Holding

Paddy husk and rice husk are separate commodities, and tax on paddy husk is only leviable from the notification dated 6 June 1996; a notification cannot retrospectively impose tax without an express provision.

Summary

The respondents, M/s National Industrial Corporation Ltd., used paddy husk as fuel and were assessed sales tax under various Uttar Pradesh Trade Tax notifications. They contended that paddy husk was first included as a taxable commodity only by the notification dated 6 June 1996, and that earlier assessments were invalid. The State argued that paddy husk and rice husk are the same commodity, so tax could be levied from earlier notifications that listed rice husk. The Supreme Court held that paddy husk and rice husk are distinct commodities; therefore tax on paddy husk could be imposed only from the 1996 notification and cannot be retrospectively applied. The Court also ruled that a tax‑imposing notification must be express and cannot be used as a mere clarification to create fiscal liability, invoking Article 265 of the Constitution. Consequently, the appeals were dismissed and the assessments prior to 1996 were held unlawful.

Issues considered

Whether 'paddy husk' and 'rice husk' denote the same commodity for the purpose of sales tax under the Uttar Pradesh Trade Tax Act.
Whether a notification can be treated as a clarification to impose tax retrospectively on a commodity not expressly mentioned earlier.
Whether tax can be levied without an express statutory provision under Article 265 of the Constitution.

Legislation cited

Central Sales Tax Act, 1956s. 15
Uttar Pradesh Trade Tax Act, 1948s. 3, s. 30, s. 3A

Subjects

sales taxUttar Pradesh Trade Tax Actpaddy huskrice huskcommodity distinctioninterpretation of statutesArticle 265notificationretrospective tax

Judgment

.1-
/

/~
[2008] HS S.C.R. 1026 ~

A COMMISSIONER OF TRADE TAX, U.P.
v. t
"
-
MIS. NATIONAL INDUSTRIAL CORPpRATIGN LTD.
(Civil Appeal Nos. 6938-6939 of 2008 etc.)
DECEMBER 02, 2998
B
[S.B. SINHA AND CYRIAC JO~f:P,H 1 JJ~l

Uttar Pradesh Treg~ Tax Act, 1948 - ~'~and 30 - Levy
of sales tax - o,, 'P~dciy Hus!<' ...,. Assessee using 'P;:tdqy
C husk' in manufactvririg µnits -- Assessm~nt in terms of various
Notifications issued since 7,9.1981 -- Notification dated
6. 6. 1996 for the first time Including 'Paddy husk' -- Assessee
claimed to be assessed only w.e.f. 6.6.1996 - Revenue
contending that assessment in respect of 'Paddy husk' 90L{tg
D be done even prior to 6.6.1996 as 'Rice H,psk' \41~§ ((able ta
be taxed by earlier Notific.at(ons as 'Rice husk' and 'Paddy
husk' are the same commodity- Held: 'Paddy husk' and 'Rice
)-·
husk' are not the same commodity -- Tax was liab!fJ (Q b.~
levied an '.P,addy busk~ /;Jy reason of Notific?.t(o.n. 4@~?-€1
E 6. 6. 1996 and not prior to that.

Taxation -- Levy of tax,,,. Held: Levy of tax is permissible
having regard to provi$ions contained in Article 265 of the
Constitution and in terms of statute - Power to impose tax
must be express -- No equity can be claimed in such matter
F -- Notification imposing fiscal liability not to be imposed by
way of clarification or otherwise -- Benefit of ambiguity in the r.
Notification to go to the assessee -- Constitution of India, 1~§Q
-- Article 265.

G Words and Phrases - 'hus.({ -- Meanfn,g Qt, in t-he qontext
of Uttar Pradesh Trad{3 "fa>J Act,, 1948 . -

Respgnc::t@ot~ Y§~ 'J?,iddY H4$,k' iU~ fuel in their
manufaetyring units. They were assessed for payment of
H 1026
COMMISSIONER OF TRADE TAX, U.P. v. M/S. NATIONAL 1027
INDUSTRIAL CORPORATION LTD.

-+ sales tax in terms of various Notifications issued u/s 30 A
of Uttar Pradesh Trade Tax Act, 1948. The respondent·
j assessee questioned the levey of the tax on the ground
that as the paddy husk was included for the first time in
the Notification dated 6.6.1996, the tax was leviabl~
thereon by reason of that Notification ahd not prior B
thereto . Ftevenue stated tliat as 'Paddy husk' and 'Rice
_, i husk' are the same commodities ,therefore, 'Paddy husk'
must be deemed to have been notified for the purpose
of levy of sales tax from the very beginning. Trade Tax
fribunal, by majority helci that both are different c
commodities. High Court confirmed the majority view of
·- the tribunal. Hence, the present appeals.

Dismissing the appeals, the Court
I
-.\
---1 HELD: 1.1. A notification imposing any fiscal liabililV D
cannot be imposed upon a dealer by way of clarification
-~ or otherwise. A tax must be levied having regard to the
,., provisions contained in Article 265 of the Constitution of
India, i.e., by authority of law. The power to impose ta)(
~ must be express and no equity can be claimed in the E
matter of levy of tax. One has to look merely at what is
clearly stated in the statute. Imposition of tax is
permissible only in terms of the provisions of statute.
Reasonable taxation is a part of the doctrine of good
governance. If a.n entry contained in a Notification F
imposing tax is ambiguous, the assessee cannot suffer
.. """ therefor. In the instant case, no attempt was made by the
State to clearly state that rice husk is synonymous to
paddy husk. It was necessary in view of the fact that
admittedly paddy and rice are different commodities. It
G
has been stated in High Court judgments that nothing is
_... known as rice husk, however, opined that rice polish and
rice brown are the same thing. [Para 10] [1038-C-E; 1039-
D-H]
1.2. As paddy and rice are considered to be the H
-1.
, ___
I
1028 SUPREME COURT REPORTS [2008] 16 S.C.R. :

..,,.
A separate C()mmodities, .Paddy husk cannot be treated to t
be rice. husk.. Not ~nly in th,e notificatiO_n dated 7.9.1981
but a1$0 in tlie notitication dated 5;6.1985 'paddy husk'
is not mentlohed. Sy reason of Notification dated 6.6.1996
'paddy husk' wasinserted. E;ven then; ttie· 'rice husk' was I

B not deleted. No explanation was offered· therefor; Both:
'rice husk' and· ipaddy·~usk' thus, found place:in the
Notificatio·n. Therefore; 'paddy husk' was subjected to for t- . .
the first time by reason 6f the said notification dated
a
6.6.1996. Yet again; while giving purported riew look to ~

c the entry, in the notification dated 15.1.2000, the words
'rice husk' and 'paddy husk 1 have respectively been
mentioned. Even then no attempt was made to issue any .
clarification.· [Para 11] [1 ()40 ..a. 01
1.. 3. Two expressions having b·een used ordinarily
D two different meanings should be:assigned thereto. If by
of
reason. a notification, tax'es are sough't fo be imposed
a
upon new'comrnodity applying Heydon 1s Rules , it must ~-
be held that the mischief was sought to be remedied "
thereby. [Para 11] [1040-E]
E ~
1.4. Schedule was annexed to the notification
prescribing rate to the U.P. Value Added Tax. Ordinance,
2007 specifying the exempted goods, item No.4 whereof
included "de-oiled paddy husk or outer covering of paddy"
But the same excluded "oil cake; rice polish; rice bran and
F rice husk." It is, therefore, evident that 'rice husk' is still
considered by the Government of Uttar Pradesh to be a r
different· commodity. In 'A Class Book of Botany'
indicated that on removing the husk; a .brownish
membranous layer is seen adherent to the grain and that
G this layer is made up of the seed coat and the wall of the
fruit fused together. If, according to the Government of
~
.'
Uttar Pradesh, 'rice husk' is this cover which further
requires h.usking, no exception thereto can be taken.
When a paddy is dehusked, it becomes 'paddy husk' and
H when the rice is dehusked, it becomes 'rice husk'.
COMMISSIONER OF TRADE TAX, U.P. v. MIS. NATIONAL 1029
' INDUSTRIAL CORPORATION LTD.

[Para 12 and 13] [1040-G, H; 1041-A-E] A
1
1.5. If something is included in the Schedule which
is non-existent, no tax can be levied thereupon.

. ;

____,,
Furthermore, if there is a doubt or dispute as to whether
'paddy husk' or the 'rice husk' denotes the same
commodity or not, th~ benefit thereof shall be given to
the assessee. Furthermore, it is not the case of the
B

'.A' i appellant that the respondent extracts any oil out of
'paddy husk'. [Para 14] [1041-F]
-(
Ganesh Trading Company, Kamal v. State of Haryana c
and Anr. 1974 (3) SCC 620; Chordia Kavelu Udyog v. State
of Madhya Pradesh and Two Ors. 1988 (69) STC 49 and
Babu Ram Jagdish Kumar and Co. v. State of Punjab and
Ors. 1979 (3) SCC 616, relied on.
D
---< Commissioner of Sales Tax, U.P. v. Naveen Traders 36
<
I Sales Tax Cases 440; Commissioner of Sales Tax v.
-i ~ Jamuna Prasad 36 STC 442; Chordia Kavelu Udyog v. State
"' of M.P. and Two Ors. 1988 (69) STC 49; Mumbai Agricultural
Produce Marked Committee v. Hindustan Lever Ltd. 2008 (5)
E
SCC 575 and Jindal Stainless Ltd. (2) v. State of Haryana
2006 (7) sec 241, referred to.
(
': Case Law Reference:
36 Sales Tax Cases 440 Referred to. Para 7 F
~·,. 36 STC 442 Referred to. Para 7
----.' 1974 (3) sec 620 Relied on. Para 10
2008 (5) sec 575 Referred to. Para 10
G
2006 (7) sec 241 Referred to. Para 10
~
1988 (69) STC 49 Relied on. Para 12
1979 (3) sec 616 Relied on. Para 14
H
1030 SUPREME COU~T Rtf:>'dRTS r2ooa1 1a s,o,R.

A CIVIL APPELLATE JURISDICTION .: Civil Appeal Nos. J._
6938-6939 Of 2008. I

From the final Judgment and Order dated 30.1.2004 of the
High Court of Judicature at Allahabad in Trade-Tax Revision
B
Nos. 61 and 63 of 1999.
WITH
C.A. Nos, 6940; 6941 ..4Ei; 6947, 6948-49, 6950-51, 6952,
6953-57, 6958, S!~H:l9,.63 1 S964 1 6965! 6966-70, 6971, 6972-
c 6973, 6974~1s. 6976, 5g71 .. aof a9a1. e9a2, 6983, 6984,
- 6985-86, 6987-88, 6989, 6990, S991, 6992, 6993-94, 6995,
6996,6997,6997,6998,6999, 7000, 7001! 7002, 7003, 7004,
7005, 7006, 7007 of 2008.

Sunil Gupta, Dhruv Agrawal, Rakesh K. Khanna, Aarohi
D Bhalla, Manoj Dwivedi, Gunnam Venkateswara Rao, Praveen
Kumar, Anil Kumar Sangal, Nalin Sengal, Deba Prasad
Mohanty, Surya Kant, Yash Pal Dhingra, Rajesh Kumar, K.K. t-
Mohan, Prakash Kumar Singh, Rajeev Sharma, Sarva Mitter "'
(for Mis. Mitter & Mitter Co.), Ajay Majithia, Dr. Kailash Chand,
E Shekhar Kumar, Y.P. Dhingra, K.C. Dua, Aruneshwar Gupta,
P.K. Jain, P.K. Goswami, K.K. Mishra and Himanshu Shekhar
for the appearing parties.

The Judgment of the Court was delivered by
F
S.8. SINHA, J. 1. Leave granted.

Questio11

2. Whether Paddy Husk and Rice Husk connote the same
· G commodity or Rot is the question involved herein.

An overview

3. Respondents, who own and operr;1te their manufacturing
units, use Paddy Husk as fuel in their respective factories.
H
COMMISSIONER OF TRADE TAX, U.P. v. M/S. NATIONAL 1031
INDUSTRIAL CORPORATION LTD. [S.S. SINHA, J.]

They were assessed for payment of sales tax in terms of A
.-f various notifications issued by the State of Uttar Pradesh (for
short, 'the State') from time to time under Section 30 of the
Uttar Pradesh Trade Tax Act (for short, 'the Act').

4. Before we advert to the rival contentions of the parties,
8
we may notice certain statutory provisions.

Section 3 of the Act is the charging provision. The rate of
~· ~ tax is determined by the State in exercise of its power conferred
on it under Section 3A of the Act.
c
Section 30 of the Act which is material for our purpose,
reads as under :

"Section 3-D - Levy of trade tax on purchase of sales of
certain goods-(1) Except as provided in sub-section (2),
there shall be levied and paid, for each assessment year 0
or part thereof, a tax on the turnover, to be determined in
the prescribed manner-
·1
A
(a) of first purchases of opium, at such rate not
exceeding 'thirty-five percent ; E
(b) of first purchases of such other goods at such rate
not exceeding--
(i) the maximum rate for the time being
specified in Section 15 of the Central Sales F
Tax Act, 1956 in respect of goods declared
" 1 by Section 14 of the Act to be of special
importance in inter-State trade or commerce,
and
G
(ii) twenty percent, in respect of other goods.

and with effect from such date, as the State
Government may, by notification in the
Gazette, specify in relation to purchases
H
1032 SUPREME COURT REPORTS ' [2008) 16 S.C.R.

A made within Uttar Pradesh by a dealer
(whether on his own account or on account
of any one else), or through a dealer acting
as a purchasing agent."

8
5. Indisputably, the State in exercise of its power conferred
upon it under clause (b) of sub-section (1) of Section 30 of the
Act, had been issuing notifications from time to time specifying
the rate of tax and the point thereof. One of such notifications t- ,
was issued on 7 .9.1981, Item No. 18 thereof reads as under:

C "18. Rice polish, rice bran and rice husk."

By reason of a notification dated 5.6.1985, inter alia, the
said item was amended to the following effect.

"18. Rice polish, rice bran and rice husk, but excluding de-
D oiled rice bran, de-oiled rice polish or de-oiled rice husk."
- '

In supersession of the earlier notifications, however, the
State yet again amended the said item with effect from
6.6.1996 by a notification of the said date, which reads as
E under:

"(18) Rice polish, rice bran, rice husk and paddy husk but
excluding de-oiled rice bran,- de-oiled rice polish, de-oiled
rice husk and de-oiled paddy husk. @ 4% at first
purchase."
F
However, on or about 15.1.2002, the said entry was given
a new look and in stead and place of entry No.18, new entry
being entry No.15 was inserted, pursuant whereto and in
furtherance whereof the rate of interest was increased from four
G per cent to eight per cent. The said entry reads as under :

"15. Rice polish, Rice bran, Rice husk and paddy husk but
excluding deoiled rice bran, deoiled rice polish, deoiled
rice husk and deoiled paddy husk."
H
COMMISSIONER OF TRADE TAX, U.P. v. MIS. NATIONAL 1033
INDUSTRIAL CORPORATION LTD. [S.B. SINHA, J.]

However, an amendment was carried out in the description A
~ of goods as also the rate of tax by a notification issued on 30th
September, 2000.

Precedents

6. The procedure relating to manufacture of rice from paddy B
vis-a-vis the exemption clauses contained in the relevant
.. -+ notifications came up for consideration before the High Court
from time to time.

7. We would refer to a few of the decisions rendered by c
the Allahabad High Court and Madhya Pradesh High Court to
which our attention has been drawn by the learned counsel for
the parties. One of such decisions is Commissioner of Sales
Tax, U.P. v. Naveen Traders [36 Sales Tax Cases 440]
wherein, the High Court of Allahabad, while determining the D
question in regard to the meaning of the words 'Bhusa' and
'Bhusi' for which exemption was claimed, held as under:
~
;., "The assessee owns a rice mill. It purchased paddy and
after processing it obtained rice. Thereafter, the rice so
obtained is subjected to polishing process. As a result of E
this process, the outer surface of the rice is scraped off.
The scraping so obtained, which is in powder form is
called rice bran and in Etawah district, where this mill is
situate, this product is also known as "polish". The bran
so obtained is used for either extracting oil or for feeding F
,. ~
cattle. By Notification No. ST-911 /X dated 31st March,
1956, the State Government in exercise of powers
conferred by Section 4 of the U. P. Sales Tax Act
exempted with effect from 1st April, 1956, amongst other
articles "cattle fodder including green fodder" from G
payment of tax. This notification was amended by
Notification No. ST-3471/X dated 16th July, 1956, and for
the entry "cattle fodder and green fodder'' the following was
substituted:
H
1034 SUPREME COURT REPORTS [2008] 16 S.C.R.

A Cattle fodder including green fodder, chuni, bhusi, chhilka,
chokar, cotton seed, gowar and oil-cake. ~

The assessee claimed that rice bran was exempt under
this notification. This contention was neither accepted by
the Sales Tax Officer nor by the Assistant Commissioner,
B
Sales Tax. The revising authority, however, took the view
that rice bran was nothing but bhusi of rice, because it was ,,,:
t-:
I

the inner husk of the rice and as such was exempt from
tax. We are unable to agree with the view of the revising
authority. Rice with its outer husk is known as paddy. After
c the husk is removed, the product is known as "rice". Rice
does not have any inner husk, as has been held by the
revising authority. Moreover, it is clear from the findings
recorded that rice bran in respect of which exemption is
claimed is powdered rice, which is obtained in the
D polishing process. It is difficult to appreciate how this
powdered form of rice can be termed as bhusi of rice.
Bhusi is nothing but a fine form of bhusa, which in turn is ,..
obtained by thrashing of stems, leaves and the outer husk ,..
of grain. The rice bran in question, as has been seen, is
E obtained during the polishing process of th~.grain itself. It
is not a product obtained from stalk, leav~s or the husk of
paddy or rice."

The Court while applying the common parlance test to the
F terminologies 'Bhusa' and 'Bhusi' opined that they are
commodities obtained from stalk, leaves and' husk of grains.
,.~

A similar view was taken by another Division Bench of the
said High Court in Commissioner of Sales Tax v. Jamuna
Prasad [36 STC 442] wherein relying on or on the basis of an
G earlier decision. of the said Court in Naveen Traders, N.D. Ojha,
J. (as His Lordship then was) speaking for the Bench, opined:
,...
"The notification dated 16th July, 1956, exempts from sales
tax cattle fodder, which term is defined .to include green
H fodder, chuni, bhusi, chhilka, chokar, cotton seed, gowar
COMMISSIONER OF TRADE TAX, U.P. v. MIS. NATIONAL 1035
INDUSTRIAL CORPORATION LTD. [S.B. SINHA, J.J

i and oil-cake. In Commissioner of Sales Tax, U. P., Lucknow A
v. Naveen Traders, Etawah 1973 U.P.T.C. 215, a Division
Bench of this Court has held that rice with its outer husk is
known as paddy and after the husk is removed the product
is known as rice. Rice does not have any inner husk. The
rice bran in respect of which exemption was claimed was B
nothing but powdered rice. "Bhusa" and "bhusi" as
--'"' + understood in common parlance are commodities
obtained from stalk, leaves and husk of grains. "Rice bran"
cannot be treated as "bhusi of rice". In view of this
decision, the question referred to us has to be answered c
against the assessee."

The contention of the assessee therein that rice bran was
cattle fodder, however, was directed to be considered afresh
on the premise that the same involves a wider question.
D
The Madhya Pradesh High Court had also an occasion to
i consider the said question in Chordia Kave/u Udyog v. State
.. of M.P. & Two Ors. ((1988) 69 STC 49]. N.D. Ojha, Chief
Justice, relied upon the decision of the Allahabad High Court
in Naveen Traders to hold : E
"4. "Husk" according to dictionary means, inter alia,
"bhusi". The question as to whether rice bran could be
called "bhusi" or husk, came up for consideration before
a Division Bench of the Allahabad High Court in
--"' -.< Commissioner of Sales Tax, U.P. v. Naveen Traders F
[1975] 36 STC 440. It was held that "bhusa" or "bhusi" as
are understood in common parlance, are commodities
obtained from stalk, leaves and husk of grains. Rice, with
its outer husk, is known as paddy. After the husk is
~;; removed, the product is known as "rice". Rice does not G
___. have any inner husk. Rice bran is powdered rice and is
obtained during the polishing process of the grain itself
and is not a product obtained from stalk, leaves or the husk
of paddy or rice. The same view was taken by another
Division Bench of the said Court in Commissioner of H
1036 SUPREME COURT REPORTS [2008] 16 S.C.R.

A Sales Tax v. Jamuna Prasad [1975] 36 STC 442. It was +-
held that bran cannot be included in the category of "bhusi".
Again the same view was reiterated in Commissioner of
Sales Tax, UP. v. Ohannamal Ramgopal [1975] 36 STC
445. We agree with this view.
B
5. Reliance was placed by the learned counsel for the
petitioner on an extract from Shri A. C. Datta's book "A +- "--
Class Book of Botany" attached as annexure D to the writ
petition which indicates that on removing the husk,, a
brownish membraneous layer is seen adherent to the grain
c and that this layer is made up of the seed coat and the
wall of the fruit fused together. The said extract further ~
indicates that rice grain and the husk are together known
as the paddy grain.

D 6. It would thus be seen that the seed coat has not been
treated as an ingredient separate from rice, otherwise it
would have stated that the rice grain, its seed coat and the r·
husk are together known as the paddy grain. The seed •
coat, even according to the learned author of the book
E aforesaid thus constitutes a part of rice."

The said question also came up for consideration before
a Three Judge Bench of the Trade Tax Tribu; 1al. Shri RN. Singh
and Shri Dau Dayal, Members, Trade Tax Tribunal, Moradabad
held in favour of the assessee stating that paddy hust and rice
F husk are different commodities. But Shri Y.C. Gupta, Member
of the Tribunal held in favour of the Revenuestating that they are
the same commodity. The High Court, while exercising the
revisional jurisdiction at the instance of the Revenue, affirmed
the majority decision of the Tribunal. These appeals are against
G the judgments of the High Court.

Submissions

8. Mr. Sunil Gupta, learned senior counsel appearing on
H behalf of appellant, would contend whether factually or
COMMISSIONER OF TRADE TAX, U.P. v. M/S. NATIONAL 1037
INDUSTRIAL CORPORATION LTD. [S.S. SINHA, J.]

1 conceptually and/or legally decided or judicially determined, A
Paddy Husk and Rice Husk denote the same commodity and
in that view of the matter, the word 'Paddy Husk' must be held
to have been notified by the State of Uttar Pradesh from the
very beginning for the purpose of levy of sales tax,
B
Dehusking of paddy, Mr. Gupta would contend, is a
crushing process which when undertaken, the grain is left which
~ -+
is rice and the second process thereof is the sheathing of the
rice (grain) whereby the brown coating on the rice is eliminated
which is commonly known as Rice Bran, Rice Husk or Rice
polish. The decisions of Allahabad High Court and the Madhya
c
Pradesh High Court, it was argued, having categocially noticed
the process of husking and having laid down that rice does not
have any other husk, the impugned judgment cannot be
sustained.
D
Mr. Gupta urged this Court to agree with the minority
i opinion of the Tribunal contending that rice bran or rice polish
• being not husk and their being no other inner husk of rice, the
view taken by the majority Members of the Tribunal and
consequently by the High Court suffers from a legal infirmity. E
9. Mr. Dhruv Agrawal, and Mr. Rakesh K. Khanna, senior
counsel appearing on behalf of the respondents, on the other
hand, would contend that for the purpose of levy of sales tax,
rice husk and paddy husk had all along been treated to be
F
--~
different commodities, as would appear from Section 14(1) of
the Central Sales Tax Act, 1956. Relying on <:>r on the basis of
the said distinction, the learned counsel would contend, that as
paddy husk was included for the first time to be an item in

~1
respect whereof sales tax became leviable by reRson of the
notification dated 6.6.1996, any assessment or demand of tax G
prior thereto must be held to be wholly illegal and without
jurisdiction. The said notification of 1996 as also the
subsequent notifications, it was urged, were not clarificatory in
nature as tax has been levied thereby which, therefore, must
be held to be a substantive provisinn. H
1038 SUPREME COURT REPORTS [2008] 16 S.C.R.

t-
A Application of Statute/Precedents

10. At the threshold, we must notice the definition of 'husk';
the dictionary meaning whereof is 'the dry outer covering of
certain fruits or seeds of plants; the outer or worthless part of
anything'.
B
The Act is a taxing statute. The notifications have been
issued thereunder. Concededly, tax becomes payable at such
+- ~
rate and at such point as may be directed by reason of the
notifications issued by the State Government from time to time.
c It may not be correct to contend that a notification imposing
any fiscal liability can be imposed upon a dealer by way of
clarification or otherwise. A tax must be levied having regard
to the provisions contained in Article 265 of the Constitution of
India, i.e., by authority of law. The power to impose tax must
D be express and no equity can be claimed in the matter of levy
of tax. One has to look. merely at what is clearly stated iri the ¥-
statute.
"
Imposition of tax is permissible only in terms of the
E provisions of statute. Reasonable taxation is a part of the
doctrine of good governance. In Mumbai Agricultural Produce
Marked Committee v. Hindustan Lever Ltd. [(2008) 5 SCC
575], this Court referring to this Court's decision in Jindal
Stainless Ltd. (2) v. State of Haryana [(2006) 7 SCC 241 ],
F ·stated the law, thus :
~

"A finding of fact has been arrived at by the High Court
that_ no service was being rendered by the State. If no
service is being rendered, even no fee could have been

!
levied. It has been so held by a Constitution Bench of this
G Court in Jindal Stainless Ltd. and Anr. v. State of Haryana
and Ors. [(2006) 7 SCC 241] in the following terms :

'40. Tax is levied as a part of cor:nmon burden. The
basis of a tax is the ability or the capacity of the tax J

payer to pay. The principle behind the levy of a tax
•
H
COMMISSIONER OF TRADE TAX, U.P. v. M/S. NATIONAL 1039
INDUSTRIAL CORPORATION LTD. [S.B. SINHA, J.]
is the principle of ability or capacity. In the case of A
a tax, there is no identification of a specific benefit
and even if such identification is there, it is not
capable of direct measurement. In the case of a
tax, a particular advantage, if it exists at all, is
incidental to the State's action. It is assessed on B.
certain elements of business, such as, manufacture,
..... -+ purchase, sale, consumption, use, capital, etc. but
its payment is not a condition precedent. It is not a
. term or condition of a licence. A fee is generally a
term of a licence. A tax is a payment where the c
._ special benefit, if any, is converted into common
burden."

If an entry contained in a notification imposing tax is
ambiguous, the assessee cannot suffer therefor.
D
In their decisions, the Allahabad and Madhya Pradesh
i High Courts to which we have adverted to heretobefore, while
" stating that nothing is known as rice husk, however, opined that
rice polish and rice brown are the same thing.
E
Although the said decisions were rendered long time
back, no attempt was made by the State to clearly state that
rice husk is synonym to paddy husk. It was necessary in view
of the fact that admittedly paddy and rice are different
commodities. It has been held to be so in a decision of this
Court in Ganesh Trading Company, Kamal v. State of Haryana
F
..... ·~

& Anr. [( 1974) 3 SCC 620] in the following words

"Now, the question for our decision is whether it could be
said that when paddy was dehusked and rice produced,
its identity remained. It was true that rice was produced G
out of paddy but it is not true to say that paddy continued
- -t to be paddy even after dehusking. It had changed its
identity. Rice is not known as paddy. It is a misnomer to
call rice as paddy. They are two different things in ordinary
parlance. Hence quite clearly when paddy is dehusked and H
1040 SUPREME COURT REPORTS [2008] 16 S.C.R.

A rice produced, there has been a change in the identity of
"-
the goods."

Our View

11. As paddy and rice are considered to be the separate
B commodities, paddy husk cannot be treated to be rice husk.

Not only in-the notification dated 7.9:1981 but also in the t ...
notification dated 5.6.1985 paddy husk is not mentioned. By
reason of notification dated 6.6.1996 'paddy husk' was
c inserted. Even then, the rice husk was not deleted. No
explanation was offered therefor. Both rice husk and paddy husk,
thus, found place in the notification. Indisputably, therefore,
paddy husk was subjected to for the first time by reason of the
said notification dated 6.6.1996. Yet again, while giving a
D purported new look to the entry in the notification dated
15.1.2QOO, the words 'rice husk' and 'paddy husk' have
respectively been mentioned. Even then no attempt was made
~
to issue any clarification. .
Two expressions having been used ordinarily two different
E meanings should be assigned thereto. If by reason of a
notification, taxes are sought to be imposed upon a new
commodity applying Heydon's Rules (3 Co. Rep. 7a; 76 E.R.
637), it must be held that the mischief was sought to be remidied
thereby.
F
It is, therefore, difficult to agree with Mr. Gupta that rice
husk and paddy husk denote the same commodity.
r -
12. We may place on record that schedule was annexed
to the notification prescribing rate to the U.P. Value Added Tax
G Ordinance, 2007 specifying the exempted goods, item No.4
whereof is as under : f---

"Acquatic feed; poultry feed including balanced poultry
feed; cattle feed including balanced cattle feed; and cattle
H fodder including green fodder, chuni, bhusi, Chhilka,
COMMISSIONER OF TRADE TAX, U.P. v. MIS. NATIONAL 1041
INDUSTRIAL CORPORATION LTD. (S.B. SINHA, J.]

-t choker, javi, gower, de-oiled rice polish, de-oiled paddy A
husk or outer covering of paddy; acquatic, poultry and
cattle feed supplement, concentrate and additives thereof;
wheat bran and deoiled cake but excluding oil cake; rice
polish; rice bran and rice husk."
B
(Emphasis supplied)
-{-<. ~
It is, therefore, evident that rice husk is still considered by
the Government of Uttar Pradesh to be a different commodity.
Even from the perusal of the Decision of the Chordia Kavelu
Udyog v. State of Madhya Pradesh & Two Ors. [1988 (69) STC c
49], it would appear that 'A Class Book of Botany' was referred
to therein which indicated that on removing the husk, a brownish
membranous layer is seen adherent to the grain and that this '
layer is made up of the seed coat and the wall of the fruit fused
together. D

1'
13. If, according to the Government of Uttar Pradesh, rice
• husk is this cover which further requires husking, no exception
thereto can be taken. When a paddy is dehusked, it becomes
paddy husk and when the rice is dehusked, it becomes rice
E
husk.

14. There are two other aspects of the matter which cannot
be lost sight of. If something is included in the Schedule which
is non-existent, no tax can be levied thereupon. Furthermore, if
there is a doubt or dispute as to whether paddy husk or the rice F
husk denotes the same commodity or not, the benefit thereof
shall be given to the assessee. Furthermore, it is not the case
of the appellant that the respondent extracts any oil out of
'paddy husk'.
G
There are many other fruits which have two layers; for
example Pista, Cashew Nut and Ground Nut etc. One may only
remove the outer cover and take the fruit or grain with the inner
cover but one may like to take out the inner cover also which
will depend upon the taste of the person concerned. Some H
1042 SUPREME COURT REPORTS [2008] 16 S.C.R.

A persons may like to take 'brown rice' but some other may like t-
to take 'white rice'.

In Babu Ram Jagdish Kumar & Co. v. State of Punjab &
Ors. [(1979) 3 SCC 616], this Court, following the decision of
Ga.nesh Trading Co. (supra), opined :
B
"We may at this stage refer to one other subsidiary ~· w
argument urged on behalf of the appellants. It is argued
that because paddy and rice are not different kinds of
goods but one and the same, inclusion of both paddy and
c rice in Schedule 'C' to the Act would amount to imposition
of double taxation under the Act. There is no merit in this
contention also because the assumption that paddy arid
rice are one and the same is erroneous. In Ganesh
Trading Co., Kamal v. State of Haryana, arising under the
D Act, this Court has held that although rice is produced out
of-paddy, it is not true to say that paddy continued to be
paddy even after dehusking; that rice and paddy are two ~

different things in ordinary parlance and, therefore, when
..
paddy is dehusked and rice produced, there is a change
E in the identity of the goods."

15. For the reasons aforementioned, there is no merit in
these appeals which are dismissed accordingly with costs.
Counsel's fee assessed at Rs.25,000/- in each matter.

F K.K.T. Appeals dismissed.
~· --