M/S. PAPPU SWEETS AND BISCUITS ETC.versusCOMMISSIONER OF TRADE TAX U.P. LUCKNOW

              MIS. PAPPU SWEETS AND BISCUITS ETC.                                  A
                                      v.
         COMMISSIONER OF TRADE TAX U.P. LUCKNOW

                            OCTOBER 6, 1998

  (S.P. BHARUCHA, M.K. MUKHERJEE AND G.T. NANAVA TI, JI.]                          B

      Sales Tat

      Uttar Pradesh Sales Tat Act, 1948 : Section 4A

      Notification dated 27. 7. 91 granting exemption from payment of sales        C
lat-Industrial units engaged in manufacturing of 'toffees '-Application for
eligibility certificate-Rejected on the ground that 'toffee' is a 'sweetmeat'
falling under Entry 18 of the Notification-Not entitled to exemption-On
 appeal, held : High Court has not correctly interpreted and construed Entry
 18 of the Notification-The words 'sweetmeat' and 'commodities of like             D
 nature' used in the Notification did not include within their sweep 'toffees'-
 Popular parlance test not correctly applied to find out how 'toffee' is
 understood by people in the State-Entitled to exemption Notification.
      Words & Phrases
      'Sweetmeat' and 'commodities of like nature '-Meaning of in the context      E
of Notification issued under section 4A of U.P. Sales Tat Act, 1948.

      The State Government with the intention to promote industrial growth
in the State, issued a Notification dated 27.7.1991 granting exemption from
payment of sales tax to new Industrial Units and to Units undertaking
expansion, diversification or modernisation. Under Annexure II, Entry 18 to        F
the Notification, units making sweetmeat, namkin, reori, gazak and
commodities of like nature and restaurants were excluded from the benefit
of exemption notification. The appellants, new Industrial Units established
for manufacturing 'toffees' applied for eligibility certificate. The Joint
Director rejected the application on the ground that 'toffet' was a 'sweetmeat'    G
and therefore being a type of unit mentioned in Annexure II to the NotiflC8tion,
was not entitled to the exemption. The appellant appeal to the Trade Tax
Tribunal and its revision application before the High Court were dismissed.
Hence the present appeal.
      The contention of the appellants was that the High Court has not             H
                                  119
     120                       SUPREME COURT REPORTS [1998] SUPP. 2 S.C.R

A correctly interpreted the word 'sweetmeat' as used in Entry 18 and that
    instead or being influenced by the dictionary meanings or the words 'sweetmeat'
    and 'toffee' it should have decided the question whether 'toffee' was
    'sweetmeat' by considering how those commodities are understood by the
    people in the State.

B          Allowing the appeals, this Court

          HELD : 1. The High Court has not correctly interpreted and construed
    Entry 18 of the Notif1C&tion. The word 'sweetmeat' and the words 'commodities
    or like nature' as used in the Notification dated 27.7.91 did not include
    within their sweep "toffees" manufactured by Industrial Units as contemplated
C   by the Notification. Thus appellant Industrial Units are entitled to the benefit
    or sales tax exemption under the Notification. [129-E-F]

           2. The object ofthe Notification was to increase industrial activity in
    the State by encouraging setting up or new industrial units or expansion,
D diversification or modernisation by existing units. At the same time the State
    did not desire to·extend that benefit to all such industries. It was, therefore,
    specifically stated in the notification that industries mentioned in Annexure
    II shall not be entitled to the benefit of exemption from payment ortax or
    reduction in the rate of tax. It is however necessary to note that Annexure
  . II is an exclusionary part of the exemption notification. High Court failed to
E appreciate that exclusionary part of an exemption notification has to be
    construed rather strictly. Even though the word used in exclusionary part of
    an exemption notification has a wide dictionary meaning or connotation, only
    that meaning should be given to it which would achieve rather than frustrate
    the object of granting exemption and which does not lead to uncertainty or
F unintended results. (127-C; D & E]

          3. High Court has not correctly applied the popular parlance test for
    finding out how "toffee" is understood in the country and more particularly
    in the State of Uttar Pradesh. Instead it preferred to decide the issue by
    relying upon how toffee is understood by the people of the country where it
G   originated. (127-H)

          Collector of Excise v. Mis Parle Exports (P) Ltd., (1989) 1 SCC 345,
    referred to.

           4. The words 'commodities of like nature' in Entry 18 were meant to
H include commodities other than those specifically mentioned. They indicate
         PAPPUSWEETSAND BISCUITS ETC. v. C.T. T. [NANAVATJ,J.]               121

that other commodities of like nature also were not to get the benefit of the       A
exemption. The scope of entry is indeed widened to that extent but that cannot
be construed to have the effect of enlarging the meaning of the word
'sweetmeat'. Thus, the High Court was not justified in giving an unlimited
and unrestricted meaning to the word 'Mithai' or "sweetmeat." (127-F-G)

     State of Bihar v. S.K. Roy, (1966] Supp. SCR 259 and Yogender Nath             B
Naskar v. Commissioner ofIncome Tax, Calcutta, (1969) 3 SCR 743, referred
to.

      Cape Brandy Syndicate v. J.R.C., (1921) 2 KB 403, referred to.

     CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9282 of                        C
1995 etc.

      From the Judgment and Order dated 4.7.95 of the Allahabad High Court
in T.T.R. No. e 93of1995.

      Dhruv Aggarwal for the Appellants.                                            D
     A.K. Goel, Additional Advocate General for State ofU.P., Kavin Gulati
and Pradeep Misra for the Respondent.

      The Judgment of the Court was delivered by
                                                                                    E
       NANA VATI, J. The question that arises for consideration in these two
appeals is whether 'toffee' is 'sweetmeat' or a commodity of a like nature and
therefore the appellant's industrial units making toffees, though newly set up,
were not entitled to the benefit of exemption from payment of sales tax under
notification dated 27. 7 .1991, issued by the State of Uttar Pradesh, in exercise   F
of its powers under Section 4A of the Uttar Pradesh Sales Tax Act, 1948 (for
short' the Act').

       With a view to step up economic growth by promoting development of
certain industries in the State, the U.P. State Government decided to grant
exemption from payment of sales tax to new industrial units and to units G
undertaking expansion, diversification or modernization. To achieve that object,
it issued a notification on 27.7.1991 under Section 4A of the Act. For ready
reference, we quote below the r.elevant part of that notification.

           "WHEREAS the State Government is of the opinion that for
        promoting the development of certain industries in the State it is          H
    122                         SUPREME COURT REPORTS (1998) SUPP. 2 S.C.R.

A          necessary to grant exemption from or reduction in rate of tax to new
           units and also to units which have undertaken expansion,
           diversification or modernization:

               Now therefore, in exercise of the powers under section 4-A of the
           Uttar Pradesh Sales Tax Act, 1948 (U .P. Act No. XV of 1948), hereinafter
B          referred to as the Act the Governor is pleased to declare that :·

                l(A) in respect of any goods manufactured in a 'new unit' other
           than the units of the type mentioned in Annexure II established in the
           areas mentioned in column 2 of Annexure 1, the 'date of starting
           production' whereof falls on or after first day of April, 1990 but not
c          later than 31st day of March, 1995, no tax shall be payable, or, as the
           case may be, the tax shall be payable at the reduced rates, as specified
           in column 4 of Annexure I, by the manufacturer thereof on the turnover
           of sales of such goods,

D

               l(B) in respect of any goods manufactured in a unit other than
           the units of the type mentioned in Annexure II, which 'has undertaken
           expansion, diversification or modernimtion' ............ .
E
               (2) The period of such facility shall be reckoned from the first date
           of production :-

           (i) .......... ..

           (ii) ............
F
          The facility of exemption from or reduction in the rate of tax shall be
    subject to the following conditions in addition to the conditions referred to
    in Section 4·A of the Act.

            (i)
G
            (u)     that the new unit is established on land or building or both
                    owned or taken on lease for a period of not less than fifteen
                    years by such unit or allotted to such unit by the State or the
                    Central Government or any Government Company or any
                    Corporation owned or controlled by the Central or the State
H                   Government;
         PAPPU SWEETS AND BISCUITS ETC. v. C.T. T. [NANAVATl,J.]                123
        (w)                                                                             A
        (iv) that the said unit furnishes to the assessing authority concerned
             an eligibility certificate granted in this behalf by the General
             Manager, District Industries Centre, Area Development Officer
             (Industry) of the concerned Industrial Development Authority,
             Additional or Joint Director of (Industries) of the concerned              B
             Industrial Development Authority, as the case may be.
        3...... .

        4...... .
        5. ..... .                                                                      c
        6...... .
                                    Annexure I



                                   Annexure II                                          D
        List of Industries not entitled to the facility of exemption from or
        reduction in rate of tax.



        18. Units making sweetmeat, narnkin, reori, g87.8k and commodities of
                                                                                        E
        like nature and restaurants.



      Mis Pappu Sweet and Biscuits, appellant in CA No. 9282 of 1995,
established a new industrial unit for manufacturing 'toffees' in Bareilly district,     F
by investing substantial amount of capital. It commenced production within
the specified period and thereafter applied to the Joint Director of Industries,
Bareilly, for an eligibility certificate. The Joint Director rejected the application
on the ground that toffee is 'sweetmeat' and, therefore, the appellant's new
industrial unit being a unit of the type mentioned in Annexure - II to the              G
Notification was not entitled to the exemption. Aggrieved by that rejection,
the appellant preferred an appeal to the Trade Tax Tribunal, U.P. It was
dismissed as the tribunal agreed with the view of the Joint Director. The
appellant then filed a revision petition in the Allahabad High Court but that
was also dismissed. Hence, CA No. 9282 of 1995 by it after obtaining special
leave.                                                                                  H
    124                        SUPREME COURT REPORTS (1998] SUPP. 2 S.C.R.

A         Mis. Rose Garden Confectionery Pvt. Ltd., appellant in C.A. No. 1692
    of 1997 also established a new industrial unit for manufacturing toffees, by
    making substantial capital investment. It commenced production on 1.4.93. On
    17.8.93, it applied to the General Manager, District Industries Centre, Fatehpur,
    U.P. for an eligibility certific.ate. The application was referred to the Joint
    Director who refused to grant it on the ground that toffee is 'sweetmeat' and
B   units manufacturing sweetmeats are specifically excludeci by the exemption
    Notification. The appellant's appeal to the Trade Tax Tribunal and its revision
    application to the High Court were dismissed. It, h~ therefore, filed this
    appeal after obtaining special leave.

C         As the question raised in both the appeals is common, they are heard
    together and disposed of by this common judgement.

          The High Court while interpreting the word 'sweetmeat' in the entry at
    Sl.No.18 of the list of excluded industries contained in the notification, took
    into consideration:
D
    (i) the dictionary meanings of the words 'sweetmeat', 'confectionery' and
    'toffee'; (ii) how toffee is understood in commercial parlance; (iii) enlarged
    scope of Entry No.18 as indicated by the words 'commodities of like nature';
    (iv) possibility of discrimination with respect to items of Indian origin like
    'reori'; 'gazak' and petha', if toffee is not held to be a 'sweetmeat'; and (v)
E   the fact that some manufacturers of toffees sell their product by describing
    them as 'sweets'. The reasoning of the High Court and the observations made
    by it in this behalf are as under :

                "In order to find out whether toffee is a mithai or sweetmeat or
            a commodity of the nature of sweetmeat, reori or gazak, as mentioned
F           in item No.18 aforesaid, we may see what the word 'Mithai' or
            'sweetmeat' indicates 'Sweetmeat' as mentioned in the Webster New
            Collegiate Dictionary, means "a food rich in sugar, a candy or
            crystallized fruit. Toffee according to the same dictionary, means candy
            of brittle but tender texture made by boiling sugar and butter together.
G           Thus, a toffee is an article which is rich sugar and is a sweetmeat.

                Chambers Dictionary defines 'toffee' as a hard backed sweetmeat
            made by sugar and butter. In the Oxford Dictionary 'toffee' is stated
            to mean "all kinds of sweet made from sugar, butter etc." A person
            manufacturing sweetmeat including things like toffee is called a
H           confectioner. The word 'confect' means "to put together froin varied
         PAPPUSWEETSANDBISCUITS ETC. v. C.T. T. [NANAVATI,J.]               125
        material". The term 'confection' means "the act or processing of           A
        confecting as a fancy dish or sweetmeat or fruit or nut preserved for
        even a medical preparation made with sugar syrup or honey".
        'Confectionery' then means "sweet edibles or the confectioner's art
        or business."

      In consolidated Glossary of Technical Terms Central Hindi Directorate,       B
Ministry of Education, Government oflndia (1962 Edition), 'confectionery' is
defined as MISTHAN, MITHAI. In the English Hindi Dictionary of Dr. Kamil
Bulkey, the meaning of the word 'confectionery' is given as Misthan, Mithai,
and sweetmeat has been described to mean as Murabba, Misthan, Mithai.
Thus, according to the dictionaries Mithai is synonymous with 'sweetmeat'          C
in English and that is why the English translation of the aforesaid notification
correctly uses 'sweetmeat' as the English version of 'Mithai'. There is no
doubt that a toffee is a sweetmeat, as understood by the people where toffee
originated.

      The learned counsel contended that the people in India or in U.P. do         D
not conceive a toffee as a mithai. This may be so in respect of some people.
The law of Sales Tax is of general application and is equally applicable to
sweetmeat, mithai of any region whatsoever. Toffee and other things of that
nature are of foreign origin and are sweets or.sweetmeat according to those
people and their nature cannot be changed simply because their origin is
different from what is usually conveyed by the word ·'inithai' in this part of     E
the country. The word 'mithai' is a generic wordwhich does not mean only
'mithai' sold in U.P. and consumed by the {leeple here. A 'Mithai' will remain
a 'mithai' whether its origin is English or Chinese or of any other foreign
country and it will remain to be a mithai even if some people in this State do
not understand it to be so. The act is meant to cover commercial transactions      F
and is not restricted to the sense of any particular class of people residing
in the State of Uttar Pradesh.

      Then, the notification does not stop at the word 'mithai' or 'sweetmeat'
only. It explains that the scope of the word is unlimited and is not restricted
to 'mithais' and 'sweetmeats' of any particular region. It mentions 'reori',       G
'gazak' and commodities of like nature to be included within item no. 18.
'Reori' is nothing but an Indian version of toffee with grains of Til embeded
on its surface. The use of the words 'reori', gazak' and 'commodities of like
nature' expands the scope to unlimited extent and would take within the
scope of the aforesaid entry any mithai or sweetmeat irrespective of its orgin,
area of popularity and shelf life etc.                                             H
    126                        SUPREME COURT REPORTS [1998] SUPP. 2 S.C.R.

A         A toffee is, undoubtedly, a mithai or a sweetmeat and a commodity of
    nature like sweetmeat, reori or gazak, Exemptions are discriminatory in nature
    as they grant exemption to some and deny the same to others. Therefore, they
    should be strictly interpreted and I ·fmd no reason why toffee, mithai or
    sweetmeat, of foreign origin should be excluded from the scope of Entry at
    item No.18 while Indian things like reori, gazak, petha which have a sufficiently
B   longer shelf-life should be denied the same benefit. It would be anomalous
    that a person who sets up a Unit to manufacture reori, gazak, petha etc.
    should be denied the exemption while another dealer manufacturing sweets
    of foreign origin like toffee should be granted exemption by excluding the
    commodity from the scope of Entry No.18 in an artificial or discriminatory
C manner.


        It may be mentioned that several manufacturers of toffees and things
  like that sell their products describing them as sweets. We can see such
D things being sold as 'parry sweets', 'Daurala sweets' or 'Cola sweets' at any
  confectioner's shop."

          Learned counsel for the appellants challenged the judgment of the High
    Court on the ground that it has not correctly construed Entry No.18. They
    also submitted that the High Court has not correctly interpreted the word
E   'sweetmeat' as used therein and that instead of being influenced by the
    dictionary meanings of the words 'sweetmeat' and 'toffee' it should have
    decided the question whether 'toffee' is sweetmeat' by considering how
    these commodities are understood by the people in the State.

          It is true that dictionary meaning of the word 'sweetmeat' is very wide
F and any food which is sweet and rich in sugar can be described as 'sweetmeat'.
  Toffee is a confection of sugar and other materials and being rich in sugar
  would be 'sweetmeat' in its wider sense. But for deciding whether toffee is
  'sweetmeat' as contemplated by the exemption Notification, what is required
  to be considered is the object of the notification and the context in which that
G word is used in the notification.
        A close reading of the Notification discloses that the State intended to
  give benefit of exemption or reduction in rate to these new industrial units
  and existing units undertaking expansion, diversification or modernization
  which were to make substantial capital investment. Paragraph 2 of the
H Notification prescribing conditions of having a licence or a letter of intent and
        PAPPU SWEETS AND BISCUITS ETC. v. C.T. T. [NANAVATI,J.]         127
of owning land or building or talcing them on lease for a period of not less A
than 15 years and paragraph 3 prescribing fixed capital investment consisting
of land, building, plant, machinery, equipment and apparatus are indicative of
that intention. Entry 18 of Annexure II is also suggestive of the same intention.
The items mentioned therein viz, 'sweetmeat', 'namkeen', reori and 'gazak' are
usually prepared by shopkeepers and restaurants for selling them to their
consumer - customers. They are not manufactured in factories having plants B
and machinery.

      The notification further discloses that the object of declaring exemption
from payment of sales tax wali to increase industrial activity within the State
by encouraging setting up of new industrial units or expansion, diversification C
or modernization by the existing industrial units. At the same time the State
did not desire to extend that benefit to all such industries. It was therefore
specifically stated in the notification that industries mentioned in Annexure
II shall not be entitled to the benefit of exemption from payment of tax or
reduction in rate of tax. Presumably, the State did not desire further growth
of such industries by suffering loss of revenue. What is however necessary D
to note is that Annexure 0 is an exclusionary part of the exemption notification.
The High Court did not examine the issue from this angle and also failed to
appreciate that exclusionary part of an exemption notification has to be
construed rather strictly. Even though the word used in exclusionary part of
an exemption notification has a wide dictionary meaning or connotation, only E
that meaning should be given to it which would achieve rather than frustrate
the object of granting exemption and which does not lead to uncertainty or
unintended results.
      A correct reading of the notification further discloses that the words
'commodities of like nature' in Entry 18 were meant to include commodities F
other than those specifically mentioned. What they indicate is that other
commodities of like nature also were not to get benefit of the exemption. To
that extent they did widen the scope of the Entry but they cannot be construed
to have the effect of enlarging the meaning of the word 'sweetmeat'. As that
was not the purpose of including those words in the Entry, the High Court
was not justified in holding that they gave an unlimited and unrestricted G
meaning to the word 'Mithai' or 'sweetmeat'.
      The High Court has also not correctly applied the popular parlance test.
As can be seen from the observations made by it that "There is no doubt
that a toffee is a sweetmeat, as understood by the people where toffee
originated" and that "Toffee and other things of that nature are of foreign H
    128                       SUPREME COURT REPORTS [1998] SUPP. 2 S.C.R.

A origin and are sweets or sweetmeat according to those people and their nature
  cannot be changed simply because their origin is different from what is
  usually conveyed by the word 'Mithai' in this part of the country", the High
  Court preferred to decide the issue by relying upon how toffee is understood
  by the people of the country where it originated rather than by considering
B how 'toffee' is understood in India and more particularly in the State of U.P.
  As held by this Court in Collector of Excise v. Mis Parle Exports (P) Ltd,
  [ 19&9] I SCC 345 "The words used in the provision, imposing taxes or
  granting exemption should be understood in the same way for which they are
  understood in ordinary parlance in the area in which the law is in force or by
  the people who ordinarily deal with them. "In that case, the question that had
C arisen for consideration was whether non-alcoholic beverage bases are food
  products or food preparations in terms of Central Excise Notification No.55/
  75 dated 1.3.75. This Court observed that non-alcoholic beverages are not
  understood in India as food products or food preparations, though they
  might have been regarded as such in foreign countries. The High Court,
  therefore, should have applied the test of popular parlance by finding out
D how toffee is understood in the country and more particularly in the State of
  U.P. No evidence was led by the State to substantiate its case that 'toffee'
  is considered as sweetmeat either by the dealers in toffees or by the consumers.
  On the other hand evidence· was led by the appellant in C.A. No. 1692of1997
  indicating that toffee is not considered as sweetmeat, that they are not sold
E in shops selling sweetmeats but are sold in shops selling confectioneries or
  other types of goods, and that the consumers do not buy toffees as sweetmeat
  or treat them as such. It was, however, contended by the learned counsel for
  the State that sometime before this exemption notification was issued by the
  State, the Allahabad High Court had in two cases held that toffee is a
  sweetmeat. But it was so held in a different context and no evidence was led
F by the State to show that thereafter, the dealers in toffees and consumers
  started treating them as sweetmeat. In the Hindi version of the Notification
  for the word 'sweetmeat' the word 'Mithai' is used. The word 'Mithai' has
  a definite connotation and it can be said with reasonable amount of certainty
  that people in this country do not consider toffee as 'mithai'. The High Court
G committed a grave error in holding that as some manufacturers of toffees sell
  their products by describing them as sweets it can be said that in commercial
  circles toffee is known as sweetmeat.

        The learned counsel for the appellant also drew our attention to a
  similar exemption notification for the subsequent period issued by the State
H ofU.P. wherein the relevant item is worded thus: "Units making sweetmeats,
           PAPPUSWEETSANDBISCUITSETC. v. C.T. T. [NANAVATI,J.]                129
namkin, reori, gazak (but excluding such confectionery manufacturing units as A
are registered under the Factories Act, 1948) and restaurants." The learned
counsel submitted that subsequent legislation can be looked at in order to
see what is the proper interpretation to be put upon the earlier legislation
when the earlier legislation is found to be obscure or ambiguous or capable
of more than one interpretation. In support of his contention, he relied upon B
the decisions of this Court in State of Bihar v. S.K. Roy (1966] Supp. SCR
259 and Yogender Nath Naskar v. Commissioner of Income Tax, Calcutta
(1969] 3 SCR 742. In Naskar's case (supra), this Court quoted with approval
the following observations made in Cape Brandy Syndicate v. I.R.C. (1921 2
K.B.403):

              "I think it I~ clearly established in Attorney General v. Clarkson
                                                                                     c
          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      D
          earlier legislation, then the subsequent legislation may fix the proper
          interpretation whirh is to be put upon the earlier Act."

      For the aforesaid reasons we are of the view that the High Court has
not correctly interpreted and construed Entry No.18 of the notification.
Considering the object of the notification and the intention of the State            E
Government in granting exemption from payment of sales tax and applying the
correct principles of interpretation in such cases, we hold that the word
'sweetmeat' and the words "commodities of like nature" as used in the
Notification dated 27.7.91 did not include within tneir sweep toffees
manufactured by industrial units as contemplated by the notification and the         p
Joint Director of Industries, the Tribunal and the High Court were wrong in
taking a contrary view. We, therefore, allow both these appeals, set aside the
judgments and orders passed by the High court, and direct the concerned
authorities and the State ofU.P. to grant the required eligibility certificate and
to extend the benefit of sales tax exemption to the extent lawfully available
to them under the notification. In view of the facts and circumstances of the        G
case there shall be no order as to costs.

S.V.K.L                                                        Appeals allowed.