MEMBER-SECRETARY, ANDHRA PRADESH STATE BOARD FOR PREVENTION AND CONTROL OF WATER POLLUTIONversusANDHRA PRADESH RAYONS LTD. & ORS.

A         MEMBER-SECRETARY, ANDHRA PRADESH STATE
           BOARD FOR PREVENTION AND CONTROL. OF
                     WATER POLLUTION
                             v.
            ANDHRA PRADESH RAYONS LTD. & ORS.
B
                             SEPTEMBER 30, 1988

             [SABYASACHI MUKHARJI, M.H. KANIA AND
                     S. RANGANATHAN, JJ.]

         ~Water (Prevention and Control of Pollution) cess Act. 1977: Secc
C    tion 3 and Schedule 1-Cess-Levy and collection of-Industry
     manufacturing Rayon Grade pulp-Neither chemical, textile nor paper
     industry ..

           'Statutory Interpretation: Taxing Statute-Interpretation of-No
     room for any intendment-No equity about tax-No presumption as to
D    tax-Whether any industry falls within realm of taxation-To be judged
     by predominant purpose and process-Not by any ancillary or inciden-
     tal process carried on. by the industry.

           The respondent, Andhra Pradesh Rayons Ltd., manufacturing
     Rayon Grade Pulp, a base material for the manufacture of synthetics or
E    man-made fabrics, was assessed by the petitioner under the provisions
     of Water (Prevention and Control of Pollution) Cess Act, 1977 which
     provided for levy and coilection of Water cess from the specified
     industries enumerated in Schedule I of the Act. On appeal, the Appel-
     late Committee confirmed the order of assessment on the ground that
     the respondent was manufacturing Rayon Grade Pnlp which came
F    under the category of Textile industry.

            The respondent flied a writ in the High Court challenging the levy
    . inter alia on the ground that it.was not one of the. industries mentioned
      in the Schedule. The High, Court upheld this contention.                 ·
G           Before this Court, it was sought to be canvessed by the petitioner
     that Rayon Grade Pulp was covered either by Item No. 7 of the
     Schedule, which was chemical industry, or item No. IO which was tex-
     tile industry, oi item No. 11 which was paper industry.

           Dismissing the petition, it was,
H

                                        380              • I   •   "   _..,.
              A.P,WATERPOLLUTIONv. A.P. RA"\'ONSLTD.                  381

     HELD: (1) The Act being fiscal in nature must be strictly
                                                                             A
construed. The question as to what is covered ··must be found out
from the language according to its natural meaning, fairly and
squarely read. [385F; 386B]

      (2) In a taxing Act one bas to look merely at what is clearly said.
There is no room for any intendment. There is no equity about a tax,         B
there is no presumption as to tax. Nothing is to be read in, nothing is to
be implied. [385HJ

      (3) Whether a particular industry is an Industry covered in
Schedule I has to be judged normally by what that industry produces
mainly, its predominant purpose and process, and not by any ancillary
or incidental process carried on by it. {386D I                              c
      (4) Chemical process would be involved to a certain extent, more
or less in all industries; but an industry would be known as a chemical
industry if it carries out predominantly chemical activities and is
involved in chemical endeavours. [386E]                                      D.

     (5) Taxing consideration may stem Crom administrative
experience and other factors of life and not artistic viSualisation or
neat logic and so the literal, though pedestrian, interpretation must
prevail. [386C]
                                                                             E
      (6) One of the well recognised canons of construction is that the
legislature speaks its mind by use of correct expression and unless there
is any ambiguity in the language of the provision the Court should
accept literal construction if it does not lead to an absurdity. [387E]

       (7) There is no absurdity in the literal meaning. Broadly and         F
literally it can be said that the Rayon Grade Pµlp is neither chemical
industry nor textile industry nor paper industry. l387G; 386Hl

      In Re Micklethwait., [1885] ll EX 452, 456; Tenant v. Smith,
[1892] AC 150; St. Aubyn v. AG., [1951] 2 All E.R. 473; Cape Brandy
Syndicate v. /RC., [1921] 1 KB 64 at 71; Gursahai Saigal v. C.I.T.           G
Punjab, [1963] 3 SCR 893; C.l.T. Madras v. V. MR. P. Firm,' Muar,
[1965] 1 SCR 815; Controller of Estate Duty, Gujarat v. Kamila/
Trikamlal, [1977] l SCR 9; IRCv. Duke of Westminster, (1936] AC 1 at
24; AV Fernandez v. The State of Kera/a, (1957] SCR 837; Martand
Dairy & Farm v. Union of India, 11975] Supp.- SCR 265; Lt. Col.
Prithi Pal Singh Bedi v. Union ofIndia, (1983] lSCR 393, referred to.        H
     382         SUPREME COURT REPORTS                [1988] Supp. 3 S.C.R.

           Mis. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. Mavoor v. The
A    Appellate Committee for Water Cess, Trivandrum, A.I.R. 1983 Kerala
     110, overruled.

           CIVIL APPELLATE JURISDICTION: Special Leave Petition                  •'
     (C) No. 8566 of 1988.
B
         , From the Judgment and Order dated 9. 10. 1987 of the Andhra
     Pradesh High Court in W.P. No. 306 of 1983.

           R. Mohan for the Petitioner.

           The Judgment of the Court was delivered by
c
           SABY ASA CHI MUKHARJI, J. This petition is for leave to
     appeal under Article 136 of the Constitution from the judgment and
    order of the High Court of Andhra Pradesh dated 9tb October, 1987.
    The question that was nrged before the High Court and tbe question
D which is sought to be raised in this petition is whether the respon-
    dent-Andhra Pradesh Rayons Ltd. which is manufacturing Rayon
    Grade Pulp, a base material for manufacturing of synthetics or man-
    ·made fabrics is an industry as mentioned in Schedule I of the Water
    (Prevention and Control of Pollution) cess Act, 1977 for the purposes
    of levy of Water Cess under the Act: The water (Prevention and Control
E of Pollution) Act, 1974 was passed by the Parliament to "provide for.
    the prevention and control of water pollution and the maintaining or
    restoring of wholesomeness of water, for the_ establishment, with a
    view to carrying out the purposes aforesaid, of Boards for tbe preven-
    tion and control of water pollution, for conferring on and assigning to
    such Boards powers and functions relating thereto and for matters
F connected therewith". For the aforesaid purposes, the Act con-
    templated creation of State Boards at State level and the Central
    Board at the national level. Thereafter, the Water (Prevention and
    Control of Pollution) Cess Act, 1977 being Act 36 of 1977 was passed
     (hereinafter called 'the Act'). The preamble to the said Act states that·
    the said Act was "to provide for the levy and collection of a cess on
0 water consumed by persons carrying on certain industries and by local
    authorities, with a view to augment the resources of the Central Board
    and the State Boards for the prevention and control of water pollution
    constituted under the Water (Prevention and -Control of Pollution)
    Act, 1974". Therefore, the said Act was passed only for the purpose of
    providing for levy and collection of cess on water consumed by persons
Iii carrying on certain industries with a view to augment the resources of
      A.P. WATER POLLUTION v. A.'P. RAYONS LTD. [MUKHARJI, J.]        383


the Central Board and the State Boards. Section 2(c) stipulates             A
'specified industry' means any industry specified in Schedule I. Section
3 provides as follows:

           "3. Levy and collection of cess.-(1) There shall be levied
           and collected a cess for the purposes of the Water (Preven-
                                                                            B
           tion and Control of Pollution) Act, 1974 and utilisation
           thereunder.

            (2) The cess under sub-section (1) shall be payable by-

            (a) every person carrying on any specified industry; and
                                                                            c
            (b) every local authority,

            and shall be calculated on the basis of the w.ater consumed
            by such person or local authority, as the c!ise may be, for
            any of the purposes specified in column ( 1) of Schedule II,
            at such rate, not exceeding the rate specified in the cor-      D
            responding entry in column (2) thereof, as the Central
            Government may ,oy' notification in the Official Gazette,
            from time io time, specify."

     Therefore, this section provides for levy and collection of cess
from the specified industries. Specified industry is one which is           E
mentioned in Schedule I which is as follows:

            " 1. Ferrous metallurgical industry.

             2. Non-ferrous metallurgical industry.
                                                                            F
             3. Mining industry.

             4. Ore processing industry.
                   '
             5. Petroleum industry.
                                                                            G
             6. Petro-chemical industry.

             7. Chemical industry.

             8. Ceramicindustry.
                                                                            H
    384         SUPREME COURT REPORTS                 [1988] Supp. 3 S.C.R.

A                9. Cement industry.
                                I
                10. Textile industry

                11. Paper industry.
B
                12. Fertilizerindustry.

                13. Coal (including coke) industry.

                14. Power (thermal and diesel) generating jndustry.

c               15. Processing of animal or vegetable products industry."

          Therefore, the short question, is, whether the industry run by the    l
    respondent herein for manufacturing Rayon Grade Pulp, a base mate-
    rial for manufacture of synthetics or man-made fabrics is one of the
    industries mentioned in Schedule I hereinbefore.
D
           In this case, the respondent company was registered as a
    company in 1975. The supply of energy to the company comil1enced on
    August 22, 1981 and the production began from September 1, 1981.
    The company manufactures rayon grade pulp of 26250 tonnes per
    annum._ The Company was served with a notice on 12th August, 1981
R   to furnish the quantum of water consumed for assessment under the
    Act: Based on the returns filed by the respondent as required under
    section 5_ of the Act, assessment of water cess was made by an order
    dated 31st December 1981. Aggrieved by the said order the respon-
    dent filed an appeal b_efore the Appellate Committee constituted
    under the Act. The Appellate committee by its order dated 30th
p   November, 1982 conformed the orders of the assessment passed by the
    petitioner. Before the Appellate Committee various contentions were
    urged and only one of such contention survives now and is agitated
    before us, namely, that the Rayon Industry is not included in Schedule
    I of iiie said Act. The Appellate Committee by its order said as follows:

d               "We are unable to agree with the arguments advanced by
                the learned counsel. The appellant industry is manufactur-
                ing Rayon Grade Pulp which comes under the category of
                textile industry as it involves the production of Rayon
                Grade Pulp, a base material for manufacture of synthetic of
                man-made fibres."
H
      A.P. WATER POLLUTION v. A.P. RAYONS LTD. [MUKHARJl,J,]       385

        From the aforesaid, it appears that the Appellate Committee was
  of the view that the respondent herein was manufacturing Rayon A·
  Grade Pulp which comes under the category of Textile mentioned in
  Schedule I of the Act. Textile industry is item No. 10 in the aforesaid
  Schedule. Aggrieved by the decision of the Appellate Committee, the
  respondent herein filed writ petition challenging the constitutional 1
  validity of the Act as well as the levy of cess on water on .the ground B
  that it was not one of the industries mentioned in the Schedule. The
  High Court by its order dated 9th October, !987 rejected the conten·
  tion relating to the constitutional validity but upheld the contention
  that the respondent's industry was not an industry which is mentioned
  in Schedule I and as such was not liable to pay cess. It is the propriety
  or the correctness of that decision which is sought to be canvassed
  before us by this petition. It must, therefore, be made clear that we are C
  not concerned with the correctness or otherwise of the decision of the
  High Court about the constitutional validity of the Aci in question.
  That is not at issue before us since the petitioner, Andhra Pradesh
  State Board for Prevention and Control of Water Pollution has not
 challenged that finding. The only question is whether the respondent is o
  an industry as mentioned in the aforesaid schedule. The High Court in
  the impugned judgment has held that Rayon Grade Pulp is not
1
  covered  by any of the items specified in the said Schedule. We are of
  the opinion that the High Court was right. Before us it was sought to
  be canvassed that Rayon Grade Pulp is covered either by Item No. 7
  which is chemical industry or i,y item No. 10 which Is textile industry E _
 or item No. 11 which is paper industry. We are unable .to accept the
  c911tention.                _

       It has to be borne in mind that this Act with which we are con·
 cerned is an Act Imposing liability for cess. The Act is fiscal in nature.
The Act must, therefore, be strictly construed in order to find out F
 whether a liability is fastened on a particular industry. The subject is
 not to be taxed without clear words for that purpose; and also that
 every Act of Parliament must be read according to its natural construe·
tion of words. See the observations in Re Mick/ethwait, [1885] 11
Ex 452, 456. Also see the observations in Tenant v. Smith, [1892] AC
 150 and Lord Halsbury's observations at page 154. See al~o the obser- G
 vations of Lord Simonds in St. Aubyn v. AG, [1951] 2 All_E.13., 473 at
 485. Justice Rowlatt of England said a long time ago, that in a taxing
 Act one has to look merely at what is clearly said. There is no room for
 any intendment. There is no equity about a tax. There is no presump-
 tion as to tax. Nothing is to be read in, nothing is to be implied. One
·has to look fairly at the language used. See the observations in Cape H
    386         SUPREME COURT REPORTS               [1988] Supp. 3 S.C.R.

A   Brandy Syndicate v. IRC, [1921] 1 KB 64 at 71. This Court has also
    reiterated the same view in Gursahai Saigal v. C.I. T. Punjab, [1963] 3
    SCR 893; C.I. T. Madras v. V. MR. P. Firm, Muar, [1965] l SCR 815.
    and Controller of Estate Duty Gujarat v. Kantilal Trikamlal, [1977] 1
    SCR9.

B         The question as to what is covered must be found out from the
    language according to its natural meaning fairly and squarely read. See
    the observations in IRC v. Duke of Westminster, [1936] AC 1 at 24,
    and of this Court in AV Fernandez v. The State of Kera/a, [1957] SCR
    837. Justice Krishna Iyer of this Court in Marland Dairy & Farm v.
    Union of India, [ 1975] Suppl. SCR 265 has observed that taxing con-
e   sideration may stem from administrative experience and other factors
    of life and not artistic visualisation or neat logic and so the literal,
    though pedestrian, interpretation must prevail.

       .In this case where the question is whether a particular industry is
  an industry as covered in Schedule I of the Act, it has to be judged
D normally by what that industry produces mainly. Every industry car-
  ries out multifarious activities to reach its goal through various
  multifarious methods. Whether a particular industry falls within the
  realm of taxation, must be judged by the predominant purpose and
  process and not by any ancillary or incideqtal process carried on by a
  particular industry in running its business.

          Chemical process would be involved to a certain extent, more or
    less in all industries, but an industry would be known as a chemical
    industry if it carries out predominantly chemical activities and is in-
    volved in chemical endeavours.

F         We fail to see that Rayon Grade Pulp could be considered even
    remotely connected as such with chemical industry or textile industry
    or paper industry. In all preparations, there is certain chemical process
    but that does not make all industries chemical industries. The expres-
    sion "chemical" means, according to Collins English Dictionary, any
    substance used in or resulting from a reaction involving changes to
G   atoms or molecules or used in chemistry. The Concise Oxford Dic-
    tionary, 8th Edition page 170 defines "chemical" as made by or relat-
    ing to, chemistry. Broadly and literally, in our opinion, it can be said
    that the Rayon Grade Pulp is neither chemical industry nor textile
    industry nor paper industry. We find it difficult on a broad and literal
    construction to bring the industry of the respondent into any of these
H   categories. In other words, to find out the intention of the legislation,


                                                                                ·~·
          A.P. WATERPOLLUTION-v. A.P. RAYONS LTD. (MUKHARJl,J.]            387

    if possible it should be found out from the language used in case of
                                                                                  A
    doubt. The purpose of legislation should be sought for to clarify the
    ambiguity only, if any. The fairest and most rational method, says
    Blackstone, to interpret the will of the legislator is by exploring his
    intentions at the time when the law was made, by signs the most
    natural and probable. And these signs are either the words, the con-
    text, the subject matter, the effects and consequence, or the spirit and      B
    reason of the law. See Commentaries on the Laws of England by
    Blackstone (facsimile of 1st edition of 1765, University of Chicago
    Press, 1979 Vol. 1 p. 59.). The words are generally to be understood
    'in their usual and most known signification', although terms of art
    'must be taken according to the acceptation of the learning in each art,
    trade and science. If words happen still to be dubious, we may
    establish their meaning from the context, which includes the preamble         c
    to the statute and laws made by the same legislator on the same sub-
    ject. Words are always to be understood as having regard to the sub-
    ject matter of the legislation. See Cross Statutory Interpretation, 2nd
    Edition page 21.
                                                                                  D
          This Court in Lt Col. Prithi Pal Singh Bedi etc. v. Union of India
    & Ors., [1983] 1 S.C.R. 393 at page 404 of the report reiterated that
    the dominant purpose in construing a statute is to ascertain the inten-
    tion of the Parliament. One of the well recognised canons of construc-
    tion is that the legislature speaks its mind by use of correct expression
    and unless there is any ambiguity in the language of the provision the        E
    Court should adopt literal construction if it does not lead to an absur-
    dity. Therefore, the first question to be posed is whether there is any
    ambiguity in the language used. If there is none, it would mean the
    language used-, speaks the mind of Parliament and there is no need to
    look somewhere else to discover the intention or meaning. If the literal
    construction leads to an absurdity, external aids to construction can be      F
    resorted to. To ascertain the literal meaning it is equally necessary first
    to ascertain the juxtaposition in which the rule is placed, the purpose
    for which it is enacted and the object which it is required to subserve
    and the authority by which the rule is framed.

           Bearing the aforesaid principle in mind, we find that there is no G
    absurdity in the literal meaning. The purpose of the Act is to realise
    money from those whose activities lead to pollution and who must bear
    the expenses of the maintenance and running of the State Board. It is a
    fiscal provision and must, therefore, not only be literally construed but
    also be strictly construed. Having regard to the literal expression used
    and bearing~ mind the purpose for the legislation, we arrive at a H



1
    388         SUPREME COURT REPORTS                [1988] Supp. 3 S.C.R.

    result that certain industries have to pay the expense~ of the main-
A · tenance and functioning of the State Boards. Considering the principle
    broadly and from commonsense point of view, we find nothing to
    warrant the conclusion that Rayon Grade Pulp is included in either of
    the industries as canvassed on behalf of the petitioner here and as held
    by the High Court in the judgment under appeal.

          In this case, we must also note that neither the water Pollution
    Board nor any authorities under the Act nor the High Court pro-
    ceeded on any evidence how these expressions are used in the parti-
    cular industry or understood in the trade generally. In other words, no
    principle of understanding in "common parlance" is involved in the
    instant case.
c
          In that view of the matter, we are of the opinion that the conten-
    tion sought for by the petitioner is of no substance.

          Our attention, however, was drawn to the decision of a learned
1J1 single Judge of the High Court of Kerala in Mis. Gwalior Rayon Silk
    Mfg. (Wvg.) Co. Ltd., Mavoor v. The Appellate Committee for Water
     Cess, Trivandrum and others, A.I.R. 1983 Kerata 110. There, the
     learned single Judge of the Kerala High Court held that industry
     manufacturing rayon-grade pulp is chemical industry. The High Court
     has observed that the product of the Pulp· Division of a rayon silk
R manufacturing company is rayon-grade pulp, extracted from bamboo
     or wood. The High Court noted that the pulp produced in the Pulp
     Division of the company is the raw material for the Staple Fibre Divi·
     sion. The High Court further observed that the pulp in question is a
     chemical used as chemical raw material, in the form known as chemical
     cellulose, for preparation of fibres. The High Court noted that for the
p scientist cellulose is a carbohydrate an organic compound, a saccharide
     and for the layman also it is a chemical like salt and sugar.
     Manufacture 'of pulp from wood or bamboo involves consumption of
     large quantities of water which get polluted in the process; and
     "chemical industry" in the context in which it is used in Schedule I of.
     the Act, can therefore, include an industry manufacturing rayon-grade
G pulp. We are unable, with respect, to accept the circuitous process of
     reasoning of the Kerala High Court. As mentioned hereinbefore,
     looked at from this .circuitous method every industry would be
     chemical industry. It could not have been the intention to include all
     industries because every inclustry has to go to certain chemical process
     more or less and, therefore, it could not be so construed. Such expres-
1!{, sion should, therefore, be construed reasonably, strictly and from a
     A.P. WATERPOLLUTIONv. A.P. RAYONS LTD. [MUKHARJl,J.}            389

commonsense point of view. The High Court of Kerala has set out in
                                                                            A
the said judgment the company's case in that case which also produced
Rayon Grade Pulp and the manufacturing process consisted. only of
isolating cellulose present in bamboo and wood by removal of "lignin"
and other contents, and that the resultant product is not chemical
cellulose. It explained the process as under:
                                                                            B
           "The actual process of manufacture of Rayon grade pulp is
           by feeding the raw materials on the conveyors leading to
           the chippers, where they are chipped into small pieces in
           uniform sizes. The raw materials are washed by a con-
           tinuous stream of water before they are fed into chippers
           for removal of their adhering mud and dirt. The chips are
           then conveyed into Digesters, where they are subjected to        c
           acid pre-hydrolysis, using dilute sulphuric acid solution. The       •
           spent liquor is then, drained out, and the chips washed to
           remove the acid. The chips are again cooked using a solu-
           tion containing cooking chemicals at high temperature of
           above 160C. After the chips are thus cooked the pressure is      D
           released, and the material is collected in a blow tank, from
           where the chipped pulp is serit to "Knotter Screen" for
           removal of uncooked particles. The pulp is washed in a
           series of washers in a counter-current manner. The washed
           pulp is bleached in a multi-staged Bleaching Plant, and
           converted into sheets in a continuous machine. The pulp          E
           sheets so obtained are sent to other factories for their con-
           version into Staple Fibre."

     The said High Court also relied on a passage from the "Book of
Popular Science" Grolier, 1969, Vol. 7, p. 55 which reads as follows:
                                                                        F
           "Just what is a chemical, after all? Presumably it is a pure
           chemical suostance (an element or compound) and not a '
           mixture. Thus sulphuric acid is.a chemical ...... But com-
           mon salt and sugar, with wliich all of us are familiar, are
           also pure chemical substances ....· The truly chemical
           industries, which manufacture chemicals, are seldom we 1l G
           known to the public. This is because we, as consumers, do
           not ordinarily make use of chemicals in their pure form.
           Instead they are converted into products that reach the .
           consumer only after a number of operations .... "
                                                   (Emphasis supplied)
                                                                        H
    390         SUPREME COURT REPORTS               [1988] Supp. 3 S.C.R.

A         As mentioned hereinbefore, the expression should be
    understood not in technical sense but from broad commonsense point
    of view to find out what it truly means by those who deal with them.
    Bearing the aforesaid perspective in mind, we are unable to agree with
    the view of the Kerala High Court expressed in the aforesaid judg-
    ment. In that conspectus of the Kerala High Court everything would
B   be included in the process of chemical.     ·

         In the aforesaid view of the matter we are of the opinion that the
    High Court of Andhra Pradesh in the impugned judgment was right
    and the High Court of Kerala in the judgment referred to hereinbefore
    was not right.
c
            In the aforesaid view of the matter this petition fails and is ac-
    cordingly dismissed.
    R.S.S.                                             Petition dismissed.