Taxation Classification | Specific Provision Will Prevail Over General Provision In A Statute : Supreme Court In ‘Maize Starch’ Case

The Supreme Court has ruled that if in any statutory rule or statutory notification, two expressions are used - one in general words and the other in special terms – then, as per the rules of interpretation, the special terms are not meant to be included in the general expression. Alternatively, the court said that where a statute contains both a general provision as well as a specific provision, the latter must prevail.The bench of Justices S. Ravindra Bhat and Dipankar Datta made the observation while dealing with the issue regarding the classification and taxability of ‘maize starch’ under the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act) for the assessment year, i.e., 1998-99.The bench noted that during the relevant assessment year, only two entries were operating the field, i.e., the Taxation Entry No.61 which taxed ‘starch of any kind’ and the Exemption Entry No.8 which exempted products of ‘millet’.Comparing the specific entry (i.e., Taxation Entry No.61) with the general entry (i.e., Exemption Entry No.8), the court concluded that there was no doubt that maize starch would be covered by the taxation entry and not by the exemption entry.The bench remarked that the Taxation Entry No.61 provided a more specific description. Thus, maize starch undoubtedly being a ‘kind of starch’ would, therefore, fall within the ambit of the Taxation Entry, the court said.Facts:The appellant, Santhosh Maize & Industries Limited, who is registered under the TNGST Act, deals in maize starch.Initially, the Government of Tamil Nadu, vide a Notification dated 14th March, 1970 exempted the products of “millets (like rice, flour,… and maize)” from tax payable under the TNGST Act. Later, through the TNGST (Second Amendment) Act, 1996, the Tamil Nadu Legislative Assembly moved ‘sago and starch of any kind’ to Entry No. 61, Part B of Schedule I of the Act (Taxation Entry). The same was made taxable at 4% with effect from 17th July, 1996.The Legislature next amended the TNGST Act in 1994, w.e.f. 1st April, 1994, and Entry No. 8 was inserted in Part B of Schedule III of the Act. The said Exemption Entry No. 8 exempted “products of millets (rice, flour,…and maize)” from taxation under the Act. The said Entry retained the language of the 1970 Exemption Notification except that the word ‘like’ was omitted. In view of the said 1994 amendment, the 2017 Exemption Notification ceased to be operative.Thereafter, Section 28-A was inserted in the TNGST Act w.e.f. 6th November, 1997 by way of an amendment, which empowered the Commissioner to issue clarifications concerning the rate of tax under the Act. After the insertion of Section 28-A, the Commissioner issued a Circular dated 23rd June, 1998, clarifying that Exemption Entry No. 8 does not encompass maize starch. The Commissioner held that the specific entry (Entry No. 61 of Part B of Schedule I), i.e., “sago and starch of any kind”, also covered maize starch. Thus, maize starch attracted a 4% tax to be levied w.e.f. 17th July, 1996.Later, assessment proceedings were initiated against the appellant seeking recovery of general sales tax. The appellant approached the Tamil Nadu Taxation Special Tribunal challenging the provisional assessment notices issued against him. The appellant also challenged the validity of the Circular dated 8th October, 1998. The petitions filed by the appellant were dismissed by the Tribunal. The writ petition filed by the appellant was also dismissed by the Division Bench of the Madras High Court, who upheld the validity of the Circular dated 8th October, 1998, which classified maize starch under Taxation Entry No. 61 subjecting it to a 4% tax. The High Court concluded that maize starch was not entitled to the benefit of exemption. The review application of the appellant was also dismissed by the High Court.Decision of the Supreme Court:In the appeal filed before the Supreme Court against the decision of the High Court, the top court noted that the entries under Schedule I are taxed under Section 3(2) of the TNGST Act while the entries under Schedule III are exempted under Section 8 of the Act.The court said that the issue was to be decided in terms of the TNGST Act read with the Schedules as it stood on 17th July, 1996. The court reckoned that though the TNGST Act was further amended with effect from 27th March, 2002, but the same was admittedly beyond the relevant period under consideration.The court observed that during the period of the relevant assessment year, i.e., 1998-99, there were two entries operating the field, i.e., “sago and starch of any kind” in Schedule I (Taxation Entry No.61) and “products of millets (rice, flour,… and maize)” in Schedule III (Exemption Entry No.8).The bench held that when Schedule III of the TNGST Act was amended in 1994 and Exemption Entry No.8 was inserted, the said Exemption Entry did not include the word ‘like’ which was present in the 1970 Exemption Notification. The court concluded, “Once it becomes clear from...

Taxation Classification | Specific Provision Will Prevail Over General Provision In A Statute : Supreme Court In ‘Maize Starch’ Case

Parina Katyal

Tags