Holding

The term "old" in the entry must be read restrictively, in line with "discarded, unserviceable or obsolete", so only non‑functional or unusable machinery is covered, and the working power plant is not liable to tax.

Summary

The Uttar Pradesh Government, under Section 3A of the Uttar Pradesh Sales Tax Act, 1948, notified that turnover from "old, discarded, unserviceable or obsolete machinery" would attract a 5% sales tax. A thermal power plant, in perfect working condition, was sold by the State Electricity Board to appellant 1, who used it for about a year and then sold it to appellant 2. The Commissioner of Sales Tax held that the plant was "old" machinery and liable to tax; the High Court affirmed this view. On appeal, the Supreme Court examined whether the word "old" in Entry 15 of the notification should be given its ordinary meaning or be read restrictively using the principle of noscitur a sociis, considering the adjoining adjectives "discarded, unserviceable or obsolete". The Court held that "old" must be confined to a sense analogous to the other three adjectives, i.e., machinery that has become non‑functional or unusable, and therefore the plant, being in perfect condition, did not fall within the entry and was not taxable. The appeal was allowed, setting aside the lower authorities' orders.

Issues considered

Whether the term "old" in Entry 15 of the Uttar Pradesh Sales Tax Notification should be interpreted in its ordinary sense or restricted by the principle of noscitur a sociis.
Whether a thermal power plant in perfect working condition qualifies as "old, discarded, unserviceable or obsolete machinery" for the purpose of sales tax.
Whether the principle of noscitur a sociis applies when the qualifying adjectives are used disjunctively and one adjective is vague.

Legislation cited

Uttar Pradesh Sales Tax Act, 1948s. 35, s. 3A

Subjects

sales taxstatutory interpretationnoscitur a sociisold machinerytax exemptionUttar Pradeshthermal power plantEntry 15

Judgment

727

RAINBOW STEELS LTD. AND ANR.
v.
COMMISSIONER OF SALES TAX, UTTAR PRADESH AND ANR.
January 30, 1981
[V. D. TULZAPURKAR AND R. S. PATHAK, JJ]

Uttar Prlldcsh Sales Tax Act 1948 S. 3A-State Government nptifying
"Sale of old discarded, unserviceable or obsolete machinery" as liable to
tax--Sale vf ti/Ci 111al power plant in running condition-Whether exigible to
.tax.

InterpretatiOI/ of Statutc:c.-Principle of noscitur a sociis-When can be
invoked.

Jn exercise of the power under section 3A of the U.P. Sales Tax Act, 1948
the State Government, issued a notification dat~d May 30, 1975 which provided
that the tu1nover in respect of "old, discarded, unserviceable or obsolete
machinery, stores or vehicles etc." shall be liable to tax at the point of sale at
the rate of five per cent.

A Thermal Power Plant together with its associate auxiliaries, components
and accessories belonging to the State Electricity Board was sold in a working
condition to the Appellant No. 1, who paid sales tax on the sale under protest
The power plant was used by Appellant No. l and as the power position in the
State improved, Appellant No. 1 discontinued the generation of electricity E
through this power plant and negotiated its sale to Appellant No. 2.

Since there was dilTerence of opinion between the parties as to the pa•yment
of sales tax on the machinery the question was referred for clarification to the
Commissioner of Sales Tax under section 35 of the Act. The Commissioner
·was of the view that the four words, "old, discarded, unserviceable or obsolete"
had been used disjunctively and each adjective had its own meanin& and seme
and that since the power plant had been used before its sale it was "old"
machinery and the sale was liable to tax under the said Entry.

The order of thP. Comn1issioner was confirmed by the High Court.
In the appeal to this Court, on behalf of the Appe1lants it was submitted
invoking the principle of no"Seitur a sociis that th~ expression 'old' which is G
more general should be restricted to a sense analogous to that of the less gene-
ral expressions. namely "discardedi unserviceable or obsolete,, and read in this
manner the sale of the power plant could not be re.i.;arded as sale of "old"
m:ichinerv falling within the Entry.

On behalf of the Respondents it was contended that the four adjectives
occurring in the Entry have· been used disjunctively and each must be given H·
its own separate meaning, 3nd 'that the principle of noscitur a sociis would nm:
apply to the construction of the expression 1old'.
728 SUPREME COURT REPORTS [1981] 2 S.C.R.

A Allowing the appeal,
HELD : 1. The thermal power plant was in perlect running condition and
was 1:iold as such. Jt would not faII within Entry No. 15 of the Notification. /1
[733D]
2. The four adjectives "old, discarded, unserviceable or obsolete·" which
are susceptible to analogous meaning are clubbed together while qualifying
8 machinery in the Entry. The first adjectiv~ 'old' is clearly more. general than
the other three and as such all the four would take their colour from each
othc.:r. the meaning of the more general adjective 'old' being restriicted to a
sense analogous to that of the less general namely "disca•rded, unserviceable or
obsolete". All the four adjectives ·which qualify the word "machinery" have
been used disjunctively. The adjective 'old' by itself is vague, imprecise and
ambiguous for there is no indication as to how n1uch old the machinery should
c be before it could be described as 'old machinery'--one day old, one month
old, one yea.r old, five years old or even ten years old (the degree of oldness
being a relative concept). l732F-733A]
3. In the absence of any indication that the adjective 'old' has been deli-
berately used in a wider sense ¥. hcn the expression 'old' is by itself vague,
1

imp1ecise and ambiguous, being too general, the principle of noscitur a sociia
D will have to be applied i.e. all the associated words will take colour from each
other. [733Bj
4. (i) The principle of noscitur a sociis is clearly applicable to the cons~
truction of the expression ·old' occurring in Entry No. 15, and that expression
will have to be given a restricted 1neaning-a sense a·nalogous to that of the less
gene!·al \.Vottls clubbed \.Vith it. [732A]
E (ii) ]f the \:vider words used are in themselves va.gue imprecise or ambi-
guou~ and there is no indication that thesei have been deliberately used to
infu~e \vider n1eaning then the rule of noscitur a sociis can be invoked.
[732E]
State of Bombay & Ors. v. The Hospital Mazdoor Sabha & Ors. [1960] 2
S.C.ll. 866 and l'he Corporation of the City of Nagpur v. Its En1ployee3
F [1960] 2 S.C.R. 942 referred to.
Letang v. Cooper [1965] I Q.B. 232 distinguished.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 337 of 1981.
Appeal by Special Leave from the Judgment and Order dated
G 18-4-1979 of the Allahabad High Court (Lucknow Bench) in
F.A.F.O. No. 39/77.
V. M. Tarkunde and B. R. Sabharwal for the Appellant.
S. Markandey for the Respondent.
The Judgment of the Court was delivered by
n
TULZAPURKAR, J. This appeal by special leave raises the question
whether on true construction of Entry No. 15 of the Notification No.
RAINBOW STEEL v. C.S.T. (Tulzapurkar, !.) 729

ST-II-4949/X-10(2)-74 dated May 30, 1975 issued under S.3A of A
U.P. Sales Tax Act 1948, the negotiated sale of a Thermal Power
Plant by appellant No. 1 to aiwellant No. 2 is exigible to sales tax
thereunder?
The short facts giving rise to the question may be stated : A
Thermal Power Plant at Rampur comprising seven boilers, five tur- 8
bines together with its associate auxiliaries components and accessories
originally belonged to the U.P. State Electricity Board. The Board,
after selling it in working condition to appellant No. 1 on May 29,
1974 for Rs. 41.31 lakhs called upon the fatter to pay sales tax
thereon which was paid under protest. Appellant No. 1 used it for
generating electricity from May 29, 1974 to September 30, 1975. C
As the power position improved in the State of U.P. appellant No. 1
discontinued the generation of electricity through this power plant
and finding it expedient to realise its investment negotiated a sale
thereof in perfect working condition to appellant No. 2. Appellant
No. 1 desired to charge sales tax on the said negotiated sale but appel-
lant Ne. 2 informed appellant No. 1 that it had obtained considered D
opinion that no sales tax on such a transaction was leviable inasmuch
as the sale was not of "old, discarded, unserviceable or obsolete
machinery," falling within Entry No. 15 of the concerned Notification
' dated May 30, 1975. Both the appellants thereupon referred the
question for clarification to the Commissioner of Sales Tax U.P.,
Lucknow under Section 35 of the U.P. Sales Tax Act 1948. It was E
contended on their behalf that the word (adjective) "old" occurring
in the Entry would take colour from the other words (adjectives)
that follow it and the cumulative effect of all the words taken together
showed that those words were either synonymous or near synonymous
suggesting that the machinery in order to fall within the Entry should
become non functional or non usable and that since the power plant F
, in question had not become "old" in that sense and was in perfect
working condition it would not fall within the Entry and the sale
thereof by ajppellant No. 1 to appellant No. 2 was not exigible to
tax. The Commissioner by his order dated February 19, 1977 nega-
tived the contention holding that the four words "old, discarded,
unserviceable or obsolete" had been used disjunctively and each G
adjective had its own meaning and sense and that since the power

• plant had been used before its sale by appellant No. 1 to appellant
No. 2 it was cild machlnery and the sale thereof was liable to tax
under the said Entry.
)
Feeling aggrieved by that order the aP1Pellants preferred an appeal H
to the Allahabad High Court being F.A.F.O. No. 39 of 1977 and
a learned single judge of the Lucknow Bench on April 18, 1979 dis-
730 SUPREME COURT REPORTS [198!] 2 S.C.R.

A missed the appeal and confirmed the Commissioner's view that since
the concerned power plant had been purchased by appellant No. 1
long ago and had been put to use it was "old machinery" within the
meaning of the Entry, observing that "the degree of oldness has to
be greater than recently manufactured machinery used only for the
some time". The Commissioner's view as confirmed by the High
.B Court is challenged by the appellants before us in this appeal.
Section 3A of tbe U.P. Sales Tax Act, 1948 empowers the State
Government to specify the rates of taxes and the point at which the
tax can be imposed, subject to a maximum of 12 per cent, on the
turn over in respect of the goods specified in the First Schedule to
·C the Act and clause (b) empowers the State Government to amend the
entries in the Schedule. In exercise of the aforesaid power the State
Government issued tbe Notification No. ST-II-4949/X-10(2)-74
dated May 30, 1975 which provided that witb effect from June 1,
1975 the turn over in respect of the goods specified in column II of
the Schedule to this Notification shall be liable to tax at the point
D
of sale and at the rate specified respectively in columns III and IV
thereof :
Schedule
'M' Stands for sale by manufacturer in Uttar Pradesh.
'I' stands for sale by the importer in Uttar Pradesh.
E SI. Description of goods Point at which Rate of tax
No. tax shall be
levied.
I II III IV
15. Old, discarded, unserviceable or obso- Sale to consu- 5 per cent
Iete machinery, stores or vehicles in- mer
F eluding waste products except cinder,
coal ash and such items as are included ....
in any other notification issued under
the Act. (
The question is whether the negotiated sale of tbe Thermal Power
-O Plant at Rampur by appellant No. 1 to appellant No. 2 falls within
tbe aforesaid Entry so as to attract sales tax at 5 per cent on the sale
price charged by appellant No. 1 to appellant No. 2? In other words
the qnestion is whether it is a sale of "old machinery" within the
meaning of the Entry and what is the true meaning of the expression
•
"old machinery". It is undisputed that the Thermal Power Plant
(
11 in question when it was sold by U.P. State Electricity Board to
appellant No. 1 on May 29, 1974 was in perfect running condition
and tbe Sales tax on that transaction was paid under protest. It is
RAINBOW STEEL v. C.S.T. (Tulzapurkar, J.) 731

I further undisputed tlmt awellaut No. 1 used that power plant for A
generating electricity for about a year and four months and because
the power position improved in the State of U.P. the appellant No. 1
negotiated the sale thereof to appellant No. 2 with the view to realise
back its investment and the power plant had been kept in !Perfect
running condition with periodical checks by the Inspector of Factories
as also by the Inspector of Boilers and when sold it was in perfect B
working and running condition. Question is whether such power
plant could be regarded as "old machinery" within the meaning of
Entry 15.
Counsel for the appellants contended that it could not be regarded
as old machinery in the sense that it had become non-functional or c
non-usable whic)l meaning should be given to the expression 'old'
occurring in the Entry. In other words, he sought to invoke the
principle of noscitur a sociis for constrning expression 'old' because
of its association with the other expressions like "discarded, unser-
viceable or obsolete" occurring in the Entry. According to the
counsel the expression 'old' which is more general should be restricted D
to a sense analogous to that of the less general expressions, namely,
"discarded, unserviceable or obsolete" and read in this manner the
sale of the power plant in question could not be regarded as sale of
old machinery falling within the Entry. On the other hand counsel
for the respondents supported the view taken by the Commissioner
of Sales Tax as well as by the High Court, for, according to him the E
principle of noscitur a sociis would not apply to the construction of
the eXjpression 'old' occurring in the Entry. He urged that the four
adjectives have been used disjunctively and each must be given its
own separate meaning and pointed out that in two decisions, namely,
State of Bomhy & Ors. v. The Hospital Mazdoor Sabha & Ors.(')
F
and The Corporation of the City of Nagpur v. Its Employees(')
this Court refused to apply the said principle while construing the
definition of 'industry' given in s.2(j) of Industrial Disputes Act,
1947 and in s.2(14) of the C.P. and Berar Industrial Disputes Set-
tlement Act, 1947 respectively, and that in Letang v. Cooper(')
Diplock, L. J., has observed thus : "The maxim noscitur a sociis is G
always a treacherous one unless you know the societas to which the
socii belong." According to 1rim further the ejusdem generis prin-

• ciple would be clearly inapplicable inasmuch as it was not a case
where some general words follow any particular, generic or specific
words.
(1) [1960] 2 SCR 866. H
(2) [1960] 2 SCR 942.
(3) [l 965] l Q.B. 232.
732 SUPREME COURT REPORTS (1981] 2 S.C.R.

A Having given our anxious consideration to the rival contentions
urged before us, we are clearly of the view that the principle of
•
noscitur a sociis is clearly applicable to the construction of the expre-
ssion 'old' occurring in Entry No. 15, and that eXJPression will have •
to be give a restricted meaning-a sense analogous to that of the less
general words clubbed with it. The principle is explained in MaxweN
B on the Interpretation of Statutes (12th Edn.) at page 289 thus :

"Where (Wo or more words which are susceptible of analogous
meaning are coupled together, noscitur a socfis, they are
understood to be used in their cognate sense. They take, as
c it were, their colour from each other, the meaning of the
more general being restricted to a sense analogous to that of
the less general."

Moreover, even in the two decisions relied upon by counsel for the
respondents where this Court refused to apply the principle of
D noscitur a sociis while construing the definition of 'industry' in the
two concerned enactments because the Legislature bad deliberately
used wider words in order to make the scope of defined word corres-
pondingly wider, the Court has observed that "it is only when the
intention of the Legislature in associating wider words with words of
narrower significance is doubtful or is otherwise not clear that the
E
present rule of construction can be usefully applied." In other words,
if the wider words used are in themselves vague, imprecise or ambi-
guous and there is no indication that these have been deliberately
used to infuse wider meaning then this rule of construction can be
invoked.
F
Dealing with the Entry in question, in the first place it cannot be
disputed that the four adjectives which are susceptible to analogous
meaning are clubbed together while qualifying 'machinery' in the
Entry. Secondly, it cannot be disputed that the first adjective 'old' is
clearly more general than the other three and as such all the four
G would take their colour from each other, the meaning of the more
general adjective 'old' being restricted to a sense analogous to that of
the less general, namely, "discarded, unserviceable or obsolete".
Thirdly, it is true that all the four adjectives which qualify the word
'machinery' have been used disjunctively but it is precisely for that
reason that the adjective 'old' becomes vague, imprecise and ambig-
B nous, being too general. The adjective 'old' by itself i~ certainly
vague, imprecise and ambiguous, for there is no indication as to how
much old the maahinery should be before it could be described as
RAINBOW STEEL v. C.S.T. (Tulzapurkar, 1.) 7 33

old machinery. A machinery could be one day old, one month old, A
on~ year old, five years old or even ten years old, (the degree of old-
ness being a relative concept) and which one is intended to be ill.elud-
ed in the Entry has not been made clear at all. And, lastly, there is
nothing in the Entry to indicate that the adjective 'old' has been de-
liberately used in a wider sense. In the absence of any indication to
that effect and when the expression 'old' is by itself vague, imp~se, B
and ambiguous, being too general, the principle of noscitur a sociis
will have to be applied i.e. all the associated words will take colour
from each other, the meaning of the more general, adjective viz. 'old'
being restricted to a sense analogous to the less general adjectives "dis-
carded, unserviceable or obsolete". In other words in order to fall
within th~ expression 'old machinery' occurring in the Entry, the c
machinery mnst be old machinery in the sense that it has become non•
functional or non-usable. In our view, therefore, on true construction
the sale of the Thermal Power Plant which at the time of sale by ap-
pellant No. l to appellant No. 2 was in perfect running condition and
which was sold as such would not fall within the aforesaid Entry No.
D
15 of the concerned Notification dated May 30, 1975.

The English decision of the Court of Appeal in Letang v. Cooper
(supra) relied upon by counsel for the respondents is clearly distin-
guishable inasmuch as it dealt with a statute which referred to "neg-
ligence, nuisance or breach of duty (whether the duty exists by virtue E
of a contract or of provision made by or under a statute or indepen-
dently of any contract or any such provision)," and when it was argu-
ed that because the cause of action in both nuisance and negligence
included the infliction of actual damage as an essential element,
"breach of duty" should also be understood as confined to causes of
a~tion in which actual damage was likewise essential the said conten- F
tion was rejected by Diplock, L.J., by observing thus :

"It is clear, however, that 'breach of duty' cannot be res-
tricted to those giving rise to causes of action in which the
infliction of actual damage is an essential element, for the
words in parentheses expressly extend to a duty which exists G
by virtue of a contract and the infliction of actu_al damage is
not an essential element in an actfon for breach of contractual
duty."

In other words, it was a case of a statute where the parentheticel por-
tion occurring therein expressly indicated the contrary intention-con- H
trary to the contention urged and, therefore, the principle of noscitur a
sociis was not applied.
14-152SCl/81
734 SUPREME COURT REPORTS [1981] 2 S.C.R.

A In the result the appeal is allowed and the view of the lower antho-
rities is set aside and the sale in question is declared to be not exigi-
ble to tax under Entry No. 15 of the concerned Notification dated May
30, 1975 .. In the circumstance, there will be no order as to costs.

N.V.K. Appeal allowed.

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