Courts should Strictly Interpret Penal or Taxation Statutes: Supreme Court [Read Order]

A two-judge bench of the Supreme Court has held that the Courts should interpret the penal or taxation statutes strictly.

The appellant is a manufacturer and registered dealer of the cashew kernels cashew shell oil, etc. the appellant contended that the levy of sales tax under Section 6B of the Act, on the total turnover is a misconstruction of the provision and it has to be on the “taxable turnover” which may be in conformity with Article 286 of the Constitution of India. However, the Assessing Authority rejected the above contention.

On appeal, the authorities and the High Court dismissed the plea of the assessee.

Justices A M Khanwilkar and Ajay Rastogi observed that the expression “total turnover” + “turnover” which has been used u/s 6B has the same meaning as defined under Section 2(1)(u2) and 2(v) of the Act. Moreover, u/s 6B, reference is made on ‘total turnover’ and not the ‘turnover’ as defined u/s 2(v) of the KST Act and taking note of the exemption provided under first proviso clause(iii), exclusion has been made in reference to use of sale or purchase of goods in the course of interstate trade or commerce. According to the bench, it clearly indicates that the expression ‘total turnover’ which has been incorporated as referred to under Section 6B(1) is for the purpose of identification of the dealers and for prescribing different rates/slabs. The first proviso to Section 6B(1) provides an exhaustive list of deductions which are to be made in computation of such turnover with a further stipulation as referred to in second proviso that except for the manner provided for in Section 6B(1), no other deduction shall be made from the total turnover of a dealer.

The bench said that “the economic superiority principle for the purpose of levy of turnover tax while holding that the interpretation of statute would not depend upon contingency. It is trite law which the Court would ordinary take recourse to golden rule of strict interpretation while interpreting taxing statutes. In construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation and this is what has been considered by this Court in Commissioner of Customs(Import), Mumbai Vs. Dilip Kumar and Company and Others.”

“In the instant scheme of the Act of which reference has been made in detail, the expression ‘total turnover’ has been referred to for the purpose of identification/classification of dealers for prescribing various rates/slabs of tax leviable to the dealer and read with first and second proviso to Section 6B(1), this makes the intention of the legislature clear and unambiguous that except the deductions provided under the first proviso to Section 6B(1) nothing else can be deducted from the total turnover as defined under Section 2(u2) for the purpose of levy of turnover tax under Section 6B of the Act,” the bench said.