Kerala H.C : Whatever be the callous negligence on the part of the respondents. Interpretation of any legislation is not to be made on the basis of default or even a concession rashly made. (Vide Hindustan Paper Corporation Ltd. vs. Government of Kerala, AIR 1986 SC 1541.) Could the levy be effective from the 1st April, 1987, with the existing provisions of the amendment Act ?

K. A. Nayar, T. D. Rajalakshmy, M. Pathrose Mathai, C. V. Antony & M. A. Manhu, for the Petitioners : Government Pleader, for the State

K. SUKUMARAN, J.:

Plantations in Kerala play a prominent role in the economy of the State. Many are the tales of thrill behind the pioneering operations of this organised agricultural activity. Even when a revolutionary land reform passed along the social life of the State in a steam-roller manner, plantations were spared. Whether it be the aromatic cardamom in the higher planes or the tea bushes with the sprinkling of colourful leafgatherers, or the coffee plants with their inimitable blooms and berries or the rubber trees arrayed as if in an Army parade, they elicit the appreciation of all who pass by. When many a rural tyrant had his wings clipped off, the planter soared high with a spirited profit- earning spree. Naturally, this boundless contiguity of greenery attracted the attention of administrators including the tax-gatherers. Plantation tax was imposed in the State by the Kerala Plantation Tax Act, 1960 (Act 17 of 1960). Law-making has its own complexities. This enactment also had its share. The legislation was not born on the very day of the commencement of the financial year. Though the Act was brought into force only in August, 1960, the device of a statutory fiction helped to net the tax for that year also. Our Legislature too has extraordinary abilities, though not to the full measure of the mother of Parliaments, the British Parliament, which could, as it is said, perform by means of a statute, any feat other than making a man a woman or a woman a man. A new Government assumed office in the State, soon after the elections of March, 1987. During the election campaign, the front of political parties (which came to office later) had exhibited to the electorate a cute basket of promises and programmes. Promises are easily made. Implementation is difficult. Resource mobilisation is not an easy exercise even for expert economists.

There was obvious paucity of time, for a leisurely presentation of the budget and a detailed discussion thereon. That is evident from the Budget Speech of the Minister of Finance presented later on 5th June, 1987. The relevant portion reads :

“As Honourable Members are aware, a budget statement was presented on the 28th March, 1987, by the Chief Minister. But contrary to the usual custom, there was no general discussion and only a vote on account for four months was taken. While presenting the budget statements, the Chief Minister indicated to this House that detailed budget proposals incorporating the basic policies of this Government, already briefly enumerated by the Governor in his address to this House, along with an alteration memorandum would be presented in the succeeding session of the House.” (Emphasis italicised in print supplied) Paragraphs 137 and 138 of the Budget Speech dealt with plantation tax. They read : “137. The existing system of plantation tax is such that there is an exemption limit upto 4 hectares for all garden crops. The exemption limit is on the high side for certain crops taking into consideration the higher levels of yield and the remunerative prices fetched from the plantation sector. The present rate which ranges form Rs. 70 to a maximum of Rs. 130 per hectare is also on the very low side and does not reflect the paying capacity of the plantation industry. I propose to rationalise the exemption and tax rates as follows: 138. There will be a basic exemption limit of up to one hectare for all plantations. For coconut and arecanut plantations, however, the exemption limit will be retained at 4 hectares. For other plantations, tax will be from 1 to 4 hectares at the rate of Rs. 100 per hectare, from 4 to 8 hectares at Rs. 150 per hectare, from 8 to 15 hectares at Rs. 200 per hectare, from 15 to 25 hectares at Rs. 300 per hectare and for plantations having an area of more than 25 hectares, the rate will be Rs. 500 per hectare. As a result of lowering the exemption limit and an increase in the rate of tax, net additional revenue during the year is estimated at Rs. 6 crores.”

In the summary of the additional resources mobilisation measure, under the head “Plantation Tax Rationalisation”, Rs. 6 crores was indicated.

In tune with the announced policy of the Government, the Kerala Finance Bill, 1987, was published in the Gazette Extraordinary dt. 2nd July, 1987. It was introduced in the Assembly on 31st July, 1987, and was referred to the Subject Committee on 10th Aug., 1987. The Subject Committee deliberated over the proposals of the Bill. Sec. 3 of the amendment bill proposed to amend the Kerala Plantation Tax Act, 1960, by substituting a new Schedule for the existing one. The report of the Subject Committee was published in the Gazette dt. 11th Aug., 1987. The Subject Committee suggested some modifications to the new bill. They are not, however, relevant, as regards the changes introduced in the plantation tax.

The bill was ultimately passed by the legislature and it received the assent of the Governor on 20th Aug., 1987. Under s. 1(2) of the new Act, there was a deeming provision, making the Act effective from 1st July, 1987. Collection of tax at the revised rates was resisted by some among the planters. The resistance is advantageous and without risk. It helps at least to return the maoney for some little time more. Those who offered resistance sought reference of the questions of law to the District Court, as provided under the parent Act. The learned Government Pleader submitted that the reference have been answered in some areas adverse to the State.

The taxpayer is entitled to say : let there be an authoritative and final decision. That decision has to be initially rendered by the High Court. The Supreme Court is then to consider the correctness of the view of the High Court. An authoritative decision could not be had from the reference Court—the District Court. That order of the District Court is open to further evaluation by the High Court. Instead of the slow pace along the side roads, one could as well have the highway to the High Court. Those who thought that way are the writ petitioners in the batch of cases. Tea planters like the Jayashree Tea and Industries Ltd., Bhagavathi Tea Estates, rubber growers like Harrisons Malayalam Ltd., coffee planters like Vijaya Padman are among the complainants.

The crux of the argument is this : The scheme of the Act links the tax exaction with the first of April in the financial year. Even by the fiction, the Amendment Act of 1987 has been made effective only from 1st July, 1987. The additional levy will get fastened only from the first of April after the amendment Act had become effective. In effect, therefore, despite the proclaimed objective, the levy is really operative only from the next financial year, the 1st of April, 1988.

The first among the writ petitions was admitted on 28th March, 1988. Interim stay of collection of tax was also ordered on that day subject to certain conditions. Even when the tax in question was substantial, little effort was made by the guardians of the Revenue to conserve its interests. The State machinery had only a distressingly slow pace in this case.

A finality in relation to a tax liability is desirable even from the point of view of contacting and controlling a litigation explosion. An atmosphere of uncertainty will only add to an accumulation of arrears in cases before this Court and before very many of the subordinate ones, particularly those Courts proximate to the plantation area. These considerations compelled the peremptory posting of the cases and a detailed hearing of counsel who found time to argue them. It required considerable pressure from the Court to move some of the slumbering men in charge of the Revenue, to gather the papers and present even a crude and cryptic counter-affidavit, on 7th Oct., 1988. The counter-affidavit simplistic beyond comprehension, contains three pages and four paragraphs : This counter-affidavit, sworn to by a Dy. Secretary, loudly proclaims the innocence of the deponent about many of the relevant aspects which need elucidation and elaboration in a serious defence and in a substantial litigation.

The Court has necessarily to evaluate the contention of the petitioners, whatever be the callous negligence on the part of the respondents. Interpretation of any legislation is not to be made on the basis of default or even a concession rashly made. (Vide Hindustan Paper Corporation Ltd. vs. Government of Kerala, AIR 1986 SC 1541.) Could the levy be effective from the 1st April, 1987, with the existing provisions of the amendment Act ? Some aspects of this taxation measure came up for examination by this Court when the parent Act was enacted. What exactly is the incidence of the plantation tax ? Is it on land or is it on land Revenue ? After a detailed examination of the scheme of the enactment, Govidan Nair, J., as he then was, held that the tax was one in exercise of the constitutional power under entry 49 of the Seventh Schedule—”Taxes on Land and Buildings”. (There appears to be an obvious clerical error, when the entry is referred to as 45. The Correct figure the Court had in mind must be 49). A Division Bench in Essa Ismail alias Babu vs. State of Kerala (1965) KLT 944 affirmed that decision.

In view of the pronouncement of this Court, there could be no longer any doubt that the plantation tax is one imposed on lands by virtue of the legislative power of the State traceable to entry 49 referred to above.

It is equally clear that the Government had a clear intention to raise the Revenue under this enactment for the financial year 1987. The budget proposals declared it. The preamble proclaims it.

Even with the avowed purpose, it may fall short of needed accomplishment, if expression of the intention is inadequate and ineffective. The students of law or of public finance or of economic sciences, would be well acquainted with basic principles in interpretational expressions relating to tax measures. The history of diverse tax measures for the last two centuries—to say the least— would inform any one connected with serious fiscal administration about those principles. Many are the eminent Judges who have given shape and form to a searchlight that could be set on a taxing measure, for knowing its intricate mechanism and even the complicated working methods. Rowlatt, J. was an expert in that field. There had been a procession of such brainy jurists all throughout the period. Lord Donovan, in his latest exposition, has arranged the light with sufficient blaze but avoiding building daze. That is in Mangin vs. IRC (1971) 1 All ER 179 (PC). The principles so summarised are : “(1) The words are to be given their ordinary meaning. They are not to be given some other meaning simply because their object is to frustrate legitimate tax avoidance devices, (2) The moral precepts are not applicable to the interpretation of revenue statutes, (3) One has to look merely at what is clearly said. There is no room for any intendment. (4) There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to implied. One can only look fairly at the language used.” The words of Turner, J., in Marx vs. IRC (1970) NZLR 182 and of Rowlatt, J., in Cape Brandy Syndicate vs. IRC (1921) 1 KB 64 approved by Viscount Simon LC in Canadian Eagle Oil Co. Ltd. vs. R. (1945) 2 All ER 499 (HL), are clearly discernible to the watchful minds.

It may be presumed that neither nor any anomaly was intended. If a literal interpretation would produce such a result, such interpretation may be avoided. The history of an enactment and the reasons which led to its implementation may be used as aids to construction. The principles have been reiterated by Knox, J., in Russell vs. IRC (1988) 2 All ER 405 (Ch D).

It is useful to bear in mind some will recognised statutory practices in relation to the taxation statutes. The finance Act, passed later, can act and affect the citizens in retrospect. In relation to the income of a previous year, the levy and collection could be indicated by the Finance Act of the assessment year. The ED Act links the levy with the estate of the deceased as on the valuation date. The rate supplied by the Finance Act sometimes operates on a date much prior to the valuation date. That is noticeable in the administration of the taxation on wealth also.

As for the plantation tax, the extent of the plantation on the fist of April is relevant. No necessarily the rate. Once the extent as on the date is determined, the assessing authority is to apply the proper rate as given in the Schedule. When the finance Act of 1987 is passed, the assessing authority is bound to apply the rate relevant for that year as is noticeable from the finance Act of that year. In relation to the asst. yr. 1987-88, the rates would be those indicated by the amendment of the Schedule for the year 1987-88. A plain and simple understanding of the taxation practice would lead to this normal and natural result. There is no reason why the effect flowing from a plain reading of the enactment and simple understanding of taxation methodology should be allowed to be obfuscated by cloudy contentions.

Enough of guidance in the matter is available from the Indian judicial dicta spread over about four decades.

When an amendment was made effective to s. 10(2)(vii) of the India IT Act, 1922, as from 5th May, 1946, the Bombay High Court held that the amendment was not to be reckoned for the computation of the total income of the assessee for the asst. yr. 1946-47. The Court held that it was the Finance Act of 1946 that imposed the tax for the asst. yr. 1946-47; the total income had to be computed in accordance with the provisions of the IT Act as on 1st April, 1946. (vide Scindia Steam Navigation Co. Ltd. vs. CIT (1954) 26 ITR 686 (Bom)).

The Supreme Court spoke on this topic in CIT vs. Isthmian Steamship Lines (1951) 20 ITR 572 (SC). In respect of an amendment which came into force on 1st April, 1940, the Court held that the old law applied to every assessment year up to the asst. yr. 1939-40. Eight years later, the Supreme Court, by a majority, decided a similar question. There is a pertinent passage reading (See CST vs. Modi Sugar Mills Ltd. (1961) 12 STC 182 (SC)) : “The turnover of the previous year is fictionally made the turnover of the year of assessment ; it is not the actual or the real turnover of the year of assessment. By the imposition of a different tariff in the course of the year, the incidence of tax liability may competently be altered by the legislature, but for effectuating that alteration, the legislature must devise machinery for enforcing it against the taxpayer and if the legislature has failed to do so, the Court cannot resort to a fiction which is not prescribed by the legislature and seek to effectuate that alteration by devising machinery not found in the statute.” (Emphasis italicised in print supplied).

In Karimtharuvi Tea Estate Ltd. vs. State of Kerala (1966) 60 ITR 262 (SC), all these decisions have been discussed elaborately. The effect of the decision in Isthmian Steamship Lines’ case (supra) was summarised by the Supreme Court in Karimtharuvi Tea Estate Ltd.’s case (supra), in these words: “This decision is an authority for the purposition that though the subject of the charge is the income of the previous year the law to be applied is that in force in the assessment year, unless otherwise stated or implied.” (Emphasis italicised in print supplied).

It is evident from the above passages that the turnover of a previous year can justifiably be converted by a statutory fiction as the turnover of the assessment year. It is open to the legislature to completely alter the tax liability by the imposition of a different tariff in the course of the year. The Finance Act of any year is to be applied for the assessment of that year.

In the present case, the Finance Act relevant for the asst. yr. 1987-88 is the Finance Act of 1987. Substituting the Schedule as for the asst. yr. 1987-88, the tax liability is competently altered, as it is a case of “imposition of a different tariff in the course of the year.” As noted earlier, that was what was clearly proclaimed as the intention of the Government. It is that intention that is specifically postulated in the preamble to the Act. There could, therefore, be no scope for doubt that the Schedule brought in by the Finance Act of 1987 should be employed for the computation of the plantation tax for the year 1987-88. There is no scope for any contention regarding a conflict between the main provision and the Schedule. The main provision mandates the reckoning of the area with reference to the date as 1st April, 1987. The imposition of tariff by the Finance Act 1987 obligates imposition of the Schedule, as provided in the Finance Act of 1987, for the computation of the tax liability.

The history of the enactment and the reasons which led to its being passed, as noted above, could be used as an aid to the construction of the statute. The budget proposals, though in a skeletal form, sketch the history of the amendment. The reasons which prompted the amendment are prominently in the preamble to the statute.

The assessing exercise could only be by looking at the extent as on the 1st April and applying the rate as available by the Finance Act. There is little justification for hazarding a conclusion that the budget proposals made by the Government in the month of March and the pronounced intention contained in the preamble to the enactment had been abandoned by the Government and the legislature half way through. In essence, s. 3 of the Amendment Act itself gives a contra indication. Under that section, the Schedule of the parent Act was itself substituted. Once the Schedule is so substituted by legislative will, the only available Schedule before the assessing authority would be the substituted one and not the pre-existing one. It would then follow that the amended rates are necessarily to be applied form the very commencement of the financial year 1987-88. That was what was intended. That is the effect of the Finance Act of 1987. A Division Bench of this Court in Varkey Thomas vs. State of Kerala (1960) KLT 145 considered the applicability of a taxing enactment which came into force on 1st Sept., 1957, in relation to the asst. yr. 1957-58 (1st April, 1957 to 31st March, 1958). The contention was that the Act was inapplicable to transactions prior to 1st Sept., 1957. The contention was rejected. The crux of the decision contained in that, brief but brilliant, Judgement is contained in the words : “In other words, the year is the unit and because a few months of the year 1957-58 were anterior to the date on which the Act came into force, it cannot be said that the transactions during those months are exempt from the surcharge leviable under the Act. This does not mean that the Act is retroactive in character. A statute is not retrospective simply because a part of the requisites for its action is drawn from a time antecedent to its passing” (Craies on Statute Law, 5th Edition, 357).

An application of the principle contained in the above decision will result in repulsing the arguments of the petitioners. If at all, the present case is stronger for the State than the one in Verkey Thomas’ case (supra) for, unlike the sales transactions having their individual existence, the assessment of the plantation tax has got, in the scheme of things, a link with the time of assessment, and the governing rates in accordance with the schedule on force on that day. The extent of the plantations alone is borrowed from yesterday, the 1st April, 1987.

In the light of the above discussion, the writ petitions have to fail. I dismiss the writ petitions. Before parting with the case, the Court has to express its strong dis-approval of the conduct of the case on the part of the State Government. It is doubtful whether the counter-affidavit filed on behalf of the State in an important matter and involving substantial financial stakes for the State, had been scrutinised with care and concern by any one high enough to shoulder that responsibility and accountability. The Department had issued a circular, apparently attempting to elucidate the intendment of the amendment, for the benefit of the officials. The file leading to that circular was not placed before the Court despite the indications given by the Court about the desirability of perusing the same. The State may do well to sort out its papers properly and keep its desk in order.

The disapproval of the manner in which the State has attempted its defence can have reflection only in the order as to costs. I decline to award costs in these petitions. Those who were in charge of drafting the legislation did not take enough precautions to obviate possible confusion ad guard against a clever contention. If only the date 1st April, 1987, was indicated as the date from which the amendment was to be effective, it would have irrefutably brought about the intention of the Government. It is not as though such legislative techniques are unknown to deft draughtsmen. Even in relation to the Plantation Tax Act, such devices had been pressed into service. The parent Act took a tangible shape only with the publication of the Bill in the Gazette (Extraordinary) dt. 23rd July, 1960; after its adoption by the legislative Assembly, it received the assent of the Governor only on 22nd Aug., 1960. The Act was published thereafter in the Gazatte dt. 24th Aug., 1960. In this background of events, sub-s. (3) of s. 1 gave full efficacy to the taxing proposals, effective from 1st April, 1960, by a simple sentence reading : “It shall be deemed to have come into force on the first day of April, 1960.”

(Emphasis italicised in print supplied)

How come that a similar message was missed when the Finance Act of 1987 was published ? Due to ignorance or indifference or something worse ? That is matter for the Government to seriously ponder over. Sidney Low, in his book, ‘Governance of England,’ observed at pages 146-147 : “In private life, and in most pursuits and avocations, a breach of responsibility has a definite meaning, and is commonly followed by direct and painful results…..Failure, disgrace, poverty, even starvation, may be the consequences of laxity, incompetence, irregularity, indolence. Honour and material benefits are gained by the person who discharges his trust with zeal and fidelity ; humiliation and actual want may be the portion of those who err, not necessarily through dishonesty, but through inattention or lack of judgment.”

Constitutional protection afforded to civil servants does not fundamentally change their basic responsibilities.

That noted work contains a picturesque passage on the doctrine of ministerial responsibility, “the main shaft and supporting pillar of our political edifice”. As a time and in a situation where the basics appear to get blurred, the entirety of the passage is worth reproducing. It reads : “But they (ministers) are seldom ‘experts’ in a business, to which they bring no more than a general knowledge of affairs, such as a reasonably intelligent person may be assumed to possess. Sometimes they may not even reach this moderate standard….It may not be essential that he who drives fat oxen should himself be fat;……The system (accountability of ministers) is defended on the ground that after all, precise and comprehensive knowledge of the details of his office is not what is required of a minister under our parliamentary constitution…..”

The words of Burke, though thundered long time back, have application even now: “Constitute Government how you please, infinitely the greater part of it must depend upon the exercise of powers which are left at large to the prudence and uprightness of ministers of state. Even all the use and potency of the laws depends upon them. Without them your commonwealth is no better than a scheme upon paper; and not a living, active, effective organisation.” To quote Sidney Low with reference to the persons shouldering ultimate responsibility for the governance of the State : “It is on the efficiency and integrity of ministers, and on the ability of the people’s representatives to call them to account that good government ultimately depends.”

Rulers can ill-afford to show any slackness in vigil.

[Citation : 179 ITR 508]