JUNE 10, 2024

By Dr Sanjay Kalra, LLM., Ph.D.(GST Law), Advocate, KPS Legal

THIS Part-II explains the Principles of Interpretation under category of Secondary rules of Interpretation, International aids in Interpretation, External aids in interpretation, and other Rules of Interpretation including Judicial Principles. In Part-I of the series we had discussed the Primary Rules of Interpretation of Taxing Statutes.

(B) Secondary Rules of Interpretation

The conventions & concepts used by the Courts for a very long time are termed as secondary rules of interpretation. The court looks at the language of the statute, the context of the statute, the legislative history of the statute, the purpose of the statute and the consequences of a particular interpretation of the statute. This is commonly known as 'the Golden Rule of Interpretation'.

(i) Rule of Noscitur a Sociis : The 'Noscitur a Sociis' in Latin phrase means that "it is known by its associates". This rule suggests that a word is given meaning by its context or association with surrounding words and phrases i.e., the meaning of a word is to be judged by the company it keeps. The words in a statute are construed with reference to the words found in immediate connection with them. To put it differently, if two or more words which are capable of analogous (similar or parallel) meaning, are grouped together, they should be understood in cognate sense i.e., they are interpreted to take their color from each other and are given a similar or related meaning.

Hon'ble Supreme Court in the case of Commissioner of Trade Tax U.P v Kartos International [2011-TIOL-39-SC-CT] observed as under:

"Nositur a Sociis means that when two words are capable of being analogously defined, then they take colour from each other. The term ejusdem generis is a facet (small part) of Nositur a Sociis. The aforesaid principle means that the general words following certain specific words would take colour from the specific words."

The principle of 'Noscitur a sociis' is closely related to the rule of 'Ejusdem generis', with the former being broader in scope than the latter. Noscitur a sociis involves interpreting a word based on its context, while ejusdem generis focuses on interpreting a general term in a list based on specific accompanying terms. Rule of noscitur a sociis does not apply where a statute defines a term, which applied only to a particular Section or part of a statute, such definition cannot extend to other Sections/parts. This cannot be applied when the words are used in different context, for example, the word 'plant' shall be given a different meaning when construing the term 'plant & machinery' and the term 'plant & trees.'

Hon'ble Apex Court in the case of State of Bombay v Hospital Mazdoor Sabha [AIR 1960 SC 610] as well as in the case of Pardeep Aggarbatti v State of Punjab reported [(1997) 107 STC 561 (SC)] held that noscitur a sociis is merely a rule of construction & it cannot prevail in cases where it is clear that the wider words have been deliberately used in order to make the scope of the defined word correspondingly wider. It is only where the intention of the legislature in associating wider words with words of narrower significance is doubtful or otherwise not clear, then this rule of construction can be usefully applied. It can also be applied where the meaning of the words of wider import is doubtful; but, where the object of the legislature in using the wider words is clear and free of ambiguity the rule of construction in question cannot be pressed into service.

(ii) Rule of Expressio Unius Est Exclusio Alerius: This rule of interpretation means that "expression of one thing is the exclusion of another". This rule clarifies that where things are specifically included in list and others have been excluded it means that all others have been excluded. As per this maxim if two or more things belonging to a particular class are mentioned, other members of that class are silently excluded. Sometimes a list in a statute is illustrative, not exclusionary. This is usually indicated by a word such as "includes" or "such as". Thus a statute granting certain rights to "police, fire, and sanitation employees" would be interpreted to exclude other public employees not enumerated from the legislation. This is based on presumed legislative intent and where for some reason this intent cannot be reasonably inferred the Court is free to draw a different conclusion. The general meaning of "expression of one thing is the exclusion of another" is also known as the negative implication rule. This rule assumes that the legislature intentionally specified one set of criteria as opposed to the other. Therefore, if the issue to be decided addresses an item not specifically named in the statute, it must be assumed the statute does not apply.

(iii) Contemporanea Expositio: It means interpretation of a Statute by reference to the exposition it has received from contemporary authority. The best way to interpret a law is to read it as it would have been read when made. Where the language is ambiguous, the Court shall pay due regard to the interpretation which the language of the Act has received over a long period of time. Besides, much weight is given to the interpretation adopted by the Department whose duty is to construe & implement the said Act. Accordingly, Circulars, Clarifications &Notifications issued by administrative authorities like CBDT, CBE&C should be given due consideration in interpretation of a statute. This Rule cannot be applied for interpretation of a new statute.

(C) Intrinsic aids in Interpretation of Statutes

Intrinsic/ internal aids to interpretation refer to those elements which are present in the concerned Act itself.

(i) Title: It is a part of the Act & describes it. It is used for ascertaining the scope of the Act & interpreting it. It is used to resolve any ambiguity, but it cannot modify the plain language of the Act. For example, the Central Goods and Services Tax Act, 2017

(ii) Preamble: If the wording of a statute is ambiguous, the preamble can be referred to ascertain the scope & object of Act. The main objective and purpose of the Act are found in the Preamble of the statute. It contains the recitals showing the reason for enactment of the Act.

Example: The preamble of the Central Goods and Service Tax Act, 2017 reads as : "An Act to make a provision for levy and collection of tax on intra-State supply of goods or services or both by the Central Government and for matters connected therewith or incidental thereto."

Preamble of a statute is a part of the enactment and can legitimately be used for construing it. However, the Preamble does not override the plain provision of the Act but if the wording of the statute gives rise to doubts as to its proper construction, e.g. where the words or phrase has more than one meaning and a doubt arises as to which of the two meanings are intended in the Act, the Preamble can and ought to be referred to in order to arrive at the proper construction.

Preamble to an Act discloses the primary intention of the legislature but can only be brought in as an aid to construction if the language of the statute is not clear. However, it cannot override the provisions of the enactment. The preamble expresses the scope & object of the Act more comprehensively than the long title. It is a part of the Act. It states the reasons for creation of the Act and evil it wants to suppress

(iii) Definitional sections/clauses: Justice G.P. Singh in the 'Principles of Statutory Interpretation' (12th edition, 2010) says that the object of a definition of a term is to avoid the necessity of frequent repetitions in describing all the subject matter to which that word or expression so defined is intended to apply. Statutes contain definitions of certain words and expressions used in an Act. Definition gives the interpretation of certain words or expressions, they may include or exclude something, may be of restrictive extensive, ordinary or special kind.

When a word or expression has been defined prima facie, such definition governs that word in the body of an Act everywhere, unless specially excluded. A definition is not to be read in isolation, it must be read in context of its use. Where definition itself is ambiguous, it has to be interpreted in the light of other provisions of the Act.

If exhaustive definition is given for a term, the meaning of such term must be restricted to the meaning given in the definition. Use of word 'means' & 'means & include" imply that a definition is exhaustive. If inclusive definition is given for a term, an extended meaning is given to such term. Such word can also include something else in addition to the meaning assigned to it in the definitional clause. In addition, use of words 'includes', 'deemed to include' and 'to apply and to include' imply that a definition is inclusive. Example: In terms of Section 2(34) of the CGST Act "conveyance" includes vessel, an aircraft and a vehicle

Effect of statutory definition: Where the meaning of a word or expression is statutorily given, only that meaning must be given. The Court cannot ignore the statutory definition & make wide speculations about the meaning of the expression. However, if there is anything repugnant in the context, a different meaning may be adopted considering the object of the Act & ordinary meaning of such word. Further, a word defined in the Act bears the same meaning throughout the Act, unless by doing so any repugnancy is created

(iv) Illustrations: These are examples appended to a section. These are inserted to clarify the scope & object of the Section. These furnish indications of the presumed intention of the legislature. These follow the text of the Section and do not form part of the Section. However, these do form part of the statute

(v) Proviso: A clause which is an exception to the main provision is known as proviso. A proviso is added to qualify or create an exception to what has already been stated in the main body of the section. It does not state a general rule. Its scope is restricted to what has already been stated in the main body of the section. The normal function of a proviso is to except something out of the enactment or to qualify something stated in the enactment which would be within its purview if the proviso were not there.

(vi) Explanation: It is generally a clarification of the legislative intent. It does not make a substantive provision. It is so construed as to remove any ambiguity in the main Section. It is used to clarify & explain the meaning of the Section/legislative intent. It makes the main Section more meaningful & purposeful. However, it cannot take away a statutory right given under the Act

(vii) Non-Obstante Clause: Non-obstante clause usually starts with the word 'Notwithstanding anything contained in…….'. Non obstante clause is employed to give overriding effect to certain provisions over some contrary provisions that may be found in the same enactment or some other enactments, which is to say to avoid the operations and effect of all contrary provisions.

(D) External aids in Interpretation of Statutes

"External Aids means consideration of the situation behind enactment of an Act. These can be used for limited purpose of finding out the intention of the legislature and that too if the words used in the statute are not clear."

History or process of enactment of the subject Act may be looked into. Objects for such enactment is relevant. Further, a statute must be interpreted to include circumstances/situations which were unknown / did not exist at the time of enactment of the statute. Changes in social conditions and technology should be given due consideration. For Example - 'Handwriting' under Indian Evidence Act also implies 'typewriting' and 'email'. Judicial pronouncements in various other cases may also be referred.

(E) Other rules of interpretation of statutes

(i) Rules or Notifications: Any rule or notification cannot override provisions of the Act: Rules cannot be framed to bring into existence substantive rights or obligations or disabilities not contemplated by the provisions of the Act itself.

(ii) Doctrine of merger: Doctrine of merger states that there cannot be more than one decree or operative orders governing the same subject-matter at a given point of time. When a decree or order passed by inferior court, tribunal or authority was subjected to a remedy available under the law before a superior forum then, though the decree or order under challenge continues to be effective and binding, nevertheless its finality is put in jeopardy. Once the superior court has disposed of the lis before it either way - whether the decree or order under appeal is set aside or modified or simply confirmed, it is the decree or order of the superior court, tribunal or authority which is the final, binding and operative decree or order wherein merges the decree or order passed by the court, tribunal or the authority below.

(iii) Doctrine of Prospective Ruling: This doctrine implies that a law to be made applicable prospectively so not to affect the earlier transactions. This is general proposition of law. Hon'ble Supreme Court in the case of Union of India & Ors. v M/s Martin Lottery Agencies Ltd. [2009-TIOL-60-SC-ST] held that when a new type of tax is introduced or a new concept of tax is introduced to widen the net, it, in our opinion, should not be construed to have a retrospective operation on the premise that it is clarificatory or declaratory in nature.

(iv) Legislative intention: At times, while interpreting the statutes, the legislative intention is also required to be taken into consideration.

A Constitution Bench of Hon'ble the Supreme Court in Mathuram Agarwal v State of Madhya Pradesh [1999 (10) TMI 125] held as under-:

"The intention of the legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language…Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spirit and intention of the legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e. the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter."

(v) Rule of Strict & Liberal Construction: Rule of strict & liberal construction of statutes applied for interpretation of penal and taxing statutes. As per the rule of strict & liberal construction, a statute enacting an offence or imposing a penalty should be strictly construed. While constructing a provision in penal statute if there appears to be a reasonable doubt or ambiguity, it shall be resolved in favour of person who would be liable to penalty. Statutes imposing taxes or monetary burdens are to be strictly construed. The logic behind this principle is that imposition of taxes is also a kind of imposition of penalty which can be imposed if the language of the statute so says.

[The views expressed are strictly personal.]