAMIL NADU

- **Citation:** [1977] 1 S.C.R. 950
- **Court:** Supreme Court of India
- **Decided:** 1976-10-26
- **Bench:** H. R. Khanna, Jaswant Singh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/third-manickam-and-co-v-the-state-of-tamil-nadu-7006
- **Pages:** 7

## Headnote

DR. R. D. NAJIAH AND ORS.
Central Sales Tax .Act, 1956-S. 15(b)-Scope of-Assessee bought declared goods and paid State sales tax-Sq/e by way of inter-state Safe-If entitled to refund of state sales tax.
•
Interpretation "refund" meaning of-Subsequem amendment of section-If
could be used to interpret earlier ambiguous provision.
Section 15(a) of the Central Sales Tax Act, 1956 as it existed at.the relevant time enacted that tax in respect of any sale or purchase of declared goods
~nside the State shall not be levied at more thim one stage. According to cl. (b)
1f these goods were subsequently sold, in the course of inter-state trade, the tax
so levied shall be refunded to such person as prescribed in the State law. The
proviso to s. 4 of the Tamil Nadu General Sales Tax Act and r. 23 of the Rules
provide for the refund of the sales tax in the type of cases mentioned in s. 15 (b).
The appellant bought cotton yarn from local dealers and sold it by way
of inter_state sale. It paid the State sales tax and claimed refund under s. 15
(b) of the1 Central Act. It .succeeded in part at each of the different stages; but
on second appeal for the balance, the Appellate Tribunal rejected the :.i.ppellant's
claim and held that it was not entitled to any refund including the relief granted
by, the Appellate Assistant Commissioner. The High Court rejected its revision
petition.
Allowing the ~ppeal,
HELD : ( 1) The appellant-firm is entitled to be paid the amount of eales
tax levied under tbe State Act in respect of the goods sold by it in the course
of inter-State trade provided the appellant has paid the sales tax
under
the
Central Act in respect of those sales. [956 El
(2) The proviso to s. 4 of the State Actread with the rules leaves na doubt
J
that the amount has to be paid to the dealer who sells the goods in the course
. ..--
of inter-State trade and who has paid the tax under the Central Act in respect
F
of such sale. [955 BJ
G
H
(3 )(a) There is no anomaly in paying tbe amount of the sales tax under
the State Act to a dealer who sells declared goods in the course of inter-State
trade even tbough he did not himself pay the tax under the State Act in
respect of those goods.
The reason for that is the price charged from such
dealer by ilie person from whom he purchased the goods would normall v take
into account the sales tax paid by the seller. [955 CJ
(b) The case of M. A. Khader & Co. v.
Deputy <Jommercial
Taxation
Officer 25 S.T.C. 104 followed by the High Court is distinguishable on fact•.
The question of asking for refund of the sales tax paid under the State ·.Ac~
did not arise directly in that case. The emphasis in the word 'refunded' as
used in s. 15(b) of tbe Central Act and the proviso to s. 4 of the State
Act.
is on repayment of the amount. [954 GJ
( 4 )(a) A word can have manv meanings. To find out the exact connotation of a word in a statute, one should
look to the context in which it
is
used.
The context would quite often provide the key to meaning of the word
and the. sense it should carry. Its seMing would give colour to it and provide
cue to the intention of the legislature in using it. In the instant
case
the
context in which tbe word "refunded" is used shows that such repayment need
not be to the person who initially paid the tax. [954 HJ
I
THIRU MANICKAM v. TAMIL NADU (Khanna,!.)
951
(b) The amended provision makes it plain beyond doubt that
the
tax
levied under the State Act in respect of llec!ared goods has to be reimbursed
to the person making sale of those goods in the course of inter-State trade or
co=eree in such inanner and subject to such conditions as may be provided
in the law in force in that State. According l!O the notes on clauses aooended
to the statement of objects and reasons of the Bill the amendment made in
cl. (b) makes it clear that local sales tax would be reimbursed to the person
making the sale in the course of inter-State trade and commerce. The amendment mado in cl. (b) can thus be taken to

## Text

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950
THIRD MANICKAM AND CO.
V.
THE STATE OF TAMIL NADU
October 26, 1976
(H. R. KHANNA AND JASWANT SINGH, JJ.]
DR. R. D. NAJIAH AND ORS.
Central Sales Tax .Act, 1956-S. 15(b)-Scope of-Assessee bought declared goods and paid State sales tax-Sq/e by way of inter-state Safe-If entitled to refund of state sales tax.
•
Interpretation "refund" meaning of-Subsequem amendment of section-If
could be used to interpret earlier ambiguous provision.
Section 15(a) of the Central Sales Tax Act, 1956 as it existed at.the relevant time enacted that tax in respect of any sale or purchase of declared goods
~nside the State shall not be levied at more thim one stage. According to cl. (b)
1f these goods were subsequently sold, in the course of inter-state trade, the tax
so levied shall be refunded to such person as prescribed in the State law. The
proviso to s. 4 of the Tamil Nadu General Sales Tax Act and r. 23 of the Rules
provide for the refund of the sales tax in the type of cases mentioned in s. 15 (b).
The appellant bought cotton yarn from local dealers and sold it by way
of inter_state sale. It paid the State sales tax and claimed refund under s. 15
(b) of the1 Central Act. It .succeeded in part at each of the different stages; but
on second appeal for the balance, the Appellate Tribunal rejected the :.i.ppellant's
claim and held that it was not entitled to any refund including the relief granted
by, the Appellate Assistant Commissioner. The High Court rejected its revision
petition.
Allowing the ~ppeal,
HELD : ( 1) The appellant-firm is entitled to be paid the amount of eales
tax levied under tbe State Act in respect of the goods sold by it in the course
of inter-State trade provided the appellant has paid the sales tax
under
the
Central Act in respect of those sales. [956 El
(2) The proviso to s. 4 of the State Actread with the rules leaves na doubt
J
that the amount has to be paid to the dealer who sells the goods in the course
. ..--
of inter-State trade and who has paid the tax under the Central Act in respect
F
of such sale. [955 BJ
G
H
(3 )(a) There is no anomaly in paying tbe amount of the sales tax under
the State Act to a dealer who sells declared goods in the course of inter-State
trade even tbough he did not himself pay the tax under the State Act in
respect of those goods.
The reason for that is the price charged from such
dealer by ilie person from whom he purchased the goods would normall v take
into account the sales tax paid by the seller. [955 CJ
(b) The case of M. A. Khader & Co. v.
Deputy <Jommercial
Taxation
Officer 25 S.T.C. 104 followed by the High Court is distinguishable on fact•.
The question of asking for refund of the sales tax paid under the State ·.Ac~
did not arise directly in that case. The emphasis in the word 'refunded' as
used in s. 15(b) of tbe Central Act and the proviso to s. 4 of the State
Act.
is on repayment of the amount. [954 GJ
( 4 )(a) A word can have manv meanings. To find out the exact connotation of a word in a statute, one should
look to the context in which it
is
used.
The context would quite often provide the key to meaning of the word
and the. sense it should carry. Its seMing would give colour to it and provide
cue to the intention of the legislature in using it. In the instant
case
the
context in which tbe word "refunded" is used shows that such repayment need
not be to the person who initially paid the tax. [954 HJ
I
THIRU MANICKAM v. TAMIL NADU (Khanna,!.)
951
(b) The amended provision makes it plain beyond doubt that
the
tax
levied under the State Act in respect of llec!ared goods has to be reimbursed
to the person making sale of those goods in the course of inter-State trade or
co=eree in such inanner and subject to such conditions as may be provided
in the law in force in that State. According l!O the notes on clauses aooended
to the statement of objects and reasons of the Bill the amendment made in
cl. (b) makes it clear that local sales tax would be reimbursed to the person
making the sale in the course of inter-State trade and commerce. The amendment mado in cl. (b) can thus be taken to be an exposition by the legislaturo
itself of its intent contained in the earlier provision. [955 G]
( c) Tho fact that the amendment of cl. (b) of s. 15 was not like some
other P.rovisions given retrospective effect, would not materially affect the position.
'b1e legi~lature as a resuh of the amendment clarified what was imolicit
in the provisions as they existed earlier. An amendment which is by wav of
clarification of an earlier ambiguous provision can be useful aid in construing
tlie earli~ provision even though such amendment is not given retrospective
effect. [9 56 BJ
·
C!vIL APPELLATE JURISDICTION : Civil Appeal No. 1528 of 1971 .
. (Appeal by Special Leave from the Judgment and Order dated
23-11-1970 of the Madras High Court in Tax case No. 398/70
(Revision No. 260/70)
·
S. T. Desai and T. A. Ramachandran, for the Appellant.
V. P. Raman, Addi. Solicitor General for India, A. V. Rangam
and Miss A. Subhashini, for the Re5pondent.
·
The Judgment of the Court was delivered by
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KHANNA, J. This appeal by special leave is against the judgment
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of the Madras High Court whereby the High Court dismissed
the
petition filed by the appellant under section 38 of the Tamil Nadu
General Sales Tax Act, 1959 (hereinafter referred to
as
the State
Act).
The matter relates to the assessment year 1960-61.
The appellant
firm is a dealer in cotton yarn.
The appellant bought yarn from
local dealers and manufacturers and, in turn, sold that yarn by way
of inter-State sale.
Sales tax under the State Act on the yarn purchased by the appellant had been paid by those manufacturers and
dealers.
The inter-State sales of yarn made by the appellant were
asseS1Sed to tax under the Central Sales Tax Act (hereinafter referred
to as the Central A~t) in the hands . of the appellant.
The appellant
claimed refund of the tax amounting to Rs. 16,769.96 paid under the
State Act in respect of the yam sold by it in the course of inter-State
trade in accordance with section 15 (b) of the Central Act and the
proviso to section 4 of the State Act read with rule 23 of the Tamil
Nadu General Sales Tax Rules, as these provisions stood at the relevant time.
The Additional Commercial Taxation Officer
admitted
the claim of the appellant for refund of the tax only in respect of the
sum of Rs. 5,562.59 and rejected the claim in respect of the balance.
On appeal the Additional Appellate Assistant Commissioner allowed
refund of a further sum of Rs. 3,204.73 and rejected the claim
regarding the balance of Rs.
8,002.64.
On second
appeal
t'he
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952
SUPREME COURT REPORTS
[ 1977) 1 S.C. R.
Appellate Tribunal relying upon the decision of the Madras High
Court in M. A. Khader & Co. v. Deputy Commercial Taxation Officer (1), rejected the claim
of the appellant for
the balance
of
Rs. 8,002.64. At the instance of the State representative, the Tribunal
further held that the appellant was not entitled to get refund of the
amount of Rs. 5,562.59 and Rs. 3,240.73 in respect of which relief had
been granted by the Appellate Assistant Commissioner. The appellant
thereafter preferred revision petition to the Madras High Court under
section 38 of the State Act. The High Court dhmissed the said petition
after observing that the principle laid down in the_case of M. A. Khader
& Co. (supra) would _apply to the facts of this case.
The apJ'Cllant
thereafter came up in appeal to this Court by special leave.
.
__Before dealing with the point of controversy, it may be •..1ppositc
c
to refer to the material provisions of Jaw, as they stood at the relevant
time.
A number of goods have been declared under section 14 of
the Central Act to be of special importance in inter-State trade or
commerce.
Cotton yarn i:s one of those. goods.
Section 15 of the
Central Act at the relevant time read as under :
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"15. Restrictions and conditions in regard to tax on sale
or purchase of declared goods within a State.-Evcry sales
tax law of a State shall, in so far as it imposes or authorises
the imposition of a tax on the sale or purchase of declared
goods, be subject to the following restrictions and conditions,
~lamely :-
(a) the tax payable under that Jaw in respect of any sale
or purchase of such goods inside the State shall not
exceed two -per cent of the sale or purchase price
thereof, and such tax shall not be levied at more
than one stage;
(b) where a tax has been levied under that Jaw in rl)Spect of the sale or purchase inside the State of any
declared goods and such goods
are sold in the
course of inter-State trade or commerce, the tax so
levied shall be refunded to
such person
in
such
manner and subject to such condition:s as may be
provided in ~my law in force in that State."
Section 4 of the State Act reads as under :
•
"4. Tax in respect of declared goods.-Notwithstanding anyfuing contained in section 3, the tax under this Act
shall be payable by a dealer on the sale or purchase inside
the State of declared goods at the rate and only at the point
specified against each in the Second Schedule on the turnover in such goodis in each year, whatever be the quantum
of turnover in that year:
Provided that where a tax has been levied under this
section in respect of the sale or purchase of declarod goods
and such goods al'e sold in the course of inter-State trade
(l)
25 S.T.C. 104.
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'THIRU MANICKAM v. TAMIL NADU (Khanna, J.)
953
or commerce the tax so levied shall be refunded -to such
. A
person in such manner and subject to such conditions · as
may be prescribed."
According to the Second Schedule to the State Act, the tax on cotto•
yarn but excluding cotton yarn waste shall be one -per cent at the
point of the first sale in the State.
Clauses (1) to (3) of rule 23 of the Madras General Sales Tax
Rules, :\,959 read as under :
·. "23. (I) The tax levied under section 4 in respect of
the sale or purchase inside the State of any goods specified
therein shall, if such goods are sold in the course of interState trade qr commerce, be refunded in the manner and
. subject to the conditions prescribed in this rule to the dealer
who has made· the
inter-State sale and has paid the tax
under the Central Sales Tax Act, 1956, in respect of such
sale.
(2) Every such dealer who claims a refund under this
rule, shall, within the time anowed in sub-rule (3), submit
to the assessing authority a statement in Form A-4.
(3) The statement referred to in sub-rule (4) shall be
submitted to the assessing authority not later than three
months from the date on which the dealer paid the Central
sales tax 9ue on the
transaction in respect of which he
claims refund of the State sales tax:
Provided that the assessing
authority
may condone
delays up to a period of fourteen days in the submission of
· the statement,· if he is satisfied t.hat the dealer had sufficient
cause for not submitting· the
statement within the said
period."
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In appeal before us, Mr. Desai on behalf of the appellant has
assailed the judgment of the· High Court and has urged that in accorF
dance with clause .(b) of section 15 of the Central Act, the proviso
to section 4 of the State Act and rule 23 of the Madras General
Sales Tax Rules, the sales tax under the State Act in respect of yarn,
which was the subjact-matter of inter-State sale, should have been
paid to the appellant. The High Court, according to· the learned
counsel, was . in error in holding to the contrary. As against that,
learned Additional Solicitor General has canvassed for the correctG
ness of the view taken by the High Court.
There is, in our opinion,
considerable force in the contention advanced by Mr. Desai.
·
Section 15 of the Central Act, as it existed at the relevant time,
contemplates that every State law in so far. as it imposes or authorises the imposition of tax on sale or purchase of _declared goods,
would be subject to the restriction and condition that the tax payable
H
nnder that law in respect of any sale of purchase of such goods in-
. side the State, shall hot exceed two per cent of the sale or purchase
price thereof and .. such tax ~hall not be levied at more than one ~tage.
• •
954
SUPREME COURT REPORTS
[1977] 1 S.C.R.
A
Clause (b) of that section has a direct bearing, and according to that
clause,. where tax has been levied under the State law in respect of
sale or purchase of declared goods which are subsequently sold in
the course. of inter-State trade or commerce, the tax so levied shall
be refunded to such person in such manner and subject. to such conditions as may be prescribed in any law in force in that State. Section
4 of the State Act has been enacted in conformity with section 15 of
B . the Central Act. · The proviso to that section deals with the refund
of the sales tax levied under the State Act in respect of declared goods
when such goods are sold
in the course of inter-State '1"ade or
commerce.
According to that proviso, where a tax has been levied
under section 4 in respect of the sale or purchase of declared goods.
and such goods are sold in the course of inter-State •trade or
commerce, the amount. of tax shall be refunded to such person in
c
ruch manner and subject to such conditions as may be prescribed. In
pursuance of this proviso, the State Government has framed rule 23
of the Madras General Sales Tax Rules, 1959.
According to clause ·
(1) of that rule, the refund of the sales tax has to be made to the
dealer who makes the inter-State sale and who has paid the sales tax
under the Central· Act in respect of such sale.
Clause (3) of the
rule provides that statement shall be. submitted to the
assessing
. D
authority by the aforesaid dealer not later than three months from the
date on which the dealer pays the tax under the Central Act. It may
be stated t)lat the Madras General Sales Tax Rules, 1959 had to be
placed on the table of both the Houses of the State legislature under
su)l-section (5) of section 53 of the State Act .. In the face of clause
(b) of section 15 of the Central Act, the proviso to section 4 of the
State Act and rule 23 of the Madras General Sales Tax Ruleo, we
E
have no doubt in our mind that it is the appellant who is entitled to
:;et the refund of the sales tax levied under the State Act in respect of
the goods in question because it was the appellant who sold the goods
in the course of inter-State trade and paid the sales tax under the
Central Act on that account.
. . The High Court in turning down the claim of the appellant relied
F
upon its earlier decision in the case of M. A. Khader & Co. (supra).
Perusal of the facts of that case would show that the assessee therein
sought a writ of certiorari to quash the assessment made under the·
Central Act in respect of transactions which were admittedly interState sales.
The question of asking for the ref,.nd of the sales tax
paid under the State Act did not. arise directly in that case .. There
were . no doubt some observations in the course of that judgment,
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according to which refund of the sales tax can be claimed only by .
the person who himself has earlier paid that tax, and not by a person
who has not himself paid such tax.
So far as those observations are
concerned, we are of the opinion that the>
emphasis in the word
"refunded" as used in clause (b) of section 15 of the Central Act and
the proviso to section 4 of the. State Act is ··on repayment of the
amount.
A word can have many meanings. .J'o find out the exact
H
connotation of a word in a statute, we must look to the context in
which it is used.
The context would quite often provide( the key to
meaning of the word and the sense it should cairy. lts setting would
give colour ·to it and provide cue to the intention of the legislature
·y.
•
f
;.--
,
.
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THIRU MANICKAM v. TAMIL NADU (Khanna,!.)
955.
in using it. A word, as said by Holmes, is not a crystal, transparent
A
and unchanged; it is the skin of a living thought and may vary greatly
in colour and content according to the circumstances and the time in
wWch it is used. Th" context in wWch the word "refunded" is med
shows that such repayment need not be to the person who initially
paid the tax. It is indeed for the State legislature to specify the person to whom such amount is to be repaid either in the statute enacted
by it or to make a provision for that purpose in the rules.
The State
B
legislature has made it clear in the proviso to section 4 of the statute ·
that provision in this respect would be made in the rules.· The rules
wWch have been framed leave no doubt that the amount has to be
paid to the dealer who sells the goods in the course of intelr-State
trade· and who has paid the tax under the Central Act in· respect of
such sale.
There is also no anomaly in paying tha amount of the sales tax
under the State Act to a dealer who sells declared goods in the course
of inter-State trade, even though htl did not Wmself pay the tax under
the State Act in respect of those goods.
The reason for that is that
the price charged from such dealer by the person from whom he purchases the goods would normally take into account the sales tax paid
by the seller.
Assuming that there was some ambignity in the languages of clause
(b) of section 15, as it existed at the relevant time, the matter is made
clear by the amendment made in the Central Act by the Central Sales.
Tax (Amendment) Act, 1972 (Act No. 61 of 1972).
As a result
of the amendment, clause (b) of section 15 of the Central Act reads
as under:
"(b) Where a· tax has been levied under that law in
. respect of the sale or purchase inside the State of any
declared goods and such goods are
sold in the course of
inter-State trade or commerce, and tax has been paid under
this Act in respect of the sale of such goods in the course
of inter-State trade or commerce, the tax levied under such
law shall be reimburse.d to the person making such sale in
the course of inter-State trade or commerce in such manner
and subject to such conditions as may. be provided in any
law in force in that Sta.le." ·
·
The amended provision makes it plain beyond any pale of controversy that the tax levied under the State Act in respect of declared goods
has to be reimbursed to the person making sale of those goods in the
course of inter-State trade or commerce in such manner and subject to
such conditions as may be provided in the law in force in that State.
According to the notes explaining the different clauses appended to the
statement of objects and reasons of the. Bill which emerged as the
amending Act, the amendment made in clause (b) makes it clear that
local sales tax would be reimbursed to the person making the sale in
the course of inter-State trade and commerce.
The amendment made
in clause (b) can thus be taken to be an exposition by the legislature
itself of its intent contained in the earlier provision. We are not
impressed by the argument of the learned Additional Solicitor-General
lt-!338SCI/76
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SUPREME COURT REPORTS
[1977] 1 s.c.R.
that the amendment mad~ in clause (b) was intended to mark a departnre from the position in law as it existed before the amendment.
The fact that the amendment of clause (b) of section 15 was not like
some other provisions given retrospective effect, 'would not materially
affect the position.
~s :i.Iready m~ntioned above, the legislature ·as
a result of the amendment, clarified what was implicit in the provisions
<ts they existed earlier. An amendment which is by way· of clarification of an earlier ambigiicius provision can be useful aid in construing
the earlier provision, even though such amendment is not given retrospective effect.
We may refer in this context to observations on page
147 of Craies on Statute Law (Sixth Ed.) which read as 'Ullder :
" .... iri · Cape Brandy Syndicate v. I.R.C.(') Lord
Sterndale M. R. said : 'I thin!< it is clearly established in
Att.-Gen. v. Clarkson, supra, that subsequent
legislation
may be looked at in order to see the proper construction
to be put upon an earlier Act where that earlier Act is ambiguous:
I quite agree that subsequent legislation if it proceeded on an erroneous construction of previous legislation
cannot alter that previous legislation; but if there be any
ambiguity in the earlier legislation, then the subsequent legislation may fix the proper interpretation which is to be put
upon the earlier'."
·
Looking to all the facts, we are of the view that the appellant-firm
is entitled to be paid the amount of sales tax levied under the State
Act in respect of the goods sold by it in the course of inter-State trade
provided the appellant has paid the sales tax under the Central Act
in respect of thooe sales.
We accordingly accept the appeal, set aside
the judgment of the High Court and order that the appellant-firm . be
paid the amount of sales tax levied under the State Act in respect of
the goods sold by it in the course of inter-State trade· provided the
appellant has paid the sales tax under the Central Act in respect of
those sales.
The appellant shall be entitled to recover its costs both
in this Court as well as in the High Court from the respondent.
P. B. R.
Appeal allowed.
(I) [19211 2 KB. 403 at P. 156.
•
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